Contingent judicial deference: theory and application to usury laws

Bernardo Guimaraes and Bruno Meyerhof Salama

No 440, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: Legislation that seems unreasonable to courts is less likely to be followed. Building on this premise, we propose a model and obtain two main results. First, the enactment of legislation prohibiting something raises the probability that courts will allow related things not expressly forbidden. In particular, the imposition of an interest rate ceiling can make it more likely that courts will validate contracts with interest rates below the legislated cap. Second, legal uncertainty is greater with legislation that commands little deference from courts than with legislation that commands none. We discuss examples of e§ects of legislated prohibitions (and, in particular, usury laws) that are consistent with the model.

Date: 2017
New Economics Papers: this item is included in nep-dcm, nep-law and nep-mic
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Working Paper: Contingent Judicial Deference: theory and application to usury laws (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:440

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