2000 SYNTHETIC COMMON LAW fallible, judges. A common law judge might adhere stubbornly to the view that if a statute(or perhaps a prior case)does not strictly cover the terms of a transaction, then an injured party to that transaction has no claim. Common law rules are fraught with contradictions and ambiguity, and, because they depend upon a limited number of specifie cases, necessarily contain gaps There has been vigorous academic debate about the merits and flaws of common law. This Part critiques and updates some of the most persuasive arguments for and against common law adjudication In some sense. this part seeks to understand whether we should laugh or cry in response to Holmess story. Is the story funny because of its implausibility, the assumption being that the common law is fair and efficient? Or is the story upsetting because it seems all too plausible, the implication being that the common law is neither fair A. The Case for Common Law In the modern regulatory state, dominated by federal statutes and administrative rules, it is easy enough to relegate the common law to the role of historical nicety. From the thirteenth century until recently common law was the primary source of law in the United States and England, and was revered by scholars and practitioners. 8 In modern society, it assumes a lesser role. Notwithstanding the fact that much of law school still involves the study of common law topics, many legal commentators, scholars, and practitioners have abandoned the common law in favor of statutes, including model statutes, and private law, including model and uniform laws. In a few areas of rapidly evolving technology, common law is experiencing a renaissance, with some scholars advocating common law adjudication as a higher-speed alternative to the often-sluggish modern administrative state Judge Learned Hand, drawing from Blackstone, described the common law as"a monument slowly raised, like a coral reef, from the which the plaintiff drank from a bottle containing a decomposed snail"could I characterized as a opaque bottle of ginger beer, an opaque bottle of beverage, a bottle of beverage, a container of chattels for human consumption, a chattel, or a thing. EISENBERG, supra note 2, at 54(citing MAlister(or Donoghue)v. Stevenson, [ 1932] L R. App. Cas. 562(H.L. 1932)) In his defense of common law regimes, Melvin Eisenberg has stated that ar application and extension of common law is justified when it is both socially congruent and systemically consistent. See EISENBERG, supra note 2, at 68. These tifications, to the extent one believes they are important, place additional imitations on the power of common lav i Numerous commentators have described the history of common law adjudication, a topic that is well beyond the scope of this article. See, e.g., I WILLIAM HOLDSWORTH, A HISTORY OF ENGLISH LAW 194-350(7 ed. 1956)(describing the early system of comm See infra Part Il. B. Moreover, self-interested judges, lawyers commentators too often have supported the common law with assump nd faith more than argument or analysis, making it even easier for opponents arguments in favor of common law adjudication. Of course, the primary beneficiaries f a common law-dominated legal system are lawyers and judges, so it is no surprise hat both See infra notes 57-62 and accompanying text. 2I Blackstone stressed that the adherence to common law notions of stare decisis required that courts adhere to precedent and make changes slowly over time or it is an established rule to abide by former precedents, where the same points
2000] SYNTHETIC COMMON LAW 5 fallible, judges. A common law judge might adhere stubbornly to the view that if a statute (or perhaps a prior case) does not strictly cover the terms of a transaction, then an injured party to that transaction has no claim. Common law rules are fraught with contradictions and ambiguity, and, because they depend upon a limited number of specific cases, necessarily contain gaps.17 There has been vigorous academic debate about the merits and flaws of common law. This Part critiques and updates some of the most persuasive arguments for and against common law adjudication. In some sense, this Part seeks to understand whether we should laugh or cry in response to Holmes’s story. Is the story funny because of its implausibility, the assumption being that the common law is fair and efficient? Or is the story upsetting because it seems all too plausible, the implication being that the common law is neither fair nor efficient? A. The Case for Common Law In the modern regulatory state, dominated by federal statutes and administrative rules, it is easy enough to relegate the common law to the role of historical nicety. From the thirteenth century until recently common law was the primary source of law in the United States and England, and was revered by scholars and practitioners.18 In modern society, it assumes a lesser role. Notwithstanding the fact that much of law school still involves the study of common law topics, many legal commentators, scholars, and practitioners have abandoned the common law in favor of statutes, including model statutes, and private law, including model and uniform laws.19 In a few areas of rapidly evolving technology, common law is experiencing a renaissance, with some scholars advocating common law adjudication as a higher-speed alternative to the often-sluggish modern administrative state.20 Judge Learned Hand, drawing from Blackstone,21 described the common law as “a monument slowly raised, like a coral reef, from the which the plaintiff drank from a bottle containing a decomposed snail “could be characterized as a opaque bottle of ginger beer, an opaque bottle of beverage, a bottle of beverage, a container of chattels for human consumption, a chattel, or a thing.” EISENBERG, supra note 2, at 54 (citing M’Alister (or Donoghue) v. Stevenson, [1932] L.R. App. Cas. 562 (H.L. 1932)). 17 In his defense of common law regimes, Melvin Eisenberg has stated that an application and extension of common law is justified when it is both socially congruent and systemically consistent. See EISENBERG, supra note 2, at 68. These justifications, to the extent one believes they are important, place additional limitations on the power of common law. 18 Numerous commentators have described the history of common law adjudication, a topic that is well beyond the scope of this article. See, e.g., I WILLIAM HOLDSWORTH, A HISTORY OF ENGLISH LAW 194-350 (7th ed. 1956) (describing the early system of common law jurisdiction). 19 See infra Part II.B. Moreover, self-interested judges, lawyers, and commentators too often have supported the common law with assumptions and faith more than argument or analysis, making it even easier for opponents to reject arguments in favor of common law adjudication. Of course, the primary beneficiaries of a common law-dominated legal system are lawyers and judges, so it is no surprise that both groups historically supported the regime. 20 See infra notes 57-62 and accompanying text. 21 Blackstone stressed that the adherence to common law notions of stare decisis required that courts adhere to precedent and make changes slowly over time: “For it is an established rule to abide by former precedents, where the same points
6 10/9/00 DRAFT-DO NOT CITE WITHOUT PERMISSION [ VOL # minute accretions of past individuals, of whom each built upon the elics which his predecessors left, and in his turn left a foundation upon which his successors might work. This romanticized notion of the common law as coral reef is(or was, until recently ) deeply embedded in the psyche of lawyers and legal academics. The language is loaded: Learned Hand's metaphor of the coral reef implicitly praises the role of judges in developing a"monument"(i.e,common law) through an incremental, gradual, and fair process Why such lofty praise? As the argument goes, there are two chief advantages to the common law. First, it provides a mechanism for resolving disputes in a fair and efficient manner. Second, it generates ply of incremental and consistent legal rules that reflect social 1. Evolution and Efficiency First, the superiority of a common law approach is rooted in the notion that courts resolve disputes in a fair and efficient manner by reasoning from existing standards, either of society generally or of the legal system specifically. This function- dispute resolution depends on current and past practice. Disputes typically derive from a claim of right by an individual or institution based on the application, meaning, or implications of a particular societys existing The process of common law dispute resolution is both decentralized and passive. A decentralized approach ensures that judges will hear disputes involving a large swath of experience in society; common law rules then should reflect differences in standards among various segments within society. Just as importantly, courts lay a largely passive role, responding only when parties set in motion a particular legal dispute Ideally, a societys method of dispute resolution should be efficient and fair. Commentators have argued that the decentralized passive common law is both. The efficiency argument has an evolutionary flair. In its most basic terms, the argument is that the common law is an efficient dispute resolution system simply because it is the system that has survived the test of time. The English come again in litigation: as well as to keep the scale of justice even and steady, and not liable to waiver with every new judges opinion; and also because the law in that case being solemnly declared and determined, what before was uncertain, and aps indifferent, is now become a permanent rule which is not in ast of any subsequent judge to alter or vary from according to his private senti he being not delegated to pronounce a new law but to maintain and expound SIR WILLIAM BLACKSTONE, COMMENTARIES 68(1775). The synthetic common law roposal offered embraces Blackstones appreciation of the utility of common law, but takes issue with his respect for its"permanent rule"status Learned hand, Judge Cardoso's The Nature of the Judicial Process, 35 HARV L.REV.479,479(1922 2 see GORDON TULLOCK, THE CASE AGAINST THE COMMON LAW 2-3(1997) See id. at 1 2 There may be a gap, of course, between the fact of evolution and the argument that evolution is efficient. In evolutionary biology, for example, there is strong evidence of evolutionary patterns that belie "survival of the fittest"arguments. The fact that a particular practice survives during a periodic of selection and variation does not necessarily mean it is the optimal current practice. For a discussion of evolution as applied to legal theory, see Jody S. Kraus, Legal Design and the
6 10/9/00 DRAFT – DO NOT CITE WITHOUT PERMISSION [VOL. #:# minute accretions of past individuals, of whom each built upon the relics which his predecessors left, and in his turn left a foundation upon which his successors might work.”22 This romanticized notion of the common law as coral reef is (or was, until recently) deeply embedded in the psyche of lawyers and legal academics. The language is loaded: Learned Hand’s metaphor of the coral reef implicitly praises the role of judges in developing a “monument” (i.e., common law) through an incremental, gradual, and fair process. Why such lofty praise? As the argument goes, there are two chief advantages to the common law. First, it provides a mechanism for resolving disputes in a fair and efficient manner. Second, it generates a supply of incremental and consistent legal rules that reflect social practice. 1. Evolution and Efficiency First, the superiority of a common law approach is rooted in the notion that courts resolve disputes in a fair and efficient manner by reasoning from existing standards, either of society generally or of the legal system specifically.23 This function – dispute resolution – depends on current and past practice. Disputes typically derive from a claim of right by an individual or institution based on the application, meaning, or implications of a particular society’s existing standards.24 The process of common law dispute resolution is both decentralized and passive. A decentralized approach ensures that judges will hear disputes involving a large swath of experience in society; common law rules then should reflect differences in standards among various segments within society. Just as importantly, courts play a largely passive role, responding only when parties set in motion a particular legal dispute. Ideally, a society’s method of dispute resolution should be efficient and fair. Commentators have argued that the decentralized, passive common law is both. The efficiency argument has an evolutionary flair. In its most basic terms, the argument is that the common law is an efficient dispute resolution system simply because it is the system that has survived the test of time.25 The English come again in litigation: as well as to keep the scale of justice even and steady, and not liable to waiver with every new judge’s opinion; and also because the law in that case being solemnly declared and determined, what before was uncertain, and perhaps indifferent, is now become a permanent rule which is not in the breast of any subsequent judge to alter or vary from according to his private sentiments: he being not delegated to pronounce a new law, but to maintain and expound the old one.” I SIR WILLIAM BLACKSTONE, COMMENTARIES 68 (1775). The synthetic common law proposal offered embraces Blackstone’s appreciation of the utility of common law, but takes issue with his respect for its “permanent rule” status. 22 Learned Hand, Judge Cardozo’s The Nature of the Judicial Process, 35 HARV. L. REV. 479, 479 (1922). 23 See GORDON TULLOCK, THE CASE AGAINST THE COMMON LAW 2-3 (1997). 24 See id. at 1. 25 There may be a gap, of course, between the fact of evolution and the argument that evolution is efficient. In evolutionary biology, for example, there is strong evidence of evolutionary patterns that belie “survival of the fittest” arguments. The fact that a particular practice survives during a periodic of selection and variation does not necessarily mean it is the optimal current practice. For a discussion of evolution as applied to legal theory, see Jody S. Kraus, Legal Design and the
20001 SYNTHETIC COMMON LAW common law system survived despite repeated threats, powerful criticism, and almost insurmountable obstacles, including-some argue the emergence of Parliament as a power in the eighteenth century. As the argument goes, if common law adjudication had not been an efficient means of resolving disputes, given the state of English society at the time, it likely would not have persisted over time Moreover. the fact that common law rules survived while legislatures were empowered to enact different rules is especiall strong evidence that a well-functioning democratic society could do not better than those common law rules just as the common law was threatened in England, the expansive reach of Congress has threatened U.S. common law for many decades. Again, the argument goes, if the common law were not efficient system, elected representatives would have substituted more efficient rules In the 1970s, Judge Richard Posner and others attempted to buttress the intuitive appeal of the argument for common law with economic analysis. Their arguments also have an evolutionary perspective. In general, the economic argument, first advanced by Posner and William Landes is that to the extent common law adjudication involves private parties acting in their own self-interest and judges deciding cases based on wealth-maximizing standards, onl efficient rules will survive. Accordingly, the common law is wealth maximizing Judges leave inefficient rules to the side, and over time preserve and follow only efficient rules A. Other scholars then attempted to explain how the structure of common law adjudication reinforces this efficiency-seeking process or example, George Priest argued that the process of litigation, and how parties choose whether and when to litigate, pushes common law volution of Commercial Norms, 26 J LEGAL STUD. 377, 382n 9(1997)(citing seve'26 See TULLoCK, supra note 23, at 5-6; ARTHUR R. HOGUE, ORIGINS OF THE COMMON LAW 241(1986). Tullock has argued that the common law was threatened several times during the Middle ages, when the common law survived more in the memories of individual judges and practitioners as oral histories than in formal records. See, e.g, TULLOCK, supra note 23, at 8(noting that the law was largely recorded, and occasionally the record would be consulted") This a nt assumes the democracy is well-functioning one, an assumption that may or may not be true e TULLoCK, supra note 23, at 6 (quoting Justice William Blackstone as saying in 1783 that the competence of Parliament was so great that Blackstone knew of no power in the ordinary forms of the constitution that is vested with authority This argument ignores the fact that high transaction costs, especially the collective action costs that dominate democratic voting, may prevent the legislature from effectively amending poor common law rules, although there is evidence that at least on occasion Congress can act to overturn or"amend" judicial decisions, notwithstanding these transaction costs. See, e.g. 18 U.S.C.$ 1346(amending definition of"property"in the mail fraud statute to include intangible rights, afte the Supreme Court held that such rights were not included), see generally MANCUR OLSON. THE LOGIC OF COLLECTIVE ACTION: PUBLIC GOODS AND THE THEORY OF GROUPS e william M. Landes Richard A Posner, Adjudication as a Private Good, 8J LEGAL STUD. 235(1979)
2000] SYNTHETIC COMMON LAW 7 common law system survived despite repeated threats, powerful criticism, and almost insurmountable obstacles, including – some argue – the emergence of Parliament as a power in the eighteenth century.26 As the argument goes, if common law adjudication had not been an efficient means of resolving disputes, given the state of English society at the time, it likely would not have persisted over time. Moreover, the fact that common law rules survived while legislatures were empowered to enact different rules is especially strong evidence that a well-functioning27 democratic society could do not better than those common law rules. Just as the common law was threatened in England,28 the expansive reach of Congress has threatened U.S. common law for many decades. Again, the argument goes, if the common law were not an efficient system, elected representatives would have substituted more efficient rules.29 In the 1970s, Judge Richard Posner and others attempted to buttress the intuitive appeal of the argument for common law with economic analysis. Their arguments also have an evolutionary perspective. In general, the economic argument, first advanced by Posner and William Landes, is that to the extent common law adjudication involves private parties acting in their own self-interest and judges deciding cases based on wealth-maximizing standards, only efficient rules will survive.30 Accordingly, the common law is wealth maximizing. Judges leave inefficient rules to the side, and over time preserve and follow only efficient rules. Other scholars then attempted to explain how the structure of common law adjudication reinforces this efficiency-seeking process. For example, George Priest argued that the process of litigation, and how parties choose whether and when to litigate, pushes common law Evolution of Commercial Norms, 26 J. LEGAL STUD. 377, 382 n.9 (1997) (citing several articles). 26 See TULLOCK, supra note 23, at 5-6; ARTHUR R. HOGUE, ORIGINS OF THE COMMON LAW 241 (1986). Tullock has argued that the common law was threatened several times during the Middle Ages, when the common law survived more in the memories of individual judges and practitioners as oral histories than in formal records. See, e.g., TULLOCK, supra note 23, at 8 (noting that the law was largely judge-made and unwritten, although some “common law court decisions were recorded, and occasionally the record would be consulted”). 27 This argument assumes the democracy is well-functioning one, an assumption that may or may not be true. 28 See TULLOCK, supra note 23, at 6 (quoting Justice William Blackstone as saying in 1783 that the competence of Parliament was so great that Blackstone knew “of no power in the ordinary forms of the constitution that is vested with authority to control it”). 29 This argument ignores the fact that high transaction costs, especially the collective action costs that dominate democratic voting, may prevent the legislature from effectively amending poor common law rules, although there is evidence that at least on occasion Congress can act to overturn or “amend” judicial decisions, notwithstanding these transaction costs. See, e.g. 18 U.S.C. § 1346 (amending definition of “property” in the mail fraud statute to include intangible rights, after the Supreme Court held that such rights were not included); see generally MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION: PUBLIC GOODS AND THE THEORY OF GROUPS (1965). 30 See William M. Landes & Richard A. Posner, Adjudication as a Private Good, 8 J. LEGAL STUD. 235 (1979)
8 10/9/00 DRAFT-DO NOT CITE WITHOUT PERMISSION VOL # rules in the direction of efficiency Inefficient legal rules are litigated more frequently, so judges can dedicate their efforts to establishing efficient rules, which then lead parties to settle cases out of court. Along different lines, but still advocating for the common law. Guido Calabresi was one of the first scholars to use economic analysis to demonstrate some of the disadvantages of a primarily statutory regime in the U.s. as compared to a regime allowing common law judicial"amendment" of statutes through interpretation. These economic arguments added an element of science and logic to the claim that the common law provides the best method of dispute resolution The economic arguments supporting the common law can be updated in the context of the ongoing debate about regulatory competition. This debate considers the question of whether a single monopolist regulator (e.g, the federal government) is superior or inferior to a group of competing regulators (e. g, the state governments). This argument, too, is evolutionary in tone: is the regulatory system that survives over time superior, or is the surviving system simply a result of a path-dependent movement from a set of somewhat arbitrary initial conditions? The contours of the debate vary, from corporate laws to securities law to environmental regulation rge L Priest, The Common Law Process and the Selection of eficient Rules, 6J. LEGAL STUD. 65(1977)(supporting efficiency conclusion with the argument that inefficient rules are more likely to be litigated, and then changed ). But see robert Cooter Lewis Kornhauser, Can Litigation Improve the Law without the Help ofJudges, 9J LEGAL STUD. 139(1980)(arguing efficiency conclusion requires very strong assumptions); Gillian K. Hadfield, Bias in the Evolution of Legal Rules, 80 GEO. L.J. 583(1992)(arguing efficiency conclusion holds only on average and cases are not a random sample); Eric Talley, Precedential Cascades: An Appraisal, 73 S CAL L rev. 87(1999)(describing precedent in terms of rational See GUIDo CALABRESL, A COMMON LAW FOR THE AGE OF STATUTES(1982) Calabresi was prescient in arguing that such amendment was required, in part because of barriers to formal legislative amendment, including interest-group pressures; federal statutes in particular have multiplied many-fold in recent decades, Clymer, Unequal Justice: The Federalization of Criminal Law, 70 S CAL L REV. 643(997)(describing recent expansion of federal criminal law) See generally William w. Bratton Joseph A Mc Cahery, Regulator Competition, Regulatory Capture, and Corporate Self-Regulation, 73 N.C. L Rev. 1861(1995); James D. Cox, Regulatory Duopoly in U.S. Securities Markets, 99 COLUM. L REV. 1200(1999 e,e.g,Bernard Black Reinier Kraakman, A Self-Enforcing Model of Corporate Law, 109 HARV. L REv. 1911, 1974-77(1996)(suggesting path nt ev law); Ehud Kamar, A R Theory of Indeterminacy in Corporate Law, 98 COLUM. L REv. 1908, 1927-28(1998) suggesting that corporate law has developed based on vague, open-ended standards ), Lucian Arye Bebchuk Mark Roe, A Theory of Path Dependence in Corporate Ownership and Governance, 52 STAN. L REv. 127(1999)(extending path dependence argument) e,e.g, Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 YALE L.J. 2359, 2384 n76(1998)(offering race-to-the top interpretation); Ralph k. Winter, Jr, State La, Shareholder Protection, and the of the Corporation, 6J. LEGAL STUD. 251, 262-92(1977)(same), James D Cox, Choice of Law Rules for International Securities, 66 U CIN. L REV. 1179 (1998)(discussing problems associated with privatizing securities regulation) Lucian Arye Bebchuk, Federalism and the Corporation: The Desirable Limits on
8 10/9/00 DRAFT – DO NOT CITE WITHOUT PERMISSION [VOL. #:# rules in the direction of efficiency.31 Inefficient legal rules are litigated more frequently, so judges can dedicate their efforts to establishing efficient rules, which then lead parties to settle cases out of court. Along different lines, but still advocating for the common law, Guido Calabresi was one of the first scholars to use economic analysis to demonstrate some of the disadvantages of a primarily statutory regime in the U.S. as compared to a regime allowing common law judicial “amendment” of statutes through interpretation.32 These economic arguments added an element of science and logic to the claim that the common law provides the best method of dispute resolution. The economic arguments supporting the common law can be updated in the context of the ongoing debate about regulatory competition.33 This debate considers the question of whether a single monopolist regulator (e.g., the federal government) is superior or inferior to a group of competing regulators (e.g., the state governments). This argument, too, is evolutionary in tone: is the regulatory system that survives over time superior, or is the surviving system simply a result of a path-dependent movement from a set of somewhat arbitrary initial conditions?34 The contours of the debate vary, from corporate law35 to securities law36 to environmental regulation.37 31 See George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) (supporting efficiency conclusion with the argument that inefficient rules are more likely to be litigated, and then changed). But see Robert Cooter & Lewis Kornhauser, Can Litigation Improve the Law without the Help of Judges?, 9 J. LEGAL STUD. 139 (1980) (arguing efficiency conclusion requires very strong assumptions); Gillian K. Hadfield, Bias in the Evolution of Legal Rules, 80 GEO. L.J. 583 (1992) (arguing efficiency conclusion holds only on average and cases are not a random sample); Eric Talley, Precedential Cascades: An Appraisal, 73 S. CAL. L. REV. 87 (1999) (describing precedent in terms of rational herding). 32 See GUIDO CALABRESI, A COMMON LAW FOR THE AGE OF STATUTES (1982). Calabresi was prescient in arguing that such amendment was required, in part because of barriers to formal legislative amendment, including interest-group pressures; federal statutes in particular have multiplied many-fold in recent decades, without much, if any, improvement in the clarity of legal rules. See, e.g., Stephen D. Clymer, Unequal Justice: The Federalization of Criminal Law, 70 S. CAL. L. REV. 643 (1997) (describing recent expansion of federal criminal law). 33 See generally William W. Bratton & Joseph A. McCahery, Regulatory Competition, Regulatory Capture, and Corporate Self-Regulation, 73 N.C. L. Rev. 1861 (1995); James D. Cox, Regulatory Duopoly in U.S. Securities Markets, 99 COLUM. L. REV. 1200 (1999). 34 See, e.g., Bernard Black & Reinier Kraakman, A Self-Enforcing Model of Corporate Law, 109 HARV. L. REV. 1911, 1974-77 (1996) (suggesting pathdependent evolution of corporate law); Ehud Kamar, A Regulatory Competition Theory of Indeterminacy in Corporate Law, 98 COLUM. L. REV. 1908, 1927-28 (1998) (suggesting that corporate law has developed based on vague, open-ended standards); Lucian Arye Bebchuk & Mark Roe, A Theory of Path Dependence in Corporate Ownership and Governance, 52 STAN. L. REV. 127 (1999) (extending path dependence argument). 35 See, e.g., Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 YALE L.J. 2359, 2384 n.76 (1998) (offering race-to-thetop interpretation); Ralph K. Winter, Jr., State Law, Shareholder Protection, and the Theory of the Corporation, 6 J. LEGAL STUD. 251, 262-92 (1977) (same); James D. Cox, Choice of Law Rules for International Securities, 66 U. CIN. L. REV. 1179 (1998) (discussing problems associated with privatizing securities regulation); Lucian Arye Bebchuk, Federalism and the Corporation: The Desirable Limits on
2000 SYNTHETIC COMMON LAW The common law is a good candidate for the regulatory competition debate because it originally depended on extensive competition among courts and judges. For example, just as many scholars argue that the competition among states for corporate charters is a race-to-the-top, driving the development of (Delaware) corporate law, one can argue that competition among courts and judges generally was a race-to-the-top, driving the development of English, and later American, common law. Over time, so the argument goes, the system that survived is superior. If it had not been superior, private parties would have opted to have their disputes governed by another regime; alternatively, rational and well-informed judges would have responded with different decisions. The viability of this argument depends on empirical research, which has not yet been done in the common law context For some scholars. it is enough to establish that the common lay is an efficient" method of dispute resolution. Yet there remains the State Competition in Corporate Law, 105 HARV. L REv. 1435, 1448-50(1992) (offering race-to-the-bottom interpretation) among e,e.g, Roberta Romano, supra note 35(arguing for regulatory competition tate securities law regimes within the U.S.); Stephen J. Choi Andrew T. Guzman, Portable Reciprocity: Rethinking the International Reach of securities Regulation, 71 S CAL L rev. 903(1998)(arguing for regulatory among national securities law regimes); Partnoy, Why Markets Crash, supra note 3 at #(criticizing and suggesting amendments to proposals for competition among international securities law regimes) See, e.g, Richard L. Revesz, Rehabilitating Interstate Competition Rethinking the"Race-to-the-Bottom"Rationale for Federal Environmental Regulation, 67NY U L. Rev. 1210(1992)(describing race-to-the-bottom versus nts in the context of enviro 38 Randy Barnett has written about the evolution of common law from competitive law merchant: " Many of [common laws] principles originated with the e common were determined in an era when common-law courts competed for legal business with other legal systems and therefore had a far greater incentive than today to be sensitive to the expectations of both parties. With this as its origin, I suggest that the correspon lence between common sense and common law is no coi nce.”See Randy e. Barnett, The Sound of silence: Default Rules and Contractual Consent, 78 VA.L.REV.821,910-11(1992) The argument in corporate law is that corporations choose to incorporate in Delaware to benefit from that state's value-enhancing corporate law rules. See, e.g Romano, supra note 35, at 2384 n 76(substantiating this claim with event studies) There is a question about whether common law competition was a race to the top or a race to the bottom. But it certainly was a race. See, e.g, Tom w. Bell, Public Choice and Public Law: The Common Law in Cyberspace, 97 MICH. L REV. 1746 1769-70(1999)(describing efficiency arguments ). The specialized courts of the law merchant often are cited as the predecessors to common law rules. See I. Trotter ardy, The Proper Legal Regime for"Cyberspace, 55 U. PITT. L REv. 993, 1019-21 (1994); David R Johnson David Post, Law and Borders- The Rise of Law in Cyberspace, 48 STAN. L REV. 1367, 1387-91(1996), see also Lisa Bernstei Merchant Law in a Merchant Court: Rethinking the Codes Search for immanent Business Norms, 144 U. PA L REV. 1765(1996). The law merchant courts evolved during the eleventh and twelfth centuries, when clients paid fees to courts. See BRUCE L. BENSON, THE ENTERPRISE OF LAW 60-62(1990) is that the has led to an inefficient and unfair ee infra Part Il. B I In the debate about common law, it frequently is un whether scholars are arguing that common law is efficient in a Pareto sense( better off without making another party worse off or in a r-Hicks sense(i. g
2000] SYNTHETIC COMMON LAW 9 The common law is a good candidate for the regulatory competition debate because it originally depended on extensive competition among courts and judges.38 For example, just as many scholars argue that the competition among states for corporate charters is a race-to-the-top, driving the development of (Delaware) corporate law,39 one can argue that competition among courts and judges generally was a race-to-the-top,40 driving the development of English, and later American, common law. Over time, so the argument goes, the system that survived is superior.41 If it had not been superior, private parties would have opted to have their disputes governed by another regime; alternatively, rational and well-informed judges would have responded with different decisions. The viability of this argument depends on empirical research, which has not yet been done in the common law context. For some scholars, it is enough to establish that the common law is an efficient42 method of dispute resolution. Yet there remains the State Competition in Corporate Law, 105 HARV. L. REV. 1435, 1448-50 (1992) (offering race-to-the-bottom interpretation). 36 See, e.g, Roberta Romano, supra note 35 (arguing for regulatory competition among state securities law regimes within the U.S.); Stephen J. Choi & Andrew T. Guzman, Portable Reciprocity: Rethinking the International Reach of Securities Regulation, 71 S. CAL. L. REV. 903 (1998) (arguing for regulatory competition among national securities law regimes); Partnoy, Why Markets Crash, supra note 3, at # (criticizing and suggesting amendments to proposals for competition among international securities law regimes). 37 See, e.g., Richard L. Revesz, Rehabilitating Interstate Competition: Rethinking the "Race-to-the-Bottom" Rationale for Federal Environmental Regulation, 67 N.Y.U. L. Rev. 1210 (1992) (describing race-to-the-bottom versus race-to-the-top arguments in the context of environmental regulation). 38 Randy Barnett has written about the evolution of common law from the competitive law merchant: “Many of [common law’s] principles originated with the competitive law merchant that preceded the growth of the common law. Many more were determined in an era when common-law courts competed for legal business with other legal systems and therefore had a far greater incentive than today to be sensitive to the expectations of both parties. With this as its origin, I suggest that the correspondence between common sense and common law is no coincidence.” See Randy E. Barnett, The Sound of Silence: Default Rules and Contractual Consent, 78 VA. L. REV. 821, 910-11 (1992). 39 The argument in corporate law is that corporations choose to incorporate in Delaware to benefit from that state’s value-enhancing corporate law rules. See, e.g., Romano, supra note 35, at 2384 n.76 (substantiating this claim with event studies). 40 There is a question about whether common law competition was a race to the top or a race to the bottom. But it certainly was a race. See, e.g., Tom W. Bell, Public Choice and Public Law: The Common Law in Cyberspace, 97 MICH. L. REV. 1746, 1769-70 (1999) (describing efficiency arguments). The specialized courts of the law merchant often are cited as the predecessors to common law rules. See I. Trotter Hardy, The Proper Legal Regime for “Cyberspace,” 55 U. PITT. L. REV. 993, 1019-21 (1994); David R. Johnson & David Post, Law and Borders – The Rise of Law in Cyberspace, 48 STAN. L. REV. 1367, 1387-91 (1996); see also Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code’s Search for Immanent Business Norms, 144 U. PA. L. REV. 1765 (1996). The law merchant courts evolved during the eleventh and twelfth centuries, when clients paid fees to courts. See BRUCE L. BENSON, THE ENTERPRISE OF LAW 60-62 (1990). 41 An alternative view is that the competition in common law was a race-to-thebottom, i.e., has led to an inefficient and unfair regime. See infra Part II.B.1. 42 In the debate about common law, it frequently is unclear whether scholars are arguing that common law is efficient in a Pareto sense (i.e., that no party can be made better off without making another party worse off) or in a Kaldor-Hicks sense (i.e., that no party can be made better off by an amount greater than the amount other parties are made worse off). In an environment of high transaction costs, the