The Evolution of Precedent

Nicola Gennaioli, Andrei Shleifer

NBER Working Paper No. 11265
Issued in April 2005
NBER Program(s):   LE

We evaluate Richard Posner's famous hypothesis that common law converges to efficient legal rules using a model of precedent setting by appellate judges. Following legal realists, we assume that judicial decisions are subject to personal biases, and that changing precedent is costly to judges. We consider separately the evolution of precedent under judicial overruling of previous decisions, as well as under distinguishing cases based on new material dimensions. 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.

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