In recent years, the rules and practices of private groups have attracted substantial attention within the field of law and economics. In applications ranging from Robert Ellickson's seminal work on rancher/farmer relations in Shasta County, California, to Lisa Bernstein's investigation of extralegal contractual relations among wholesale diamond traders, to Robert Cooter's study of aboriginal customs in Papua New Guinea, to Robert Scott and Alan Schwartz's analysis of the rulemaking procedures of the American Law Institute, an increasing number of legal and economic scholars have shown how private systems of rules work to regulate economic relations among the communities that adopt them. While much of this literature has been devoted to description – explaining how such rules arise, how they operate in practice, and what incentives they provide to group members – a significant portion of the discussion is explicitly normative, focusing on how well private rules perform according to the criteria typically used to assess publicly promulgated regulations. For economists and economically influenced lawyers, this typically means focusing on economic efficiency; and within this focus, two questions have been most prominent. First, are the rules established by private groups likely to be efficient, either on an absolute scale or compared to regulations promulgated by the state? Second, and relatedly, to what extent should the state defer to existing private rules when making law?
Law | Law and Society
Avery W. Katz,
Taking Private Ordering Seriously,
U. Pa. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3646