A Theory of Loopholes

Leo Katz

The Journal of Legal Studies, 2010, vol. 39, issue 1, 1-31

Abstract: Laws are known to be replete with loopholes. The reason is generally thought to lie in the divergence between the text and the purpose of a law. Practical constraints supposedly make laws unavoidably over- or underinclusive. Lawyers who exploit loopholes are thought to be taking advantage of that over- and underinclusiveness. This essay offers a different perspective. Most loopholes have nothing to do with the over- or underinclusiveness of rules. This is best seen by exploring a particular subset of rules that reveal most clearly what is going on: the rules of voting. Arrow's famous theorem teaches us that all halfway decent voting rules are vulnerable to agenda manipulation. Fundamentally, it will turn out, all legal rules are analogous to voting rules and all loophole exploitation analogous to agenda manipulation. The loophole-exploiting lawyer no more deserves to be criticized, sanctioned, or otherwise frustrated in his efforts than does the shrewd parliamentarian. (c) 2010 by The University of Chicago. All rights reserved.

Date: 2010
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