June 20, 2006 8:00AM

The Common Law Court and Other Myths

I’ve posted my latest law review article on SSRN. The article argues that some of the same rules that apply to executive branch agencies, like the SEC and EPA, should apply to “class action lawmaking” in ordinary courts. A warning: much of it will seem rather dry and esoteric to non‐​lawyers. 

Even so, I hope it will help highlight a serious blind spot of many Hayek‐​flavored policy proposals advanced by fellow libertarians. These flawed proposals go like this: “Agency A has identified a regulatory problem and offered a command‐​and‐​control solution. But command and control solutions often have unanticipated consequences. By contrast, the incremental case‐​by‐​case approach of common law courts allows regulation to adapt to unexpected problems as they arise. Hence, it’s better not to regulate and leave the issue to the common law process.” (If you search through Cato policy analyses, you may find a few arguments that fit this mold.) 

Here’s the problem with that argument: Over the last 50 years, courts have rejected the utility of incremental case‐​by‐​case decisionmaking, now seen as too “costly” for a mass industrial economy, and have instead patterned their proceedings after administrative agencies. Now trial judges use procedures like the class action and mechanisms for case consolidation to put hundreds of thousands of recurring disputes raising similar facts before a single “expert” judge or special master tasked with sheparding these disputes into one global settlement. As a result, in many cases, a choice between courts and agencies is a Hobson’s choice: both courts and agencies are forums for the sweeping, centralized, one‐​shot regulation that Hayek so distrusted. 

Unfortunately, many libertarians ignore the sea change in the way our courts run themselves, envisioning that beyond the hulking canyons of Southwest D.C.‘s alphabet gulch, there is a pristine land of 19th century “common law” courts, preserved in amber, waiting to rescue us from our zest for central planning. The persistence of this myth shields us from the difficult libertarian trade‐​offs between modern‐​day judicial and administrative regulation. 

My article doesn’t venture an answer to these complicated trade‐​offs. (I’m just a humble caveman lawyer.) Instead, I suggest a far more modest first step: That courts start talking about class action law and administrative law in the same legal language, using the same legal concepts, putting us all on notice about the essential similarity between modern judicially managed and agency‐​managed regulation.