10/9/00 DRAFT SYNTHETIC COMMON LAW FRANK PARTNOY L INTRODUCTION IL. THE LIMITS TO COMMON LAW A. The Case for Common Law 1. Evolution and Efficiency 2. The Supply of Legal Rules B. The Case Against Common Law 1. Devolution and inefficiency 2. The Shrinking Supply of Legal RI II. ALTERNATIVES TO COMMON LAW A. The viability of statutory Law B. Private law C. Opting Out through Private Adjudication IV. A PROPOSAL: SYNTHETIC COMMON LAW V. USING SYNTHETIC COMMON LAW IN DERIVATIVES DISPUTES A. Line-Drawing in the Derivatives Market B. A Critique of the Four Approaches 2. Judicial Treatment of Derivati 3. The Limited Applicability of Private Law C. How Synthetic Common Law Could Govern Disputes D. Institutional Barriers to Synthetic Common Law . INTRODUCTION In modern society, most everything is, or can be, synthetic: food clothing. shelter. even thought. Yet law continues to be real- Real Associate Professor, University of San Diego School of Law. J D, Yale Law School, 1992. Larry Alexander, Kevin Cole, Mitu Gulati, Peter Huang, Shaun Martin Dennis Patterson, Sai Prakash, Dan Rodriguez, Emily She and Mary Jo wiggins provided helpful advice on an earlier draft. I am grateful to the University of San Diego School of Law for financial suppor As to thought, some scholars have attempted to use findings in the field of to explain lay ng. See, e.g, Dan Hunter, Out of Their Minds: Legal Theory in Neural Nerworks, 7 ARTIFICIAL INTELLIGENCE L. 129 (999)(examining the use of neural networks in modeling legal reasoning) Commentators previously have suggested some replacements for law in stions ha nt ublic statutes and cases with new public law, see mElvin A EIsENBERG, THE NATURE OF THE COMMON LAW 78(1988); or(2)replacing current public statutes and cases with new private law in the form of private statutes (i.e, contractual provisions),see Part Ill. B infra. However, no commentator has suggested replacing public statutes and cases with new private law in the form of synthetic cases(.e, synthetic common aw). For an excellent review of Professor Eisenberg's book, see Stephen M Bainbridge, Social Propositions and Common Law Adjudication. The Nature of the Common Law by Melvin A. Eisenberg, 1990 U ILL L REV. 231(1990)10/9/00 DRAFT SYNTHETIC COMMON LAW FRANK PARTNOY* I. INTRODUCTION II. THE LIMITS TO COMMON LAW A. The Case for Common Law 1. Evolution and Efficiency 2. The Supply of Legal Rules B. The Case Against Common Law 1. Devolution and Inefficiency 2. The Shrinking Supply of Legal Rules III. ALTERNATIVES TO COMMON LAW A. The Viability of Statutory Law B. Private Law C. Opting Out through Private Adjudication IV. A PROPOSAL: SYNTHETIC COMMON LAW V. USING SYNTHETIC COMMON LAW IN DERIVATIVES DISPUTES A. Line-Drawing in the Derivatives Market B. A Critique of the Four Approaches 1. Piecemeal Regulation of Derivatives by Statute 2. Judicial Treatment of Derivatives Disputes 3. The Limited Applicability of Private Law 4. Some Attempts at Arbitration C. How Synthetic Common Law Could Govern Disputes D. Institutional Barriers to Synthetic Common Law VI. CONCLUSION I. INTRODUCTION In modern society, most everything is, or can be, synthetic: food, clothing, shelter, even thought.1 Yet law continues to be real.2 Real * Associate Professor, University of San Diego School of Law. J.D., Yale Law School, 1992. Larry Alexander, Kevin Cole, Mitu Gulati, Peter Huang, Shaun Martin, Dennis Patterson, Sai Prakash, Dan Rodriguez, Emily Sherwin, Tom Smith, Ed Ursin, and Mary Jo Wiggins provided helpful advice on an earlier draft. I am grateful to the University of San Diego School of Law for financial support. 1 As to thought, some scholars have attempted to use findings in the field of artificial intelligence to explain law and legal reasoning. See, e.g, Dan Hunter, Out of Their Minds: Legal Theory in Neural Networks, 7 ARTIFICIAL INTELLIGENCE & L. 129 (1999) (examining the use of neural networks in modeling legal reasoning). 2 Commentators previously have suggested some replacements for law in particular areas, but those suggestions have involved either (1) replacing current public statutes and cases with new public law, see MELVIN A. EISENBERG, THE NATURE OF THE COMMON LAW 78 (1988); or (2) replacing current public statutes and cases with new private law in the form of private statutes (i.e., contractual provisions), see Part III.B. infra. However, no commentator has suggested replacing public statutes and cases with new private law in the form of synthetic cases (i.e., synthetic common law). For an excellent review of Professor Eisenberg’s book, see Stephen M. Bainbridge, Social Propositions and Common Law Adjudication: The Nature of the Common Law by Melvin A. Eisenberg, 1990 U. ILL. L. REV. 231 (1990)