The common law process: Efficiency or order?

Abstract

The common law applies to conflicts not covered by statutes or the U.S. Constitution. Because constitutional law and common law are applicable (common) to all members of the community, they both confront aggregation problems of the sort discussed by Buchanan and Arrow. p ]Recent writings in law and economics view the common law as an efficient process that promotes the evolution of efficient rules through an auction-like mechanism. Because the common law applies to all individuals, however, the auction analogy fails to cope with the problem of aggregating preferences. Moreover, the belief that the efficiency of the common law is enhanced by assigning disputed rights so as to lower transaction costs is also flawed. The common law provides a form of unanimity by allowing individuals to contract around the rule and provides order by maintaining transitivity, through the use of precedent, in the application of the rule to new situations.