TY  - JOUR
AU  - Niblett,Anthony
AU  - Posner,Richard
AU  - Shleifer,Andrei
TI  - The Evolution of a Legal Rule
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13856
PY  - 2008
Y2  - March 2008
UR  - http://www.nber.org/papers/w13856
L1  - http://www.nber.org/papers/w13856.pdf
N1  - Author contact info:
Anthony Niblett
Harvard University
E-Mail: niblett@fas.harvard.edu

Richard Posner
United States Court of Appeals
E-Mail: Richard_Posner@ca7.uscourts.gov

Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu
AB  - The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.
ER  -