Economics Dictionary of Arguments

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Norms, ethics, philosophy: norms define which actions are permitted, advisable or prohibited when certain circumstances are present. The philosophical discussion deals mainly with questions of its justification.

Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

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Robert Cooter on Norms - Dictionary of Arguments

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Norms/Cooter/Wangenheim: Cooter (1994)(1) [discusses] how the lex mercatoria, a set of rules that enforces and regulates contracts between merchants despite their not being subject to any common jurisdiction, evolved spontaneously, that is, without design or enforcement by governments. Nevertheless, so Cooter argues, judges deduce the law they impose on merchants by deducing their decisions from their observations of these social norms. Cooter argues that one may expect this set of norms to be efficient because they evolved in a framework that should tend toward efficiency.
Clay: In a similar vein, Clay (1997)(2) describes merchants in California who traded long before any state was established in the area.
Cooter: Not the least, Cooter (1994)(1) himself uses the positive description mainly as a starting point for his normative argument that courts should, under certain conditions, draw the rules they use to adjudicate and thereby transform into law, from the social
Parisi I 168
norms. The conditions that in his opinion ensure that social norms tend to be efficient are the following: social norms should be generally accepted inside the group, should not serve to extract welfare from outsiders, and should not be the expression of an inefficient evolutionary lock-in.
Problems: The last condition casts doubts on the practicability of the idea, since it requires that the courts are able to identify inefficient rules, an ability that would make reliance on social norms as a guide unnecessary.
Kraus: Kraus (1997)(3) adds as condition that the evolutionary process of social norms should be fast enough, which it need not be: it might be that technological evolution is so fast that the cultural evolution of social norms cannot keep pace with it. Then social norms will not be efficient.
Predecessors: Cooter (1994)(1) was not the first to argue in this direction. Hayek (1973)(4) argues the same, though with weaker conditions. >Norms/Economic theories, >Legal history/Economic theories.
Law: The reverse influence, that is the one that the law has on social norms, has also been studied by too few law-and-economics authors to expect anything close to profound knowledge in the field. A prominent starting point for the discussion is Cooter's (1998)(5) article on expressive law and economics. He argues that the evolution of social norms may have multiple attractors and that the law may guide social-norm evolution to one or the other.
Schelling: Up to this point, Cooter's argument is not much beyond what Schelling said in his 1978(6) book. However, Cooter goes further. By a model similar to the one by Kuran (1989)(7) on the sudden revolutions in Eastern Europe, he shows that a change in legal rules may express (whence the name of his theory) that enough individuals in society favor the new rule to make them law. Even if this law is not enforced, this expression of opinions may tip some further individuals' opinions on what social norm they think to be just, which in turn provides new information for yet further individuals who were close to changing their minds on what social norm to adhere to. Like an avalanche, this may trigger more and more individuals to change their minds on social norms so that the new norm may become widely accepted.

1. Cooter, R. D. (1994). "Structural Adjudication and the New Law Merchant: A Model of Decentralized Law." International Review of Law and Economics 14: 215-231.
2. Clay, K. (1997). "Trade Without Law: Private-Order Institutions in Mexican California."
Journal of Law, Economics and Organization 13: 202-231.
3. Kraus, J. S. (1997). "Legal Design and the Evolution of Commercial Norms." Journal of Legal
studies 26: 377-411.
4. Hayek, F. A. v. (1973). Law, Legislation and Liberty, Vol. I: Rules and Order. Chicago: University of Chicago Press.
5. Cooter, R. D. (1998). "Expressive Law and Economics." Journal of Legal studies 27: 585-608.
6. Schelling, T. C. (1978). Micromotives and Macrobehavior. New York: Norton.
7. Kuran, T. (1989). "Sparks and Prairie Fires: A Theory Of Unanticipated Political Revolution." Public Choice 8:235-284.

Wangenheim, Georg von. „Evolutionary Law and Economics.” In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Cooter, Robert
Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017

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