Nicola Gennaioli and Andrei Shleifer have an excellent working paper out on "The Evolution of Precedent." Their paper investigates the oft-heard claim that common law converges to efficient legal rules. The authors find:
Convergence to efficient legal rules occurs only under very special circumstances, but the evolution of precedent over time is on average beneficial under more plausible conditions.
In other words, convergence to efficient legal rules is more difficult to achieve via common law than is usually thought.
It struck me that two factors often ignored in considering the efficiency of common law may contribute to this process. The first is the degree of centralization. Where there are multiple 'independent' territories, each with its own common law, it might be more likely that Tiebout-style competition would bring about a situation in which common law converges on efficient rules despite judicial biases. In contrast, where a single 'set' of common laws apply over a larger area, less competition would thwart this process.
Second, the presence or absence of a genuine market for law might also effect common law efficiency. In the international sphere, for instance, where adjudication is a private, for-profit industry and parties to disagreements are free to select the law that will govern their disputes, market competition contributes to (a) the weeding out of biased judges, which improves the law's objectivity through the evolution of legal precedent and (b) efficient legal rules, as considered by parties to adjudication, who in selecting certain systems of law and not others to apply to their disputes put ineffective systems of law 'out of business.'
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