Law, Economics, and Inefficient Norms

Abstract

t Assistant Professor, University of Pennsylvania Law School. My thanks to Matthew Adler, Lisa Bernstein, David Charny, Robert Ellickson, John Lott, Reed Shuldiner, participants at the Symposium on Law, Economics & Norms at the University of Pennsylvania Law School, and participants at a workshop at the University of Toronto Law School. 'See ROBERT C. ELLICKSON, ORDER WITHOUT LAW: How NEIGHBORS SETrLE DISPUTES 167-83 (1991); Robert C. Ellickson, Property in Land, 102 YALE L.J. 1315, 1320-21 (1993). 2 See, e.g., ELLICKSON, supra note 1, at 283 (arguing that the law should defer to group norms for everyday disputes between members); Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code's Search for Immanent Business Norms, 144 U. PA. L. REV. 1765, 1770 (1996) (stating that 'transactors do not necessarily want the relationship-preserving norms they follow in performing contracts and cooperatively resolving disputes among themselves to be used by third-party neutrals to decide [their] cases (footnote omitted)); Robert D. Cooter, Decentralized Law for a Complex Economy: The Structural Approach to Adjudicating the New Law Merchant, 144 U. PA. L. REV. 1643, 1650 (1996) [hereinafter Cooter, Decentralized Law] (stating conditions under which law should defer to norms); Robert D. Cooter, Structural Adjudication and the New Law Merchant: A Model of Decentralized Law, 14 INT'L REV. L. & ECON. 215, 226-27 (1994) (same); Richard A. Epstein, International News Service v. Associated Press: Custom and Law As Sources of Property Rights in News, 78 VA. L. REV. 85, 85 (1992) [hereinafter Epstein, Custom in Property] ('The state's chief function is to discover and reflect accurately what the community has customarily regarded as binding social rules and then to enforce those rules in specific controversies.); Richard A. Epstein, The Path to The T.J. Hooper: The Theoiy and History of Custom in the Law of Tort, 21 J. LEGAL STUD. 3, 4 (1992) [hereinafter Epstein, Custom in Torts] (arguing that where the standard of liability is negligence, courts should regard custom as conclusive evidence of due care); Jason S. Johnston, The Statute of Frauds and Business Norms: A Testable Game-Theoretic Model, 144 U. PA. L. REV. 1859, 1863-64 (1996) (discussing the Statute of Frauds and the circumstances in which this formality is or is not needed).