Darwinian Common Law

Last week I had a discussion with Ed Darrel about law.   In response to the Supreme Court Justice Oliver Wendell Holmes’ quote that his job is not to do justice, but apply the law, Ed wrote:

…in western law, we have given judges the ability to apply justice where the law fails — which is, by the way, where we get common law.

I asked by whose judgment do we determine when the law fails.  Ed responded:

We use the judge’s judgement.

I should have pointed out that the parties in dispute determine when law fails.  When they cannot reach an agreement privately, they then may decide to bring their dispute to court to be settled by a judge.

I then confused the term ‘common law’ with law when I wrote that I believe ‘common law’ emerges from custom. Ed wrote:

Common law is judge-made law, not custom…

I agree that judges codify common law through their judgments in court cases.  However, I still contend the true source of common law is custom or evolved social norms.

The view that law, in general, emerges from evolved human interactions is that of economist F.A. Hayek and others.  Don Boudreaux (an economist with a law degree) does a great job of laying out his own Hayek-inspired emergent order view of law in the video I linked to in this post.  At the 20 minute mark, Boudreaux defines law as:

Law is socially imposed constraints on behavior, that emerge from everyday, ordinary human behaviors, and that become embedded in widespread expectations.

When deciding a case that will become a part of common law, judges try to make sensible decisions.  How do they do that?

They listen to the arguments from both sides, consider the judgments on similar prior cases, refer to social norms as a guide among other things.  But the key is that evolved social norms weigh heavily on judgments that will set precedents for future similar cases.

In this interview with Richard Posner, regarding his book How Judges Think, Posner said (emphasis added):

American judges operate in a setting of extreme uncertainty, which forces them to exercise an uncomfortably large amount of discretion, casting them often in the role of de facto legislators. They are reluctant to admit that they are (as I call them in the book) “occasional legislators,” and have been skillful in concealing the fact from the public, being abetted in this regard by the legal profession, which has an interest in depicting the law as a domain of sophisticated reasoning rather than, to a considerable extent, of politics, intuition, and emotion. The secrecy of judicial deliberations is an example of the tactics used by the judiciary to conceal the extent to which such deliberations resemble those of ordinary people attempting to resolve disputes in circumstances of uncertainty. The concealment feeds a mystique of professionalism that strengthens the judiciary in its competition for power with the executive and legislative branches of government, the branches that judges like to call “political” in asserted contradistinction to the judicial branch.

What do ordinary people do when attempting to resolve disputes?  They heavily consider what is customary.

It’s not always perfect.  None of us perfectly adhere to social norms.  Sometimes we modify existing norms which might result in a new norm.  That’s what makes it an evolutionary process.  And one of our evolved social norms is when we cannot settle a dispute on our own, we seek the help of a third party.  Sometimes those are judges.

Maybe a better way to make the point of norm-based common law would be to ask this question:

What do you think might happen if judges made arbitrary decisions that had no basis in social norms and customs?

I don’t think it’s a stretch to imagine that judges and the legal system would quickly lose credibility with the people.  We might even see the rise of alternative dispute resolution methods, like private arbitration (hmmm…).

All I can say is that I for one feel more comfortable with judges who agree with Oliver Wendell Holmes on the matter.  Especially in cases where codified law fails (or doesn’t exist), I’d much prefer a judge who thinks his role is to discover the existing non-codified law that is “embedded in widespread expectations” than the judge who thinks he can make it up as he goes.

Planning for the Worst

A friend sent me a link to Richard Posner’s column in the Washington Post, From oil spill to the financial crisis, why we don’t plan for the worst.

For the most part, I agree with Mr. Posner’s column, but I do have some thoughts.

I think Posner misses the role government played in the financial crisis.  I agree with Russ Roberts’s take that there was a feeling government would step in if things got bad.  Robert’s makes the case that the precedence of bailouts had been set for 30 years.  Government officials were deeply entwined in the debacle by setting public goals to expand home ownership and directing Freddie and Fannie to buy bad mortgages to fulfill their goals of expanded home ownership.  They had a horse in the race.  Why would they let if fail?

Government involvement distorted price signals in the market – something that gets no attention in the media.  Instead of buying a mortgage based solely on the economics (can this guy pay it back, will the house be worth this much?) they were also buying an implied option of a government bailout (if the guy can’t pay back or housing prices go down, government will step in and I’ll get something back).

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