The purpose of this Article is to interrogate the relationship between judicial error and extralegal norms more formally, focusing particularly on typical corporate disclosure contexts. In so doing, I shall argue that this relationship is far less clear-cut than much of the literature suggests. Using a formal, game-theoretic model of information disclosure, I demonstrate that in the presence of judicial error, a society that benefits from extralegal norms of honest disclosure might ironically favor more expansive legal regulation than would a similarly situated society in which norms are weak or nonexistent. Thus, in contrast to the common argument that norms can (or should) substitute for error-prone law, I argue that the two phenomena may frequently complement each other.
Law | Law and Economics | Securities Law
Eric L. Talley,
U. Pa. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/1247