Working Paper No. 07-40:
Procedure in American and European Law: A General Economic Analysis
Peter Lewisch, Jeffrey Parker
Date Posted: 2007
This paper seeks to develop a general view on the economic analysis of procedural law (including civil, criminal, administrative, and arbitral procedure, and the law of evidence), with particular emphasis on comparing institutional differences between American and continental European legal systems.
The principal theoretical idea developed is that procedural law can function as either a complement to or a substitute for rules of substantive law, or both simultaneously. Therefore, the economic analysis of procedural law can not be separated entirely from the underlying substantive policy. Further consequences are that procedural rules can not be studied solely in terms of the conventional "expected value" model of litigation, or solely in terms of the conventional legal desiderata of "just, speedy, and inexpensive" adjudication. Litigation can be either too expensive or too inexpensive, in the latter case by inducing inefficient substitution away from optimal ex ante contracts or optimal ex ante substantive rules of law. In the economic analysis, it is the combination of both substantive and procedural rules that determine the ultimate efficiency properties of a legal system. Furthermore, agency cost and public choice problems are important to assessing those properties.
These ideas are applied to describe and critique the existing law-and-economics literature on two major topics: (1) the provision of law enforcement, including private versus public enforcement and civil versus criminal enforcement; and (2) the structure of procedural rules as influencing the costs, expedition, accuracy, and procedural fairness of adjudications. Under both topics, features of European and American procedural systems are compared.