Abstract

The economic analysis of civil procedure can be enriched by a more thorough consideration of the productive functions of civil adjudication, in particular the production of new knowledge, as distinguished from the revelation or use of pre-existing knowledge. As adjudicative facts often involve the particulars of time and place, their production through litigation has some of the same properties noted by Hayek in the determination of prices by the market system. Most importantly, the determination of adjudicative facts may reflect investment decisions made both before and after litigation has arisen, and those decisions have consequences for productive activity. Therefore, decisions to invest in litigation are not merely “rent-seeking,” but also embody some element of innovation. They are analogous to other investments in new knowledge, such as research and development, or exploration for natural resources. Rules of civil adjudication can affect the supply and price of new knowledge, and thereby affect welfare, through their influence on the timing and nature of investments in new knowledge. The implications of these factors range across a variety of topics in civil procedure.