Working Paper: NBER ID: w13563
Authors: Steven Shavell
Abstract: When is it socially advantageous for legal rules to be changed in the light of altered circumstances? In answering this basic question here, a simple point is developed -- that past compliance with legal rules tends to reduce the social advantages of legal change. The reasons are twofold: adjusting to a new legal rule often involves costs; and the social benefits of change are frequently only incremental, only in addition to those of past compliance. The general implications are that legal rules should be more stable than would be appropriate were the relevance of past behavior not recognized, and that a policy of grandfathering, namely, of permitting noncompliance, should sometimes be employed. The analysis of these points has broad relevance, applying across legal fields, often explaining what we observe but also indicating possibilities for reform, such as in the regulation of air pollution. The analysis is related to the conventional reliance-based justification for the stability of the law, the literature on legal transitions, and economic writing on optimal legal standards.
Keywords: legal change; grandfathering; past compliance; social advantages
JEL Codes: K1; K2; K32; L5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| past compliance with legal rules (K40) | social advantages of changing those rules (O35) |
| adjustment to a new legal rule incurs costs (K40) | social advantages of changing those rules (O35) |
| social benefits of change are incremental (O35) | social advantages of changing those rules (O35) |
| past compliance with legal rules (K40) | legal rules stability (K40) |
| the costs of switching to a new scrubber (Q52) | social advantages of changing those rules (O35) |