Working Paper: NBER ID: w13856
Authors: Anthony Niblett; Richard Posner; Andrei Shleifer
Abstract: The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.
Keywords: No keywords provided
JEL Codes: K13; K41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| courts' decisions (K41) | plaintiffs' claims (K41) |
| courts' decisions (K41) | economic power of the parties involved (L14) |
| plaintiffs' claims (K41) | judicial decision-making (K41) |
| economic power of the parties involved (L14) | judicial decision-making (K41) |
| nonbinding federal precedent (K37) | judicial decision-making (K41) |
| judicial leadership (K40) | application of the ELR (K20) |
| absence of a resting point (Y70) | inefficiency (D61) |
| adherence to the ELR (K16) | judicial decision-making (K41) |