New Horizons in Law and Economics series
Chapter 9: The Efficiency of the Common Law: An Economic Analysis of Dueling, Cannibalism, the Gold Rush, Racism, and Antitrust Law
9. The efﬁciency of the common law: An economic analysis of dueling, cannibalism, the gold rush, racism, and antitrust law 9.1 INTRODUCTION Chapters 2 and 3 introduced a concept of economic efﬁciency that rests on the axioms. In particular, my deﬁnition of efﬁciency requires (1) a recognition that beneﬁts and costs are psychological and subjective, (2) a recognition that one must point to a superior rule or practice in order to say that some existing practice or rule is inefﬁcient, (3) the inclusion of the transactions costs of operating the rule or practice as a part of the determination of efﬁciency, and (4) the inclusion of the value of all goods for which there is a WTP or WTA in determining inefﬁciency. This chapter applies these concepts to perhaps the major puzzle in law and economics, the efﬁciency of the common law. The common law1 has been found to tend toward economic efﬁciency2 in important instances (Posner 1986, p. 19f).3 This is an important claim, for it is not only a broadly descriptive assertion but a predictive one about the nature of common law. If this claim is true, why is it true? Though various evolutionary models have been offered to explain it (Rubin 1977; Priest 1977; Goodman 1978) none of these explanations is wholly satisfactory (Cooter and Ulen 1988, pp. 492f; Posner 1990, p. 372). Although I agree with those who have said that the common law tends...
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