On Optimal Legal Change, Past Behavior, and Grandfathering

37 Pages Posted: 12 Jan 2007

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2006

Abstract

When is it socially advantageous for legal rules to be changed in the light of altered circumstances? In answering this basic question here, a simple point is developed - that past compliance with legal rules tends to reduce the social advantages of legal change. The reasons are twofold: adjusting to a new legal rule often involves costs; and the social benefits of change are frequently only incremental, only in addition to those of past compliance. The general implications are that legal rules should be more stable than would be appropriate were the relevance of past behavior not recognized, and that a policy of grandfathering, namely, of permitting noncompliance, should sometimes be employed. The analysis of these points is general, applying across legal fields, often explaining what we observe but also indicating possibilities for reform, such as in the regulation of air pollution. The analysis is related to the conventional reliance-based justification for the stability of the law and to the literature on legal transitions.

JEL Classification: D6, D7, H8, K10, K20, K23, K32, L5

Suggested Citation

Shavell, Steven, On Optimal Legal Change, Past Behavior, and Grandfathering (December 2006). Harvard Law and Economics Discussion Paper No. 570. Available at SSRN: https://ssrn.com/abstract=956819 or http://dx.doi.org/10.2139/ssrn.956819

Steven Shavell (Contact Author)

Harvard Law School ( email )

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National Bureau of Economic Research (NBER)

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