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On Legal Regimes

Jack and I had a conversation last night that sparked my thoughts on my intermittent but ongoing research in the law and finance field.

As I noted last night, common law regimes tend to hold the State within the purview of the law. As both law giver and subject, the state, in the eyes of an independent judiciary, tends to have less sway over matters in which it itself has a vested interest; other entities are entitled to relatively more fairness in judicial decisions in a common law regime than in a civil law regime. This, as it turns out, has important implications for things such as financial development, as LLSV 1997 (if you can't track this citation down, stop reading here) claims. More fundamentally, the independence of a judiciary and the fact that in common law regimes (and here, we can use the US as perhaps the prototypical example) judges face little regulation and few job related incentives, beyond those for misbehavior (you can't use a cock pump while hearing a case. As an aside, note that if judges were drawn randomly from a population one would quickly notice the quick decline in the quality of judicial services; the current system, where one must generally have at least a JD and a work ethic rivaling that of most macacas to be considered for a post, neatly avoids that problem by selecting generally self-motivated, ethical people, is vastly superior). The combination of a positive selction bias and the lack of incentives that can be strictly tied to political desires is a critical factor in a judiciary that strives for normative ideals like justice.

By contrast, judicial independence in civil law regimes is at best coincidentally similar and at worst nil. Judges face non trivial threats relating to tenure, job placement, etc; and the selection process generally isn't very selective; you can apply for a bench job, in some cases, right after passing the bar. These regimes are also typically ones where the State is the ultimate lawgiver and arbiter and in some sense is outside of the law's purview (an idea that I think must have its hoary origin in divine right theory). Here the state, through legislative or executive means, creates law, with all the problems that lawmaking for strictly political purposes entails, and passes on to the judiciary the task of making brightline decisions, rather than the interpretation and scholarship that goes into the creation of case law in common law regimes.

Another comment Jack made, and I think might be more relevant to the thrust of his paper (or his pelvis) was taht the Supreme Court of the US is perenially the governmental institution with the highest public legitimacy ranking. While he's off arguing for a more nebulous Baudrillard-style argument as to why it's the print medium that is so key to establishing the distance that implies respect and legitimacy (ok, I don't think it's really nebulous, but perhaps isn't necessarily that important), I think that a simpler argument might suffice: Governments seek to make their commitments credible, and the act of making binding commitments (with the knowledge that there is an independent entity for adjucation of disputes is probably a pretty strong reason as to why SCOTUS retains a great deal of credibility. It's able to make relatively fair and completely binding decisions in disputes where functionally everyone has a stake. Additionally, independent judiciaries through the existence of clear-cut feedback mechanisms are key to the production of vital information about governmental mechanisms that resist overt review and thus serve to inform both the electorate and political actors of the success that political, bureaucratic processes.

I'm at this point just rambling, but it's time for class. Comments welcome. Especially in the form of Polish jokes.