The relevance of law and economics for the development of judge made rules: Examples from German case-law

Abstract

Judge-made rules play a significant role in the development of civil law. In Germany large parts of accident law and of contract law are today influenced by judge-made rules. Judges often refer to principles of medium range (‘Prinzipien mittlerer Reichweite’) when they develop new rules. It can be shown that these principles are often very close to economic principles, such as economic efficiency. The paper describes the relationship between the legal principles and the economic principles. It also explains how economic arguments can be introduced into legal reasoning. In this respect the concept of negligence is used as an example: interpretation of this concept is necessary before it can be used for a solution of hard cases. The paper presents some cases showing that the interpretation of negligence in judge made law comes very close to economic principles. The same applies for precontractual disclosure rules which generate incentives to produce useful information.