Via utriusque iuris œconomice conspecta, Mechanism Design, Path Dependence and Law

This short law and economics work offers a sustained focus on two disparate foundations for Western European legal arran­gements: one grounded in Roman law and the other based on the common law. Instead of comparing, as modern business scholars have done, the efficiency of the common law with the present-day civil law, with its own inefficiencies, the authors seek to outline through mechanism design theory what exactly are the origins and development of the present-day common law system in the United States, whether it is exceptional, and how we could further modernize it. The tradition of civil law enters the discussion insofar as sorne aspects of classical Roman law, as a paradigmatic private-law system, offer up alternate possibilities in the design of private-law institutions. Next, the authors turn to what mechanism design theory might have to say about the design of public-law institutions. Under the general assumptions of democratic theory, legislatures have positive legitimacy to make law because of the power of the people who elected them. Throughout the world, however, unelected judges also make law through the exercise of judicial review. What, if anything, gives such judges positive legitimacy to make law? The answer the authors provide may be surprising. They demonstrate that judges' positive legitimacy is based on the power of people. The court system allows a single individual to act collectively with other similarly situated individuals spread out through time. Courts are insula­ted from the political process because unelected judges are beholden to a temporally-disconnected group, rather than to contemporaneous constituencies. Acknowledgments 1 Foreword 3 Mark Gergen INTRODUCTION: MECHANISM DESIGN, PATH DEPENDENCE AND LAW 7 Insurgency of Mechanism Design 7 Path Dependence and Legal History 14 CHAPTER ONE: THE GENIUS OF THE ROMAN LAW 19 What Makes the Roman Law Admirable? 19 Incentive and Information Mechanisms in Roman Private Law 24 Roman Law of Property 24 Clearly Defined Private Domains 24 Clearly Publicized Ownership 30 Private Management of Resources 31 Institutional Mechanisms for Maintaining Typical Property Through Time 35 Roman Law of Obligations 39 Private Choices to Cooperate 39 Private Choices to Cooperate Without Stipulating All Eventualities 44 Private Cooperation Within Extracontractual Relationships 47 Private Cooperation Between Strangers 50 Roman Law of Commerce, Finance and Investment 52 Social Norms Complete Private Ordering in Roman Private Law 61 Private Self-Help in Roman Law Procedure 63 Roman Legal Scholarship in the Restatement of Civil Law Along the Lines of Law and Economics 65 CHAPTER TWO: THE EXCEPTIONALISM OF THE COMMON LAW 71 What Makes the Common Law Efficient? 71 Rights Held in Things Under English and Anglo-American Common Law and Equity 76 Real Property Taken From Feudal Law 78 Standardized Bundles of Property Rights 79 Standardized Unbundled Property Rights 86 Private Ownership of Mineral Rights 89 Personal Property Taken From Natural Law 90 Bailments Can Be Many Things 93 ‘Intellectual Property’ Is Not Property 95 Institutional Mechanisms for Maintaining Property Rights Over Time 98 Mischief Wrought by the Common Law 100 Use of Feudal Tenure to Strip Native Americans of Their Property 100 Public-Law Nature of Slavery and Indentured Servitude 107 Duties Owed to Persons Under English and Anglo-American Common Law and Equity 115 Contracts Taken From Canon Law 118 Standardized Contracts Transplanted Into Commercial Law 122 Unstandardized Contracting at Common Law 126 Efficient Breach 132 Contracts Rightly Understood 134 Torts Mirror the Roman Law 136 Tripartite Structure of Intentional Torts, Negligence, and Strict Liability 139 Torts Rightly Understood 143 Institutions Which Support the Marketplace in the United States 157 Implied and Constructive Warranties Under Commercial Law 158 Fiduciary Duties at Equity 162 Equitable Estoppel 165 Equitable Trusts 166 Equity in Delaware 167 Civil Procedure Under English and Anglo-American Common Law and Equity 170 Jury Trial Taken From Roman Law 170 Bifurcated Structure of Common Law and Equity 175 Equity Follows the Law 176 Law Secreted at the Interstices of Procedure 177 One Last Word About English and Anglo-American Common Law and Equity 177 CHAPTER THREE: THE PROVINCE OF THE RULE OF LAW 181 The Rule of Law, Not of Men 181 Che Guevara Signaling Game 190 Saint Thomas More Signaling Game 195 A New, Better-Defined Formalism 204 Cumulative Index 207 About the Authors 227