The Economics of Courts and Litigation

The Economics of Courts and Litigation

New Horizons in Law and Economics series

Francisco Cabrillo and Sean Fitzpatrick

Dissatisfaction with the working of courts is ubiquitous. Legal inertia and maladministration are the norm in many countries and have significant social and economic repercussions. No longer a theme relegated to the peripheries of economic analysis, the administration of justice is now recognised by most economists as being of fundamental importance for economic development, a factor increasingly being acknowledged by policymakers at all levels. The departure point for this book is the authors’ belief in the need for a systematic analysis of the incentive structures facing key players in the courts and litigation process. They focus not only on structures pertaining to the common law tradition, but offer analysis of issues not normally found in the North-American literature, such as the Latin notary and the selection and values of judges in civil law systems. They further propose an ample list of considerations for a reform agenda.

Chapter 2: The Courts

Francisco Cabrillo and Sean Fitzpatrick

Extract

1. INTRODUCTION Courts should be seen as public institutions within the broader set-up of a political economy. Within this comparative framework, the judicial administration occupies a position of primary importance, serving as an alternative to other means of allocating resources within an economy. There are essentially two alternatives to the adjudication process for the allocation of economic resources within a society, the market and the political process. These alternatives do not act separately but are based on interdependency. It is not the case that as the market expands the adjudicative process loses in importance, or that when the political process wields its legislative sword allocative decisions are only taken by political bodies. Quite the contrary, fluctuations in market and political activity greatly influence the nature and scope of adjudicative decisions. Greater intervention by the political process – as in the case of the welfare state – leads to a greater workload for the courts; economic boom and economic crisis in the market similarly affect the demands upon the courts. Within the market, societies’ needs and wants are satisfied according to the laws of supply and demand. Freedom of contract, according to which individuals decide of their own accord to enter into the voluntary exchange of goods and services, is at the heart of market transactions. As discussed in greater detail below, freedom of contract has been taking a beating largely since the beginning of the 20th century. Law, supported by legal scholarship, has painted freedom of contract with an unfavourable brush, to...

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