Common law and economic efficiency

Hayekian anarchism

“…The real test of the usefulness of a legal rule is found in the unseen effects of the rule in terms of the number of accidents avoided or conflicts averted, not the seen effects of the cases that come before the judge. On this question the judge will have almost no relevant knowledge or, crucially, a way of possibly acquiring the relevant knowledge to make that assessment (Zywicki and Stringham, 2010). Without any measurement of market demand, judges will be unable to determine whether their decisions are really right or wrong as measured by whether they actually do reflect parties' expectations and social consensus.…”

“…If such a system is combined with a strict adherence to precedent, stare decisis, then errors can create path-dependency effects that build upon each other and spread to other areas of the legal framework (Zywicki and Stringham, 2010). Although knowledge of the past, as embodied in the process of precedent, may be superior to no body of knowledge at all, it seems inferior to knowledge of the past as well as the present.…”

Legal System Pathways to Foreign Direct Investment in the Developing World

“…A final reason to suppose that common law systems more effectively attract FDI involves what some argue is the greater efficiency of common law systems (Zywicki and Stringham ). Common law judges have leeway to apply pragmatic and justice‐oriented legal rules to fit the facts in individual cases to existing law.…”

“…In contrast, civil law systems require judges to cram the facts of cases into existing law whether or not there is a good fit between facts and law, and this is so whatever the economic consequences and no matter whether this leads to fair and efficient administration of justice (Merryman and Pérez‐Perdomo :52). Efficiency in administering law finds a home in the common law by virtue of a decentralized process of “many judges and litigants resolving many cases in concrete factual disputes that arise from particular conflicts, rather than a judge essentially articulating a rule for the economy” (Zywicki and Peter Stringham :32). The difference between the two types of systems in this regard is similar to that between a command and market economy (Zywicki and Peter Stringham :32).…”

“…Efficiency in administering law finds a home in the common law by virtue of a decentralized process of “many judges and litigants resolving many cases in concrete factual disputes that arise from particular conflicts, rather than a judge essentially articulating a rule for the economy” (Zywicki and Peter Stringham :32). The difference between the two types of systems in this regard is similar to that between a command and market economy (Zywicki and Peter Stringham :32). Common law judges operate in what can best be described as a “legal market,” wherein individuals and entities need and want clearing and closure of disputes and society wants regularity, stability, and safety in social relations.…”