The Evolution of a Legal Rule

Anthony Niblett, Richard Posner and Andrei Shleifer

No 13856, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.

JEL-codes: K13 K41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: 2008-03
Note: LE
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