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The Evolution of a Legal Rule

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  • Shleifer, Andrei
  • Niblett, Anthony
  • Posner, Richard A.

Abstract

Efficient legal rules are central to efficient resource allocation in a market economy. But the question whether the common law actually converges to efficiency in commercial areas has remained empirically untested. We create a dataset of 461 state-court appellate decisions involving the economic loss rule in construction disputes and trace the evolution of this law from 1970 to 2005. We find that the law did not converge to any stable resting point and evolved differently in different states. Legal evolution is influenced by plaintiffs’ choice of which legal claims to make, the relative economic power of the parties, and nonbinding federal precedent.

Suggested Citation

  • Shleifer, Andrei & Niblett, Anthony & Posner, Richard A., 2010. "The Evolution of a Legal Rule," Scholarly Articles 8687032, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:8687032
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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