The (Economic) Effects of Lay Participation in Courts – A Cross-Country Analysis

Legal philosophers like Montesquieu, Hegel and Tocqueville have argued that lay participation in judicial decision-making would have benefits reaching far beyond the realm of the legal system narrowly understood. From an economic point of view, lay participation in judicial decision-making can be interpreted as a renunciation of an additional division of labor, which is expected to cause foregone benefits in terms of the costs as well as the quality of judicial decision-making. In order to be justified, these foregone benefits need to be overcompensated by other – actually realized – benefits of at least the same magnitude. This paper discusses pros and cons of lay participation, presents a new database and tests some of the theoretically derived hypotheses empirically. The effects of lay participation on the judicial system, a number of governance variables but also on economic performance indicators are rather modest. A proxy representing historic experiences with any kind of lay participation is the single most robust variable.economic effects of legal systems, judicial decision-making, trial by jury, jurors, lay assessors, constitutional economics, civil society, quality of governance, history of thought

Islam and the Institutions of a Free Society: Many Problems, Little Hope

The rule of law, constitutional democracy, and market economy are taken as the core institutions of free societies. After arguing that shared values heavily influence institutions, it is asked whether Islamic values are conducive to those institutions. The values are ascertained via the economic ethics of Islam as lived today and the attitudes of some Muslim populations via the analysis of a recent opinion poll. Neither the values nor the attitudes of Muslim societies seem particularly supportive of the institutions of a free society.Islam; Values; Culture; New Institutional economics; rule of law; constitutional democracy; market economy

How (Not) to Measure Institutions

The statement “institutions matter” has become commonplace. A precondition for it to be supported by empirical evidence, is, however, that institutions are measurable. Glaeser et al. (2004) attacks many studies claiming to prove the relevance of institutions for economic development as being based on flawed measures of institutions, or not even on institutions at all. This paper shows that their criticism deserves to be taken seriously, but that it is somewhat overblown. Some of the difficulties in measuring institutions are described and some ways of measuring them are proposed.Institutions, Institutions vs. Policies, Measurement, Formal vs. Informal Institutions

Are International Merchants Stupid? - A Natural Experiment Refutes the Legal Origin Theory.

In economics, there is currently an important discussion on the role of "legal origins" or "legal families". Some economists claim that legal origins play a crucial role until today. Usually, they distinguish between Common Law, French, Scandinavian and German legal origin. When these legal origins are compared, countries belonging to the Common Law tradition regularly come out best (with regard to many different dimensions) and countries belonging to the French legal origin worst. International arbitration provides an ideal "natural experiment" to test this view empirically: in international trade, the contracting parties are free to choose the substantive law that suits their interests best. If the literature just cited was correct, we would expect that rational traders would structure their interactions according to some substantive law based on the Common Law tradition such as British or US American law. Although exact statistics are not readily available, the evidence from cases that end up with international arbitration courts (such as the International Court of Arbitration run by the International Chamber of Commerce in Paris) clearly demonstrates that this is not the case.Legal Origins, International Arbitration, Choice of Substantive Law

The Economic Effects of Competition Policy Cross Country Evidence Using Four New Indicators

This paper introduces a number of indicators on various aspects of competition laws and competition agencies in order to make competition policies comparable. It contains an indicator concerned with the objectives and the instruments of competition laws, a second indicator evaluating to what degree an economic – as opposed to a legal – approach to competition policy has been chosen. Based on the assumption that it is not the content of the law alone but also the structures erected in order to implement the law, it further presents an indicator reflecting the formal independence of competition agencies and a fourth one reflecting their factual independence. These four indicators are used to estimate the effects of competition policies on economic growth. It turns out that all four variables contribute to explaining differences in total factor productivity. Yet, their impact is not particularly robust to the inclusion of indicators for the general quality of institutions.Competition and Growth, Competition Policy, Independence of Competition Agencies, Delegation of Competence

Iudex Calculat: The ECJ's Quest for Power

Judicial Independence is a crucial aspect of the rule of law and the concept of separation of powers. It gives judges considerable leeway in interpreting and thereby modifying the constitution. In this paper, the role of the European Court of Justice (ECJ) as an actor in the strategic game played between the other actors on the European level as well as actors on the nation-state level (the respective governments, but also national courts, corporate actors and individuals) is inquired into. After describing the changes of the ECJs competence that have occurred since 1953, an attempt at explaining them is undertaken. It is shown that the ECJ has been able to bring about implicit constitutional change because its members are constrained less stringently than most supreme court judges on the nationstate level. It is furthermore shown that lower court judges have incentives to cooperate with the ECJ sometimes to the detriment of national supreme court judges.European Court of Justice, Economic Analysis of Court Behavior, Implicit and Explicit Constitutional Change, Preliminary Reference Procedure, Positive Constitutional Economics,

Does Arbitration Blossom when State Courts are Bad?

It is often conjectured that non-state dispute resolution blossoms when state courts are not independent or are perceived as low-quality courts. This conjecture implies a substitutive relationship between state and non-state dispute resolution. An alternative hypothesis argues that both the quality and the frequency of use of these two alternative mechanisms are complementary: societies with high-quality state courts would also be able to provide high-quality non-state dispute resolution. This is the first study that puts these hypotheses to an empirical test. It turns out that the lower the perceived quality of state courts, the less frequently conflicting firms resort to them. Second, firms in common-law countries turn away from state courts significantly more often than firms in civil-law countries. This result sheds doubt on the robustness of results generated within the legal traditions literature. Finally, in states that have created the preconditions for arbitration, businesspeople resort significantly more often to state courts. We interpret this as evidence in favor of the complementarity hypothesis.Alternative Dispute Revolution, Quality of Justice, Judicial Independence, Corruption, Private Provision of Public Goods.

The Economic Effects of Judicial Accountability. Some Preliminary Insights.

Judicial independence is not only a necessary condition for the impartiality of judges, it can also endanger it: judges that are independent could have incentives to remain uninformed, become lazy or even corrupt. It is therefore often argued that judicial independence and judicial accountability are competing ends. In this paper, it is, however, hypothesized that they are not necessarily competing ends but can be complementary means towards achieving impartiality and, in turn, the rule of law. It is further argued that judicial accountability can increase per capita income through various channels one of which is the reduction of corruption. First tests concerning the economic effects of JA are carried out drawing on the absence of corruption within the judiciary as well as data gathered by the U.S. State Department as proxies. On the basis of 75 countries, these proxies are highly significant for explaining differences in per capita income.Judicial Independence; judicial accountability; rule of law; economic growth; corruption; constitutional political economy.

The (Economic) Effects of Lay Participation in Courts - A Cross-Country Analysis

Legal philosophers like Montesquieu, Hegel and Tocqueville have argued that lay participation in judicial decision-making would have benefits reaching far beyond the realm of the legal system narrowly understood. From an economic point of view, lay participation in judicial decision-making can be interpreted as a renunciation of an additional division of labor, which is expected to cause foregone benefits in terms of the costs as well as the quality of judicial decision-making. In order to be justified, these foregone benefits need to be overcompensated by other – actually realized – benefits of at least the same magnitude. This paper discusses pros and cons of lay participation, presents a new database and tests some of the theoretically derived hypotheses empirically. The effects of lay participation on the judicial system, a number of governance variables but also on economic performance indicators are rather modest. A proxy representing historic experiences with any kind of lay participation is the single most robust variable.Economic Effects of Legal Systems, Judicial Decision-Making, Trial by Jury, Jurors, Lay Assessors, Constitutional Economics, Civil Society, Quality of Governance, History of Thought

How to Measure the Rule of Law

I argue that the rule of law consists of many dimensions and that much information is lost when variables proxying for these dimensions are simply aggregated. I draw on the most important innovations from various legal traditions to propose a concept of the rule of law likely to find general support. To make the concept measurable, an ideal approach is contrasted with a pragmatic one. The pragmatic approach consists of eight different dimensions. I show that the bivariate correlations between them are usually very low, evidence that more fine-grained indicators of the rule of law, rather than a single hard-to-interpret one, are necessary for its measurement. The paper presents a list of desirable variables that could improve the measurement of various aspects of the rule of law.Rule of Law, Institutions, Governance, Measurement, Formal vs. Informal Institutions