Market Institutions and Judicial Rulemaking

UPF Economics and Business Working Paper No. 801

30 Pages Posted: 16 Nov 2005

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Veneta Andonova

Universidad de los Andes, Colombia

Multiple version iconThere are 2 versions of this paper

Date Written: December 2004

Abstract

Assuming that the degree of discretion granted to judges was the main distinguishing feature between common and civil law until the 19th century, we argue that constraining judicial discretion was instrumental in protecting freedom of contract and developing the market order in civil law. We test this hypothesis by analyzing the history of Western law. In England, a unique institutional balance between the Crown and the Parliament guaranteed private property and prompted the gradual evolution towards a legal framework that facilitated market relationships, a process that was supported by the English judiciary. On the Continent, however, legal constraints on the market were suppressed in a top-down fashion by the founders of the liberal state, often against the will of the incumbent judiciary. Constraining judicial discretion there was essential for enforcing freedom of contract and establishing the legal order of the market economy. In line with this evidence, our selection hypothesis casts doubts on the normative interpretation of empirical results that proclaim the superiority of one legal system over another, disregarding the local conditions and institutional interdependencies on which each legal system was grounded.

Keywords: Legal Systems, Institutional Development, Law Enforcement

JEL Classification: K40, N40, O10

Suggested Citation

Arruñada, Benito and Andonova, Veneta, Market Institutions and Judicial Rulemaking (December 2004). Available at SSRN: https://ssrn.com/abstract=849366 or http://dx.doi.org/10.2139/ssrn.849366

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Veneta Andonova

Universidad de los Andes, Colombia ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

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