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Contingent judicial deference: theory and application to usury laws

Author

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  • Guimaraesy, Bernardo
  • Meyerhof Salama, Bruno
Abstract
Legislation is less likely to be enforced when courts disagree with it. Building on this premise, we propose a model of Bayesian adjudicators that use their own prior knowledge to evaluate the appropriateness of legislation. The model yields a non-monotonic relation between written rules and effectively enforced rules. Hence the enactment of legislation prohibiting something raises the probability that courts will allow related things not expressly forbidden. Moreover, legal uncertainty is greater with legislation that commands little deference from courts than with legislation that commands none. We discuss examples of effects of legislated prohibitions (and, in particular, usury laws) that are consistent with the model.

Suggested Citation

  • Guimaraesy, Bernardo & Meyerhof Salama, Bruno, 2017. "Contingent judicial deference: theory and application to usury laws," LSE Research Online Documents on Economics 86146, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86146
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    File URL: http://eprints.lse.ac.uk/86146/
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    More about this item

    Keywords

    adjudication; courts; prohibitions; interest rate cap.;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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