The Economic Effects of Judicial Selection Dr. John A. Dove Faulkner Lecture Outline

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1 The Economic Effects of Judicial Selection Dr. John A. Dove Faulkner Lecture Outline 1. Introduction and Meta-Analysis a. Why do economists care about the judiciary and why does the judiciary matter for economics? i. Recognition of institutions and comparative institutional analysis: 1. Institutions are primary factor that helps or hinders economic growth and development. 2. Necessitates protection of property rights and the rule of law. ii. Economic definition of institutions (North, Wallis, and Weingast 2009, pg. 15): Formal rules, written laws, formal social conventions, informal norms of behavior, and share beliefs about the world, as well as the means of enforcement. [emphasis mine] iii. Institutions incentivize productive entrepreneurial activity and disincentivize unproductive and destructive entrepreneurial activity. 1. This drives economic growth and change. 2. Enforcement of property rights and rule of law requires an independent, third party arbitrator (court). a. Where this exists, it will minimize the ex ante costs associated with economic risk taking and minimize the risk of arbitrary expropriation. b. North (1990): Courts are centrally important economic institutions. 2. Economic Theory Applied to the Judiciary in the US a. Method of selection will create particular incentives and constraints that are imposed on judicial actors, which will influence behavior in predictable ways. i. Important to compare state courts then and the method of selecting judges. b. Economic theory applied: i. Changes in the relative costs and benefits that individuals face change the relative prices of pursuing or avoiding certain behavior (it changes the incentives and constraints). 1. These changes will lead to predictable changes in individual behavior (as individuals act rationally) at the margin. a. Increase (decrease) the price leads to less (more) of the behavior being pursued The Law of Demand. b. Marginal analysis: Does not create an across the board change, but some individuals will change behavior. ii. Public Choice Revolution (Buchanan and Tullock 1962) 1. Public choice is the economic analysis of the political process Politics without romance. a. Economic actors will all act predictably in their own selfinterest whether in the private or public sector.

2 b. The only differences are the relative incentives and constraints that exist. 2. Application to the judiciary a. Need to incentivize accountability to the law and the legal system. b. Popularly elected judges need to capture the median voter and potential special interests in their jurisdiction. i. Does not necessarily increase independence and may incentivize strategic behavior to win election or re-election. c. Appointive or merit selection systems i. Philip Dubois (1980, pg. 163): [Appointed judges] have no constituency of contributors, supporters or voters whose support they must cultivate by their own on-the-bench behavior. d. Theoretical considerations (Maskin and Tirole 2004) What are the costs and benefits of making public officials (judges particularly) accountable? i. Benefits: 1. Electoral accountability will force a judge to otherwise would not, to act in the public interest or face possible removal. ii. Costs: 1. Electoral accountability incentivizes pursuing actions that are popular, though potentially inconsistent with the rule of law and time-consistent public policy. 2. Also may give majorities too much power in shaping government and the law especially important for a judiciary where minority rights are a concern. iii. Overall the theoretical results suggests that where technical decisions are required, they are best determined by an appointed decision maker. 3. What Do the Data Say? a. Tort awards to in-state plaintiffs against out-of-state defendants are $363,000 higher in popularly elected states relative to others (Tabarrok and Helland 1999). b. Both rates and levels of public corruption are significantly lower in merit selection and appointive states (Cordis 2009). c. Political Business Cycles The change in behavior that occurs leading up to an election: i. Criminal sentencing is significantly harsher prior to an election (Huber and Gordon 2004; Gordon and Huber 2007; Berdejó and Yuchtman 2013). ii. Similar behavior is less severe for retention elections (Berdejó and Yuchtman 2013; Hall 2014).

3 iii. Appointment better protects property rights and firm owners (Besley and Payne 2003). iv. Citation counts and opinion quality is higher under appointment and merit selection (Ash and MacLeod 2016; Choi, Gulati, and Posner 2010; Berkowitz and Clay 2006; Sobel and Hall 2007). v. Entrepreneurial activity and bond ratings are higher under merit selection and appointment (Dove 2015; 2016). 4. Conclusion a. Though appointment or merit selection appears to lead to relatively better outcomes there is nuance: i. My argument in support is based in consequentialist terms. ii. No method of selection is completely costless nor is any method without benefit. It s a tradeoff. b. Additional considerations for future exploration i. Extend term limits ii. Consider internal selection by the judiciary Works Cited: Ash, E. and B. MacLeod. (2016). The Performance of Elected Officials: Evidence from State Supreme Courts. NBER Working Paper No Berdejó, C. and N. Yuchtman. (2013). Crime, Punishment, and Politics: An Analysis of Political Cycles in Criminal Sentencing. The Review of Economics and Statistics. Vol. 95, No. 3, Pg Berkowitz, D. and K. Clay. (2006). The Effect of Judicial Independence on Courts: Evidence From the American States. Journal of Legal Studies. Vol. 35, No. 2, Pg Besley, T. and A. Payne. (2003). Judicial Accountability and Economic Policy Outcomes: Evidence from Employment Discrimination Charges. The Institute for Fiscal Studies WP03/11 Buchanan, J. M. and G. Tullock. (1962). The Calculus of Consent: Logical Foundations of Constitutional Democracy. Ann Arbor: University of Michigan Press. Choi, S. J., G. Mitu Gulati, and E. A. Posner. (2010). Professionals or Politicians: The Uncertain Empirical Case for an Elected Rather than Appointed Judiciary. Journal of Law, Economics, & Organization. Vol. 26, No. 2, Pg Cordis, A. S. (2009). Judicial Checks on Corruption in the United States. Economics of Governance. Vol. 10, No. 4, Pg Dove, J. A. (2015). The Effect of Judicial Independence on Entrepreneurship in the US States. Economic Systems. Vol. 39, No. 1, Pg Dove, J. A. (2016). Judicial Independence and US State Bond Ratings: An Empirical Investigation. Working Paper. Dubois, Phillip. (1980). From Ballot to Bench: Judicial Elections and the Quest for Accountability. Austin: University of Texas Press. Gordon, S. C. and G. Huber. (2007). The Effect of Electoral Competitiveness on Incumbent Behavior. Quarterly Journal of Political Science. Vol. 2, No. 2, Pg Gann Hall, M. (2014). Representation in State Supreme Courts: Evidence from the Terminal

4 Term. Political Research Quarterly. Vol. 67, No. 2, Pg Huber, G. A. and S. C. Gordon ). Accountability and Coercion: Is Justice Blind when it Runs for Office? American Journal of Political Science. Vol. 48, No. 2, Pg Maskin, E. and J. Tirole. (2004). The Politician and the Judge: Accountability in Government. The American Economic Review. Vol. 94, No. 4, Pg North, D. (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press. North, D., J. J. Wallis, and B. R. Weingast. (2009). Violence and Social Orders: A Conceptual Framework for Interpreting Recorded History. New York: Cambridge University Press. Sobel, R. S. and J. C. Hall. (2007). The Effect of Judicial Selection Processes on Judicial Quality: The Role of Partisan Politics. Cato Journal. Vol. 27, No. 1, Pg Tabarrok, A. and E. Helland. (1999). Court Politics: The Political Economy of Tort Awards. The Journal of Law & Economics. Vol. 42, No. 1, Pg

5 The Meaning of a Constitution and the Selection of Judges Professor Harold See There is an effort to move States away from the election of judges and toward their appointment under a Missouri Plan in which a commission selects, usually, three candidates from which the Governor chooses one. A number of conventional arguments are presented in favor of this system. These arguments generally identify one or more perceived objectionable attributes of judicial elections and then conclude that a Missouri Plan usually called merit selection would remove that evil. There are two problems with this argument. First, a comparative analysis of elections and commissions is far from convincing that the assertion of superiority is accurate. Second, the argument fails to address the underlying questions of the role of the judiciary and the constituency that should make that decision. It is my thesis that the proper role of the judiciary is a constitutional question, that such a question is a question properly addressed by the people at large, and that, therefore, a merit selection system is not appropriate to our system of government.