Abstract
We investigate the evolution of common law under overruling, a system of precedent change in which appellate courts replace existing legal rules with new ones. We use a legal realist model, in which judges change the law to reflect their own preferences or attitudes, but changing the law is costly to them. The model's predictions are consistent with the empirical evidence on the overruling behavior of the US Supreme Court and appellate courts. We find that overruling leads to unstable legal rules that rarely converge to efficiency. The selection of disputes for litigation does not change this conclusion. Our findings provide a rationale for the value of precedent, as well as for the general preference of appellate courts for distinguishing rather than overruling as a law-making strategy. Journal of Comparative Economics 35 (2) (2007) 309–328.
Highlights
In the common law tradition, the law evolves through the creation and revision of precedents by appellate courts (Stone, 1985)
Overruling deserves some attention both because it is the form of precedent revision typically studied in law and economics (Rubin, 1977, Priest, 1977, Posner, 2003) and because it is sometimes used by the U.S Supreme Court
Supreme Court judges vote based on their ideological preferences (George and Epstein, 1992, Brenner and Spaeth, 1995, Songer and Lindquist, 1996), follow only those prior Court decisions that are compatible with their own ideologies (MacKuen and McGuire, 2005), and do not revise their past votes after the Court they sit on has established a new legal rule they had voted against (Segal and Spaeth, 1996, 2002)
Summary
In the common law tradition, the law evolves through the creation and revision of precedents by appellate courts (Stone, 1985). In line with the evidence on Supreme Court and appellate decisions, we find that the probability of an appellate court’s overruling a precedent increases in the distance between the precedent and the appellate court’s own bias This result implies that the conditions for judge-made law to converge to efficient legal rules are implausibly strict. Does the law fail to be efficient, but it may not converge at all, as legal rules fluctuate between extremes. This result stands in contrast to the mechanisms discussed by Rubin (1977) and Priest (1977) This highly pessimistic assessment of the quality of legal evolution under overruling may explain why appellate courts in common law countries generally prefer distinguishing. The judge changing A1 sets a new rule A2 , possibly giving rise to a new round of precedent change
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