Law and the Limits of Government

Law and the Limits of Government

Temporary versus Permanent Legislation

Frank Fagan

Why do legislatures pass laws that automatically expire? Why are so many tax cuts sunset? In this first book-length treatment of those questions, the author explains that legislatures pass laws temporarily in order to reduce opposition from the citizenry, to increase the level of information revealed by lobbies, and to externalize the political costs of changing the tax code on to future legislatures. This book provides a careful analysis which does not normatively prescribe either permanent or temporary legislation in every instance, but rather specifies the conditions for which either permanent or temporary legislation would maximize social welfare.

Chapter 3: Long-term residual effects

Frank Fagan

Subjects: economics and finance, law and economics, law - academic, constitutional and administrative law, law and economics


In the previous chapter legislators choose to legislate permanently or temporarily based upon transaction cost minimization for short-to medium-term compliance benefits. However, in addition to short-to medium-term compliance benefits, legislators can benefit from long-term compliance that results from the creation of social norms. The present chapter considers the choice between temporary and permanent legislation when this additional benefit is specified in the objective function of legislators. That legislators can create social norms differs from the current law and economics norms research which emphasizes the legislator’s passive role in norm creation. In that literature, legislators create laws for compliance benefits which, in turn, create (or focalize) social norms (Cooter 1998, 2000, McAdams 2000b,a, McAdams and Rasmusen 2005, Feldman 2009). Emphasis is placed upon the law’s role in norm creation. In some cases however, legislators are directly legislating social norms. This is especially visible when legislators nearing retirement could legislate temporarily and save transactions cost, but instead choose to legislate permanently in an attempt to extend normative influence beyond their lawmaking careers.

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