The common law has long been hypothesized to promote economic efficiency. Judges will implicitly (or for some, explicitly) attempt to craft legal rules that will enhance social welfare. But a judge’s ability to do so depends on their knowledge of the underlying factual circumstances and on their incentives to modify legal rules to accommodate changing circumstances. As such, the structure of the judicial system plays a large role in determining whether legal rules will be modified to promote social welfare.
Professor Gillian K. Hadfield tackled this issue in her paper, The Dynamic Quality of Law: The Role of Judicial Incentives and Legal Human Capital in the Adaptation of Law, which she presented at the Law and Economics Workshop. She used a mathematical model to explore how certain aspects of a judicial system—the incentives for lawyers to make novel arguments, and the incentives for judges to modify legal rules—will affect the evolution of legal rules in the face of changing economic circumstances. Her model can then be used as a basis for comparing different judicial systems and their efficacy in producing socially desirable legal rules.