NCJ Number
59831
Journal
Journal of Legal Studies Volume: 8 Issue: 2 Dated: (MARCH 1979) Pages: 235-284
Date Published
1979
Length
50 pages
Annotation
THE OPERATION OF PRIVATE JUDICIAL SYSTEMS IS EXAMINED FROM A THEORETICAL ECONOMIC STANDPOINT IN ORDER TO DETERMINE WHETHER ADJUDICATION CAN BE VIEWED AS A PRIVATE ECONOMIC GOOD FOR WHICH A FREE MARKET CAN OPERATE.
Abstract
SUPPLY AND DEMAND FOR TWO PUBLIC AND PRIVATE JUDICIAL FUNCTIONS, RULE FORMULATION AND DISPUTE RESOLUTION, ARE ANALYZED. THEIR DIFFERING CHARACTERISTICS INDICATE THAT DISPUTE RESOLUTION IS MORE ADAPTABLE TO A MARKET MODEL THAN IS RULE FORMULATION. EXAMPLES FROM PRIMITIVE SOCIETIES AND COMMERCIAL ARBITRATION CLARIFY THE CONCEPT OF ADJUDICATION ACCORDING TO MARKET PRINCIPLES. COMPETITION IN ADJUDICATION EXISTS BECAUSE THERE ARE SUBSTITUTES FOR PUBLIC ADJUDICATION, INCLUDING PRIVATE ADJUDICATION, NONADJUDICATIVE SUBSTITUTES SUCH AS LIQUIDATED DAMAGES CLAUSES, AND OTHER COURT SYSTEMS. A VOLUNTARY RELATIONSHIP BETWEEN DISPUTANTS IS NECESSARY FOR THIS COMPETITION TO EXIST. PRIVATE ADJUDICATION'S GROWTH RATE, WHICH IS DOUBLE THAT OF FEDERAL CASES, IS CITED TO SUPPORT THE ARGUMENT THAT AMERICANS ARE INCREASINGLY SATISFIED WITH PRIVATE ADJUDICATION. AN ECONOMIC MODEL FOR THE DECISION WHETHER TO SETTLE A DISPUTE IN OR OUT OF COURT IS PRESENTED AND APPLIED IN BOTH THE PRESENCE AND ABSENCE OF CONTRACTUAL RELATIONSHIPS BETWEEN THE PARTIES. IN ADDITION, IT IS ARGUED THAT RECENT LITERATURE HAS OVERSTATED THE POSITION THAT COURT-GENERATED RULES ARE EFFICIENT PRODUCTS OF PRIVATE INPUTS. IT IS CONCLUDED THAT (1) PUBLIC COURTS DO NOT AUTOMATICALLY GENERATE ECONOMICALLY EFFICIENT RULES; (2) PRIVATE ADJUDICATION'S LAW AND PRACTICES ARE STRONGLY INFLUENCED BY ECONOMIC CONSIDERATIONS AND CAN BE EXPLAINED IN ECONOMIC TERMS; AND (3) ECONOMIC THEORY CAN THEREFORE BE USED TO EXPLAIN FUNDAMENTAL ASPECTS OF THE LEGAL SYSTEM. FOOTNOTES ARE INCLUDED.