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Common Law and The Financial Crisis

There has recently been a flurry of popular interest in English common law. Niall Ferguson praised it in his recent BBC Reith Lectures, and British barristers present two separate BBC series exploring the evolutionary adaptive nature of common law, its world-influencing “standards of fairness” and “wondrous strength” in enabling British economic triumphs of yesteryear. Opportunities arose to complain more than a little about the invasion of European law and to cast doubt on the economic efficacy of “rule-bound” continental (civil or roman) law.

The quarrel about the relative superiority of Common vs Civil Law is an old one. I will draw attention to a neglected earlier framing of the opinion that neither system of law is inherently superior. Law of any origin will serve well, goes the argument, so long as it is market-friendly, impersonal, fairly predictable, and -- last but not least -- enforceable.

1. Legal origins

The most commonly cited evidence on the superiority of common law is the meticulous long-running economic research program known as LLSV after the authors -- La Porta, López-de-Silanes, Shleifer, Vishny. A downloadable 2008 article - Economic Consequences of Legal Origins - is most important as a summing-up and response to critics.