Title: Essays in law and economics
Description: This dissertation consists of three chapters linked by a common thread, namely using economic analysis to measure the discretion afforded to judges in the operation of the legal system. Legal decisions sometimes conflict with precedents. In Chapter 1, we present a framework to identify inconsistently-decided cases, measure the extent of such inconsistencies, and uncover the underlying sources of conflicting decisions in a commercial law setting. We create a new dataset tracking the consistency of 174 judicial decisions from the California Court of Appeal determining the enforceability of arbitration clauses in standard-form contracts. Our results show that cases conflict with about one-quarter of relevant precedents. Controlling for the facts of the case, we find that conflicting political ideologies of the judicial panels and the non-publication of precedents increase the likelihood of inconsistency between cases and precedents. Appellate judges are afforded a degree of discretion when outlining the relevant law in a written opinion. Citations of precedent in legal opinions are often thought to reflect the quality and influence of the precedent, however they may instead reflect biases that affect the development of the law. In Chapter 2, we examine the citation practices of California Court of Appeal judges in contract enforcement cases and ask whether the judge simply makes a decision and then uses citations of precedents with the same result to ex post justify the decision.

That is: do citations suffer from "result bias"? We take an instrumental variables approach, using political ideology as an instrument for the decision and uncover no evidence of result bias in our sample. The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. In Chapter 3, we create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.