Legal Infrastructure Rule of Law Lawmaking and Law Enforcement Courts and Judicial Review Legal Origin and Legal Transplants Legal Harmonization and Legal Competition

Rule of Law Understanding Rule of Law. What Law is About: –Reducing transaction costs –Reducing uncertainty Legal certainty Judicial independence and judicial accountability: –Separation of powers

Lawmaking and Law Enforcement (1) Lawmaking: –Legislation –Judge-made law Law Enforcement –Effectiveness –Procedures, degree of formalism –Corruption

Lawmaking and Law Enforcement (2) Law in the Books v Law in Action –Adjudication –Enforcement of judicial sentences –Interpretation of law –Incompleteness of law

Why Courts Matter? (1) Economic theory generally supports the idea that judicial independence, and, more generally, high quality courts, facilitate economic growth. Good, independent courts enforce contracts and protect property, and by doing so encourage the investment which is crucial for economic development.

Why Courts Matter? (2) Causation is be complex. Good courts are not necessary for economic growth, but economic growth is likely to increase demand for them. In turn, improvement in the quality of courts is likely to facilitate increases in growth, which will further increase demand for high-quality legal infrastructure.

Why Courts Matter? (3) The empirical literature provides some support for the idea that independent courts encourage economic growth, but causation remains unclear and much work remains to be done.

Why Courts Matter? (4) There are alternative solutions to courts in order to solve conflicts: –Reputation –Private ADRs

Judicial Review Importance and quality of judicial review: –For private parties –For state Legislative and executive powers –Constitutional judicial review Administrative powers

Legal Origin (1) Common law: Anglo-American world; Civil law: –French – Code Napoleon –Germany – German Civil Code –Nordic/Scandinavian

Legal Origin (2) The theoretical idea –Growth –Law and Finance The civil law vs. common law –Codification –The role of precedent and judge-made law

Institutional Possibility Frontier (1)

Institutional Possibility Frontier (2)

Institutional Possibility Frontier (3)

Legal Transplant When is a legal transplant successful? –Local determinants –Preferences –Complexity –Coherence

Legal Harmonization and Legal Competition Why Harmonize? – Minimum standards –Input v Output –Are differences good? Competitive Federalism –Run to the Bottom or to the Top?