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Ghei, Nita --- "The Optimal Timing of Lawmaking" [2011] ELECD 1062; in Parisi, Francesco (ed), "Production of Legal Rules" (Edward Elgar Publishing, 2011)

Book Title: Production of Legal Rules

Editor(s): Parisi, Francesco

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440326

Section: Chapter 4

Section Title: The Optimal Timing of Lawmaking

Author(s): Ghei, Nita

Number of pages: 8

Extract:

4 The optimal timing of lawmaking
Nita Ghei



Introduction
In a dynamic society, laws will need to change as economic relationships change,
as technological innovations take place, as social customs evolve. old laws,
broadly defined to include legislation, custom, and judge-made law, become
increasingly inefficient in the new environment. The question then is: what is
the optimal timing of lawmaking?
Customary law, by definition, changes by an endogenous process, and will
not be addressed here. The focus of the discussion will be legislation, where
the element of choice is substantial, and the agency problem consequently a
matter of importance. In common law jurisdictions, judge-made law remains
an important source of law making. While judges have far less discretion than
legislators in the matter of the hearing of a case, they do exercise some control
over the scope of the decision rendered, and therefore have some control of the
timing of lawmaking. nonetheless, legislation remains the type of lawmaking
where timing matters the most, and will be the focus of the discussion here,
including the inherent agency problems and the timing rules that emerge to
address these issues.
The process of lawmaking is analogous to investment (Parisi, Fon and ghei
2004; Parisi and Ghei 2005). More specifically, lawmaking shares three critical
characteristics with investments in physical assets: irreversibility in investment
(sunk costs); uncertainty about future returns; and discretion with respect to
the timing of investment. once enacted, the costs sunk into legislation cannot
be recovered if it turns out ...