Rights as Signals

Daniel A Farber

The Journal of Legal Studies, 2002, vol. 31, issue 1, 83-98

Abstract: Because rights operate as trumps over normal governmental interests, they have an inherent cost. Consequently, by entrenching protection for human rights, governments can signal a willingness to give up power in the short term to obtain long-term benefits. Investors can infer from this that the government has a low discount rate and is less likely to pose a threat of expropriation. Similarly, when courts vigorously enforce human rights, they dramatize their judicial independence, which is valuable to investors, who themselves may have no interest in human rights. Thus, human rights enforcement may help encourage investment and thereby indirectly foster economic growth. Copyright 2002 by the University of Chicago.

Date: 2002
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