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23 Sw. U. L. Rev. 443 (1993-1994)
Decentralized Law for a Complex Economy

handle is hein.journals/swulr23 and id is 453 raw text is: DECENTRALIZED LAW FOR A COMPLEX ECONOMYt Robert D. Cooterl As the economy grows in complexity, the constraints of informa- tion and motivation tighten on centralized lawmaking. Specialized business communities develop their own norms, which I call the new law merchant. Decentralized lawmaking involves selectively enforc- ing those norms. Selection should be based upon the incentive struc- ture which caused the norm to evolve, which I call the structural approach to adjudication. The structural approach to adjudication uses economics to revive and modernize the old conception that judges should find law, not make it. Norms evolve when players have incentives to signal that they are following a cooperative strategy which will increase the supply of local public goods. The obligations imposed by social norms are efficient in the absence of spill-overs, but the level of informal enforcement is deficient. I. LEGAL CENTRISM Central planning is a way of making law, as well as commodities. Officials must have the power to allocate resources to implement the central plan. To possess this power, the orders issued by planning offi- cials at the top must trump the rights of property and contract enjoyed by people and enterprises at the bottom. Thus public law crowds out private law. The paradigm for centralized lawmaking is a decree, in t A version of this article with a more detailed economics discussion will appear as Robert D. Cooter, Structural Adjudication and the New Law Merchant, in INTERNATIONAL REVIEW OF LAW AND ECONOMICS (forthcoming 1994). This Article draws upon a related paper of mine entitled The Structural Approach to Adjudicating Social Norms: Evolution of the Common Law Reconsidered (1990) (on file at Boalt Hall University of California, Berkeley, Working Papers in Law and Economics #90-5). I am grateful for the comments from Wolfgang Fikentscher, Paul Edwards, Judge Richard Posner, Dan Rubinfeld, Hans-Bernd Schafer, Claus Ott, and Goran Hagg, who participated in the Conference on European Corporate Law, Vitznau, Switzerland, September 1993; the participants in F.A. Hayek and Contemporary Legal Thought Symposium, Southwestern University School of Law, December 1993; and participants in a law faculty seminar, University of Michigan, Ann Arbor, November 1993. t Professor of Law, Boalt Hall University of California, Berkeley.

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