Making Law

The legal systems discussed in the past 14 chapters demonstrate some of the ways in which legal rules come into existence and change over time. In this chapter I will try to list all of them, and discuss the implications of each. As we will see, there is no simple one to one relation between legal systems and ways of creating law. The current U.S. Legal system is arguably created and changed in at least three different ways, Jewish and Muslim law in four.

Divine Inspiration

Two of the legal systems we have looked at are based, at least as understood by believers, on divinely inspired commandments—Jewish law on the Torah, Muslim law on the Koran. One problem raised by such a system is eliminating the risk of legal inconsistency growing out of inconsistent versions of the authoritative text.

In the case of the Koran, an “official” text was established under 'Abd al Malik (65/685-86/705) and all variant versions destroyed. We do not know if a similar process occurred, at a much earlier date, with regard to the written Torah, the Pentateuch.1 The problem was, however, raised by the oral Torah, instructions given by God to Moses on Mount Sinai and passed down from him in a chain of oral transmission; there was an obvious risk that different legal scholars would differ on its content. This was dealt with by the doctrine, based on the written Torah, that in case of uncertainty one should go with the opinion of the majority, interpreted as the majority of the Sanhedrin.

A second problem with law based on divine inspiration is that someone who can persuade others that he is divinely inspired and so entitled to continue the process can claim unlimited legal authority. The story of the furnace of Akhnai, discussed in chapter III, can be read as a strongly worded rejection of all such claims. Rabbi Eleazar provides the strongest possible proof of divine support, a string of miracles followed by a voice from the heavens. Despite that, the sages reject his view of the controversy; they tell God to butt out. Logically speaking it makes little sense; even given that the majority get to rule on what the law is, one would expect that after hearing God's opinion on the subject the majority would change their votes. But it makes perfect sense as a forceful rejection of the claims of purported miracle workers to legal authority, especially given the existence (in both Jewish and Islamic history) of individuals who claimed miraculous powers and supported their claims with (arguably fraudulent) miracles.2

The solution for Sunni law was the doctrine that Mohammed was the final prophet, hence there could be no further Koranic revelation. There were occasional attempts by later figures to claim prophethood, including in at least one case claimed authority for a new Koran,3 but they were rejected by the bulk of the Islamic community. The Shia Imams were claimed to have inherited in some form Mohammed's authority, making their practice, like his, evidence of God's will. That source of law ended when the final Imam4 went into occlusion, to reappear only in the final days.

A final problem is that God, like the legislature, never answers all the questions that matter. Hence divinely inspired law, like legislated law, requires further interpretation—and, in practice, there is no sharp boundary between interpretation that fills gaps or clarifies ambiguity in religious law and interpretation that makes new law. In the Jewish case, interpretation occurred first by vote of the Sanhedrin, influenced by the arguments of scholars, and later as decisions and treatises by scholars whose authority was based only on their reputation. The opportunity for further interpretation was kept open by the doctrine of hilkheta ke-vatra'ei, “the law is in accordance with the views of the later authorities.”5 In the Muslime case, on the other hand, the process of interpretation was in theory ended in about the tenth century by the shutting of the gates of ????, the end of further deduction of law from Koran and hadith.

Cutting off further interpretation, or at least novel interpretation, at some point, has both advantages and disadvantages. Increased legal certainty and reduction in costly efforts to change the law must be balanced against a reduction in the ability to discover and eliminate faults in the existing legal rules or to adapt law to new circumstances. One might speculate that the decline of Islamic civilization from its high point in about the ninth century reflected in part consequences of the latter problem.

Both Jewish and Islamic law, in their original form, permitted a husband to divorce his wife but did not permit the wife, even for cause, to divorce the husband. Jewish law eventually changed to give the wife a de facto, although not a de jure, mechanism of divorce: If she could persuade the court that she had adequate cause, the court could compel the husband to divorce her. Islamic law saw no such change.

Another example, one which illustrates the potential for interpretation as a form of legislation, is the decision of the rabbis of Israel early in the 20th century to raise the legal age at which a woman could marry. Their justification was the claim that people were weaker now than they were when the Torah was written, hence women were less able to bear children young. The argument was obviously bogus, given the enormous improvement in medicine, including obstetrics, over the intervening millenia. But it permitted the rabbis to eliminate a legal rule in Torah that they disapproved of6 but had no formal power to change, by interpreting it out of existence.


Another mechanism for producing law, and the one that moderns are most familiar with, is legislation by some authority entitled to make and change law. In the case of Imperial Chinese law that authority was the Emperor, in Athenian the assembly, in Jewish law first rabbis—with their decision subject to approval by the Sanhedrin while that body existed—and later communal authorities as well. In Amish law the legislation—the content of the Ordnung of a congregation—was proposed by the bishop, but required the unanimous approval of the members of the congregation.

The oddest case, of those we have looked at, is probably the Cheyenne. In at least some cases, rules could apparently be made by declaration of a single soldier society, following its resolution of a dispute, and be seen as binding in the future on all Cheyenne. It is unclear whether that ought to be viewed as a form of legislation or as a mechanism for the development of customary law.

Legislation has some obvious advantages over the alternatives. There is in most cases a well defined mechanism for changing the law, including changes needed to clarify any ambiguity that comes up after the initial legislation. In practice, however, legislation never seems to be adequate by itself, not even in the Chinese case, where the objective seems to have been to create a complete mapping from offense to punishment. In practice someone is always required to interpret the application of the law to cases that do not perfectly fit it. As in the case of religious law, the boundary between resolving ambiguity and creating law is rarely a sharp one—as illustrated by the expansion, in U.S. constitutional law, of congress’s authority to regulate interstate commerce into something very close to a blank check to regulate all economic activity.


Another approach to creating law is binding precedent, as it exists in Anglo-American common law. The court’s decision is considered binding on future courts at or below its level. Thus interpretation determines law not only for the particular case being interpreted but for all future cases.

As compared to legislation, binding precedent has several advantages. Since it grows out of the resolution of a large number of cases, it makes possible a more detailed set of legal rules than is likely to be produced by either a single ruler or a legislature. Because it originates with real cases, it is likely to map more closely to real legal issues than a system of rules created in the abstract. And because the rules it creates are continually changing as new cases are resolved, with higher courts free to overrule the precdents of lower and courts able, if reluctantly, to overrule their own past precedents, it creates a legal system that almost automatically adjusts to changing circumstances.

A system of binding precedent has disadvantages as well. It is being developed simultaneously by multiple judges, often producing inconsistent rulings. The inconsistency may eventually be resolved by a higher court, but until it is, litigants will find that the outcome of litigation depends on the choice of judge. In systems where it is in the self-interest of judges to have cases come to them, the result is to bias legal rules in favor of whichever party controls the choice of forum.7

A further characteristics of such a system, which some will see as a bug and some as a feature, is its slow response time. Judges are likely to reach a high level only late in their careers and, having reached that level, remain there until forced to retire by old age or death. A court of old judges is likely to interpret the law in terms of views of the world popular when they were young. Even if Legislatures are similarly staffed, in a democratic system aging legislators are under pressure to support positions popular with the current electorate.

Customary Law and Non-Authoritative Precedent

For a very different approach, consider Somali law as described by Van Notten or pre-Islamic bedouin law as described by Schacht. In both systems, judges are arbitrators; their judgements are seen as opinions about the law, not decisions creating it. There is precedent, but of a very different sort than in systems where precedent is binding. The fact that multiple arbitrators saw the customary law as implying a particular resolution to some legal issue is evidence that it does imply that resolution, especially if other people regarded the verdicts produced as just and if those who produced them continue to be chosen as arbitrators. Past decisions influence future decisions, but as evidence not binding precedent.

To see the same pattern in modern common law, consider the case of Annie Lee Turner et al. v. Big Lake Oil Company et al. The Supreme Court of Texas had to determine what compensation, if any, Big Lake Oil Company owed Annie Lee Turner and her neighbors for damage done to their property by the escape of polluted water from Big Lake’s storage pools. A key issue was whether Big Lake is liable only if it was negligent or whether it is strictly liable for any damage done.

The Texas judges looked first not to the statute law of Texas but to a case decided in another country in another century: Rylands v Fletcher, decided by a committee of the British House of Lords in 1868. They spent a considerable part of the written opinion explaining why it reached a different result, despite the fact that the House of Lords had never had any authority over the law of Texas.

The law lords who decided Rylands v Fletcher were a court deciding the outcome of a particular case, but they were also an expert body interpreting the common law of England. In that second role the conclusion they reached was relevant to, although not determinative of, the deliberations of a Texas court deciding a similar case based on the same underlying system of law. An English judge has authority over an American case in precisely the same sense in which an English scholar has authority over a dispute in his field carried on by American scholars; he is an expert whose opinion is relevant to deciding a disputed question of fact.

Seen from this point of view, the common law is both a system of binding precedent and a system of informative precedent.

For another example of a mixed system, consider Amish law. The final decision that determines the content of a congregation’s ordnung is legislation, albeit of a somwhat odd sort. But the process that changes ordnung looks more like the process by which customary law is changed. Someone does something that is arguably in violation of the current ordnung, or at least of the ordnung as currently interpreted. If others object, then the next time agreement must be reached the congregation will probably find that what he did is forbidden—and he may have to publicly confess to a misdeed. But if few or none object and some others imitate him, the view of what is or is not permitted may change, and the changed view be explicitly incorporated in the next redefinition of the rules.

Yet another example is Jewish law in the diaspora. It was ultimately based on divine revelation. It incorporated extensive legislation, first by the rabbis and later by communal authorities as well, as well as interpretation by halakhic authorities over an extended period of time, producing treatises on the law such as the Mishah Torah of Maimonides.

But such treatises claimed not to create law but to discover and describe it. The local halakhic authorities were offering their interpretation of an existing body of customary law. The claim of Maimonides and others was not that their opinions were a binding precedent—that would be inconsistent with both the rule that the law was according to the opinion of the later authorities and the actual practice of legal scholars, often functioning as judges, of basing their decisions on the opinions of past legal scholars as far back as they were available. One of the chief criticisms of Maimonides’ work was that, because to each legal question he gave only one answer, he failed to provide a judge with the information, the varying opinions and arguments of past scholars, needed to reach a conclusion.

Customary law is a nebulous concept, hard to get a grip on. We know where legislated law comes from, where judge made law in a system of binding precedent comes from, where law based on divine revelation comes from. It is much less clear who creates customary law, when, or how. As a justice famously said of pornography, you know it when you see it.

It may help to consider the particular form of customary law with which we are all familiar, because we are all embedded in it. Consider a simple example.

While getting dressed before going to class yesterday I went in search of a clean pair of pants, the previous pair having just gone into the washing machine. Hanging in my closet was a worn pair of blue jeans. I gave no serious thought to wearing them, although they would probably have been more comfortable, perhaps also warmer, than the slacks I ended up with.

The reason is that wearing them would have violated customary norms of behavior that apply to professors teaching courses. Such norms are a form of customary law, a form that maintains itself without the aid of judges, even judges whose precedents are only informative. We all have a general idea of what patterns of behavior are or are not acceptable in our society. Nobody legislated those rules, nobody legislates their changes, yet they exist and, over time, change. The mechanism of change is much the same as among the Amish. A particularly brave and self-assured professor chooses to push the boundaries, to appear before his class in shorts and flip flops—I have a real example in mind. If students and colleagues look at him oddly, if he notes that at the next faculty meeting his opinions carry less weight than in the past, if his wife mentions that a colleague’s wife asked her if her husband was going through some sort of stage, he may abandon his norm-violating behavior. If nobody seems particularly shocked, if colleagues react, if at all, with friendly amusement, he continues it. After a while—a week, a month, perhaps a year—another professor shows up in shorts, perhaps after discovering at the last minute that all his pants either are in the wash or should be. The norm changes.

Social norms are a form of customary law with which all of us have first hand experience. They are also, arguably, the original source of all other customary law. Individuals behave in a certain way, constrained by the expectations of others and consequences when others approve or disapprove of their acts. When a dispute arises, with the risk of violence between the parties and the more attractive alternative of an arbitrated decision, it seems plausible that the arbitrator will rule on the basis of what behavior is or is not accepted in that society. Thus norms, enforced for the most part by social pressure, evolve into customary law, enforceable if necessary by violence or the threat of violence.

[Add a reference to germanic law]

Making Good Law

In discussing different ways of making law I have so far ignored the most important question of all—what sort of law they will make. To what extent can we expect one or another of these mechanisms to produce good law, law that promotes the welfare of those to whom it applies?8

I have ignored the question because, for the most part, I cannot answer it. If divinely inspired law really is inspired by a benevolent deity, the result should be good law; but I have my doubts. Similarly if legislated law is created by a wise and benevolent ruler, but I know of no reason to expect that either.

Believers in democracy might argue that legislated law produced by an elected legislature will be designed in the interest of the voters, since otherwise the legislators will be voted out of power, but I find that claim unconvincing. The body of economics known as public choice theory provides persuasive arguments against that particular version of polyannism. Individual voters, if rational, realize that their vote has little effect on political outcomes, so devote little effort to gathering the information needed to make correct decisions. Politicians rarely help out by labeling themselves as bad guys, or even by labeling their legislation as a bill to make farmers richer and city folk poorer—although that is a reasonable description of quite a lot of legislation passed by the U.S. congress in my lifetime. The result, as I have argued elsewhere, is a system that frequently produces bad law, a theoretical conclusion for which I find quite a lot of empirical support.

Consider the case of foreign trade.9 Economists have known for about two hundred years that a country that imposes tariffs on imports will under most circumstances make its inhabitant worse off by doing so, although there are some possible exceptions. For that entire period, most countries have chosen to impose tariffs, and done so in a way strikingly inconsistent with the theoretical arguments for why a tariff might occasionally be a good idea; protection is provided not to infant industries but to senile industries. The arguments offered for imposing those tariffs hinge not on imperfections in the conventional economic analysis but on ignorance of it; they are the same arguments that were refuted two hundred years ago. It is hard to square those observations with a model in which legislators find it necessary to pass good law in order to stay in office.

What about judge made law? Richard Posner argued, long ago, that common law tends to be economic efficient, supporting that argument with economic analysis of the efficiency of common law rules. In my view, neither the evidence he offers nor the theoretical argument offered by him and others is sufficient to establish the truth of that claim; interested readers will find the question discussed at length in my Law’s Order.10

Which leaves us with customary law.

Consider a norm which, if adopted by a group of individuals for interactions among its members, makes them better off—say a norm of honest dealing. Once one group has adopted it, one would expect others to observe the result and either join that group or imitate it. Thus desirable norms could spread through a society. Once established, they could become the basis out of which customary law develops.

There is an important limitation to this argument; to see it, consider the norms that applied to whalers in the 19th century. In Order Without Law, Robert Ellickson persuasively argued that the whalers had an efficient set of norms with regard to issues such as what happened when one ship initially harpooned a whale and another eventually killed it, norms that efficiently changed as the whalers shifted from hunting one species of whale to another.

The reason that they shifted their prey was that one species after another was being hunted to near-extinction. That suggests that they would have been better off with a norm that restricted the number of whales killed to a number that would not seriously reduce the population. No such norm existed.

The reason should be obvious. A norm of restricted whaling benefits all whalers if they all follow it. But the benefit from my restraint goes to other whalers whether or not they act similarly. The right rule for all is to restrict. The right rule for any individual, or any group much smaller than all whalers, is to free ride on the restrictions of others. The problem is strictly analogous to the familiar case of the prisoner’s dilemma or, more generally, to what economists refer to as market failure,11 a situation where individual rationality does not lead to group rationality.

It follows that customary law based on social norms ought to do a good job of generating the first sort of rules, rules which benefit the members of any group that adopts them. But there is no reason to expect it to do a similarly good job of generating rules of the second sort, rules which it is in the interest of all of us for all of us to follow but not in the interest of any individual to himself follow.

I have described one mechanism that has some tendency to generate good law, within limits. A second mechanism applies to the specific case of contract law. After I have signed a contract with you, I would prefer law that favors me in any resulting dispute. But before we have signed the contract, we have a common interest in law that maximizes our combined benefit—because the expected cost to you of any rule that favors me will reduce the price you are willing to pay me for whatever I am contributing to our joint project or increase the price you will charge for whatever you are contributing. Only if the benefit to me is larger than the cost to you will it be in my interest to insist on the rule.

Which implies that a legal system in which individuals choose in advance the judge, arbitrator, or court that will interpret their contract will tend to produce good law, at least from the standpoint of the contracting parties.

1 But a similar process has occurred in Judaism much more recently, in part due to the discovery of the Dead Sea scrolls. [add details when found]

2Reference to Islamic controversial miracle worker. Jewish as well?

3Reference to “Berber Koran” etc.

4Who the final Imam was and when is one of the issues on which different Shia sects differ.

5 Jephthah in his generation has as much authority as Samuel in his generation." This doctrine is in tension with the idea that, in determining what the law was, a scholar should give greater weight to the views of earlier authorities, and was and is not universally accepted.

6 Perhaps because sephardic Jews from the Middle East and North Africa were marrying off their daughters at twelve, as Jewish law permitted them to do, in violation of contemporary European norms.

7 Mark Klerman, “Jurisdictional Competition and the Evolution of the Common Law,” University of Chicago Law Review, 74, nbr 4, Fall 2007, pp.1179-1226.

8 In the context of the economic analysis of law, this is usually put in terms of economically efficient, or “wealth maximizing,” law. For the purposes of this book I prefer to be deliberately vaguer than that.

9 For a much more detailed analysis of these issues see my Price Theory; the relevant chapter is webbed at:

10 Webbed at

11 Add reference to something of mine expanding on this, preferably webbed.