Levers of Legal Design: Institutional Determinants of the Quality of Law

Abstract

The new comparative economics is largely organized around an effort to explain differences in country economic performance in terms of differences between common law and civil code systems. Assumptions about differences between common law and civil code regimes and the correspondence between legal regimes and judicial behavior are, however, still only weakly based in real institutional features of modern legal systems. In this paper, I examine the institutional determinants of the quality of law developed by a legal regime, drawing on a model from Hadfield (2006) which identifies five key parameters that influence legal evolution: the distribution of judicial rewards for rule-following and rule-adaptation, judicial information-processing, exogenous legal human capital (which determines judicial error), legal costs of presenting evidence and argument, and damages. I set out the institutional features that determine these parameters as dimensions along which real legal systems reside. These dimensions include the organization of the courts and the extent to which jurisdiction is general or specific; the organization of the judiciary and the extent to which judicial careers are organized on a bureaucratic career model or what I call a capstone model; the mechanisms of information distribution and the extent to which information is distributed to a broad public audience or a more confined professional audience; the role of judges, whether active or passive, in finding facts and shaping the issues in adjudication; the role of public versus private entities in the enforcement of judgments (damages); and the degree to which the mechanisms by which legal services are produced, priced and distributed are competitive or professionally-controlled. My claim is that these key institutional dimensions, rather than conventional and more abstract distinctions based on the sources of law or judicial independence should be the primary focus of empirical efforts to evaluate and policy efforts to reform legal regimes. They are the levers of legal design.

Keywords: common law, civil code, comparative law, legal origins, evolution of law, institutions

JEL Classification: P51, P48, K4