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Contingent Judicial Deference: theory and application to usury laws

Bernardo Guimaraes and Bruno Salama ()
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Bruno Salama: Sao Paulo School of Economics

No 1729, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Legislation is less likely to be enforced when courts disagree with it. Building on this premise, we propose a model of Bayesian adjudicators that use their own prior knowledge to evaluate the appropriateness of legislation. The model yields a non-monotonic relation between written rules and effectively enforced rules. Hence the enactment of legislation prohibiting something raises the probability that courts will allow related things not expressly forbidden. Moreover, legal uncertainty is greater with legislation that commands little deference from courts than with legislation that commands none. We discuss examples of effects of legislated prohibitions (and, in particular, usury laws) that are consistent with the model.

Keywords: Adjudication; Courts; Prohibitions; Interest rate cap (search for similar items in EconPapers)
JEL-codes: K41 K22 K12 G21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2017-09
New Economics Papers: this item is included in nep-law and nep-mic
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