8 10/9/00 DRAFT-DO NOT CITE WITHOUT PERMISSION VOL # rules in the direction of efficiency Inefficient legal rules are litigated more frequently, so judges can dedicate their efforts to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 on8 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 path￾dependent 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-the￾top 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