Judges’ consistency & the role of predictive analysis: Judges’ consistency andamp; the role of predictive analysis Benito ARRUÑADA Pompeu Fabra University Workshop on 'Law andamp; Economics for European Law' EALE andamp; University of Luxembourg Luxembourg, November 10, 2006


Judges’ consistency requires predictive analysis: Judges’ consistency requires predictive analysis Benito ARRUÑADA Pompeu Fabra University Workshop on 'Law andamp; Economics for European Law' EALE andamp; University of Luxembourg Luxembourg, November 10, 2006


Uncontroversial claim: Uncontroversial claim Judges need good analysis to use their discretion well


1. Which analysis is “good”?: 1. Which analysis is 'good'?


Testable analyses are able to predict human behavior: Testable analyses are able to predict human behavior Only predictive ability makes possible to compare andamp; choose between alternative analyses, identifying the best analysis Two consequences: The ‘economic’ adjective is misleading Even wrong: e.g., evolutionary biology explains more for adoption and crime on children (Owen Jones works) Doubts on the value of legal positivism, in essence taxonomy: Systematic analysis Analogy Authority


Doubts on legal positivism: Doubts on legal positivism Does not predict behavior  not testable, dogmatic Useful to guide judges fitting cases into the law  Enough for judges applying ‘good’ law (robot judges)—But How to produce good law? (admittedly a question relevant for law-makers , not for robot judges) 19th century relied on analysis: Law andamp; Econ—e.g., property law 20th century? E.g., car dealers, payment delays (Arruñada et al, JLEO, 2001, 03; JLE 05; RLE 05)) Less adequate the greater the discretion of judges Greater in the Common Law judges traditionally decide according to rules of equity and nature of circumstances But increasing in many Civil Law jurisdictions


2. Why do judges need predictive analyses?: 2. Why do judges need predictive analyses?


Judges need predictive analysis: Judges need predictive analysis To achieve any of two possible standards when exercising their discretion: Not only ‘socially desirable’ or ‘efficient’ decisions But merely decisions consistent with the judge’s objectives


The compassionate judge: The compassionate judge Worried for the poor, this judge uses her discretion to favor a poor party (e.g., a tenant) Is her decision consistent with her objectives? Obvious: Little 'predictive analysis' necessary to know that a poor party is now richer Not so: She cared for the poor, not for a poor She needs predictive analyses to ascertain systemic consequences: those for the millions of poor in society (i.e., no flats for rent)


3. Generalizing the argument: 3. Generalizing the argument


Necessary conditions for markets*: Necessary conditions for markets* Efficient definition of the exchange Freedom of contract ex ante (contracting) Use of new information ex post (fulfillment) Enforcement Property rights Contractual agreements * i.e. using a broad concept of ‘market,’ so that it includes implicit human exchanges


How judges enable markets: How judges enable markets Efficient definition of the exchange PROTECT Freedom of contract ex ante EXPLOIT New information ex post Enforcement DEFINE andamp; PROTECT Property rights EXECUTE Contractual agreements


Examples of judicial failures: Examples of judicial failures Defining the exchange Wrongly ‘improving’ on freedom of contract Hindsight biases in an uncertain exchange Jurisdictional failure: ad nutum ('at will') termination of car dealers (or even workers) Enforcement failures mortgages in Brazil, Lima, etc


Dominant feature of judicial failures: inconsistency b/w goals & means: Dominant feature of judicial failures: inconsistency b/w goals andamp; means An idea of 'justice' for the case, for an individual in a class, within a contract Useful for judicial decisions with a mere taxonomic function within given law But insufficient for rulemaking judicial activity because it forgets about systemic consequences Because it precludes the same idea of justice (whatever good) for the whole class of individuals, especially through potential contracts that become nonviable


Conclusion: Conclusion The use of analyses predicting human behavior in a comparable manner is essential for judges to the extent that they enjoy discretion and they want to use it sensibly—‘sensibly’ meaning consistently with their objectives, whatever these may be.


Judges’ consistency requires predictive analyses: Judges’ consistency requires predictive analyses Thank you for your attention