My writing project this summer is now taking shape as a draft manuscript, and is available for download on SSRN. I would really appreciate current or former students, colleagues, and friends downloading it and giving me feedback on it, as I plan to spend the Fall revising it and then submit it to journals in February. The title/link is Codification and Transaction Costs, and here is the tentative abstract:
The consensus view in the academic literature has been that rules present lower transaction costs – in the form of information costs – for the courts and citizenry, when compared to standards. Rules are more specific and detailed, so there is less uncertainty and less need for sophisticated interpretation. At the same time, the prevailing wisdom holds, specific rules impose higher enactment costs for legislatures. Systematic codification, which became of universal feature of American statutes in the twentieth century, seems to invert this relationship, lowering transaction costs for legislatures; for the citizenry, codification increases legal information costs as a result of the proliferation of statutes, which is a consequence of the lower transaction costs for rulemakers (i.e., legislators and regulatory agencies). Even though an individual statute may be clearer and more precise in a codified system, the sheer number of rules, and the quantity of details (their aggregate volume) present information costs that outweigh the benefits of the greater precision. On the legislative side, lower enactment costs resulting from codification make it easier for special interest groups to obtain their desired legislation; codification also facilitates legislative borrowing, which diminishes the “laboratories of democracy” phenomenon. For the courts, codification has impacted the way judges interpret statutes, focusing more on the meaning of individual words than on the overall policy goals of enactment. We have misconceived the benefits and costs of codification, overlooked the real tradeoffs involved, and have sometimes obtained the exact opposite of the result that legal reforms intended.