Uncertainty of Law and the Legal Process

Giuseppe Dari-Mattiacci and Bruno Deffains

Journal of Institutional and Theoretical Economics (JITE), 2007, vol. 163, issue 4, 627-656

Abstract: There is extensive literature on whether courts or legislators produce efficient rules, but which of them produces rules efficiently? The law is subject touncertainty ex ante; uncertainty makes the outcomes of trials difficult to predict and deters parties from settling disputes out of court. In contrast, thelaw is certain ex post: litigation fosters the creation of precedents that reduce uncertainty. We postulate that there is a natural balance between the degree of uncertainty of a legal system (kept under control by litigation) and its litigation rate (sustained by uncertainty). We describe such equilibrium rates in a model of tort litigation, study how they are affected by different policies, and compare the costs and benefits of the legislative and the judicial process of lawmaking..

JEL-codes: K10 K40 K41 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (10)

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Working Paper: Uncertainty of Law and the Legal Process (2005)
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