This article explores, first, what the central tenet of law and economics is and uses an example to illustrate. Then I turn to discussing behavioral law and economics and empirical law and economics. In the final section, I consider three topics that are likely to be central to the next era of law and economics–data collection, constitutional law and economics, and artificial intelligence.
{"title":"The Places We’ll Go","authors":"T. Ulen","doi":"10.1515/ajle-2024-0043","DOIUrl":"https://doi.org/10.1515/ajle-2024-0043","url":null,"abstract":"\u0000 This article explores, first, what the central tenet of law and economics is and uses an example to illustrate. Then I turn to discussing behavioral law and economics and empirical law and economics. In the final section, I consider three topics that are likely to be central to the next era of law and economics–data collection, constitutional law and economics, and artificial intelligence.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140664146","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study delves into the common law efficiency theory, proposing that the efficiency of legal norms in common law systems predominantly depends on judges’ biases towards efficiency. By developing an economic model, it is demonstrated that the proportion of efficient norms correlates with the predisposition of judges towards efficiency, influenced by their personal beliefs. Historical analysis of common and civil law systems reveals that neither inherently guarantees efficiency; rather, their efficiency is contingent upon their adaptability to societal needs and prevailing judicial ideologies. The paper concludes that the efficiency of a legal system relies on its congruence with societal values and judicial ideologies, emphasizing that shifts in the judiciary’s ideological makeup have implications on legal system efficiency. This research contributes to a deeper understanding of the multifaceted process shaping legal norms in common law, highlighting the critical role of judges, societal values, and legislative dynamics.
{"title":"The Role of Judges in Selecting Efficient Norms in a Common Law System: A Law and Economics Perspective","authors":"Diogo Augusto Vidal Padre, Leandro Chaves Rêgo","doi":"10.1515/ajle-2023-0179","DOIUrl":"https://doi.org/10.1515/ajle-2023-0179","url":null,"abstract":"\u0000 This study delves into the common law efficiency theory, proposing that the efficiency of legal norms in common law systems predominantly depends on judges’ biases towards efficiency. By developing an economic model, it is demonstrated that the proportion of efficient norms correlates with the predisposition of judges towards efficiency, influenced by their personal beliefs. Historical analysis of common and civil law systems reveals that neither inherently guarantees efficiency; rather, their efficiency is contingent upon their adaptability to societal needs and prevailing judicial ideologies. The paper concludes that the efficiency of a legal system relies on its congruence with societal values and judicial ideologies, emphasizing that shifts in the judiciary’s ideological makeup have implications on legal system efficiency. This research contributes to a deeper understanding of the multifaceted process shaping legal norms in common law, highlighting the critical role of judges, societal values, and legislative dynamics.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140715301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Does antitakeover harm shareholders? Encumbered by a multitude of theoretical perspectives, the legality of antitakeover remains a shared intellectual inquiry that the A-share market has yet to fully address. This paper constructs a governance index for the A-share market based on a manually collected and hand-coded research dataset (C-index). This dataset, comprising 4251 historical firm-level profiles of Antitakeover Provisions (ATPs), is meticulously sampled from companies listed in China from 2001 to 2017. The study investigates the logical correlation between antitakeover strength, financial performance, and the governance attributes of the company by leveraging the index’s economic utility. Additionally, this paper explores the firm-level factors that prompt corporate directors to integrate ATPs. From an empirical standpoint, it provides evidence that the governance index of firm-level strength of ATPs is positively correlated with share liquidity, institutional shareholding, private ownership, and the company’s commitment to achieving specific financial performance.
反收购会损害股东利益吗？反收购的合法性问题受制于多种理论视角，仍是 A 股市场尚未完全解决的一个共同的知识探究问题。本文基于人工收集和手工编码的研究数据集（C-index），构建了 A 股市场的治理指数。该数据集包括4251个公司层面的历史反收购条款（ATP）档案，是从2001年至2017年在中国上市的公司中精心抽取的样本。研究利用该指数的经济效用，探讨了反收购力度、财务表现和公司治理属性之间的逻辑关联。此外，本文还探讨了促使公司董事整合ATP的公司层面因素。从实证角度来看，本文提供的证据表明，公司层面的反收购实力治理指数与股票流动性、机构持股、私人所有权以及公司实现特定财务绩效的承诺正相关。
{"title":"Does Antitakeover Provision Harm Shareholders? Indexing for Antitakeover Provisions in China","authors":"Sirui Han","doi":"10.1515/ajle-2023-0119","DOIUrl":"https://doi.org/10.1515/ajle-2023-0119","url":null,"abstract":"\u0000 Does antitakeover harm shareholders? Encumbered by a multitude of theoretical perspectives, the legality of antitakeover remains a shared intellectual inquiry that the A-share market has yet to fully address. This paper constructs a governance index for the A-share market based on a manually collected and hand-coded research dataset (C-index). This dataset, comprising 4251 historical firm-level profiles of Antitakeover Provisions (ATPs), is meticulously sampled from companies listed in China from 2001 to 2017. The study investigates the logical correlation between antitakeover strength, financial performance, and the governance attributes of the company by leveraging the index’s economic utility. Additionally, this paper explores the firm-level factors that prompt corporate directors to integrate ATPs. From an empirical standpoint, it provides evidence that the governance index of firm-level strength of ATPs is positively correlated with share liquidity, institutional shareholding, private ownership, and the company’s commitment to achieving specific financial performance.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-04-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140717065","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It has been widely known that good firms use lower IPO prices to signal their superior prospects to investors. The underlying intuition is that good-type firms signal their type by underpricing their initial issue of shares, because investors can rationally infer that only the best can recoup the signaling cost from subsequent issues. In this paper, we argue that the intuition is not complete. We show that a good firm always has an incentive to deviate to raise the IPO price slightly from its equilibrium price if the price is the only signaling device, implying that signaling by underpricing is not an equilibrium phenomenon in the case of one-dimensional signal. Then, we show that if the firm can choose the equity fraction to be sold as well, a good-type firm can signal its high profitability by choosing a low equity fraction. In this case, a good-type firm engages in underpricing, but it cannot be a signal because both types choose same prices in equilibrium. We also discuss the effect of investor protection laws on IPO underpricing.
{"title":"Comments on the Signaling Theory of IPO Underpricing and Investor Protection Laws","authors":"Jeong‐Yoo Kim","doi":"10.1515/ajle-2023-0153","DOIUrl":"https://doi.org/10.1515/ajle-2023-0153","url":null,"abstract":"\u0000 It has been widely known that good firms use lower IPO prices to signal their superior prospects to investors. The underlying intuition is that good-type firms signal their type by underpricing their initial issue of shares, because investors can rationally infer that only the best can recoup the signaling cost from subsequent issues. In this paper, we argue that the intuition is not complete. We show that a good firm always has an incentive to deviate to raise the IPO price slightly from its equilibrium price if the price is the only signaling device, implying that signaling by underpricing is not an equilibrium phenomenon in the case of one-dimensional signal. Then, we show that if the firm can choose the equity fraction to be sold as well, a good-type firm can signal its high profitability by choosing a low equity fraction. In this case, a good-type firm engages in underpricing, but it cannot be a signal because both types choose same prices in equilibrium. We also discuss the effect of investor protection laws on IPO underpricing.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139789836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It has been widely known that good firms use lower IPO prices to signal their superior prospects to investors. The underlying intuition is that good-type firms signal their type by underpricing their initial issue of shares, because investors can rationally infer that only the best can recoup the signaling cost from subsequent issues. In this paper, we argue that the intuition is not complete. We show that a good firm always has an incentive to deviate to raise the IPO price slightly from its equilibrium price if the price is the only signaling device, implying that signaling by underpricing is not an equilibrium phenomenon in the case of one-dimensional signal. Then, we show that if the firm can choose the equity fraction to be sold as well, a good-type firm can signal its high profitability by choosing a low equity fraction. In this case, a good-type firm engages in underpricing, but it cannot be a signal because both types choose same prices in equilibrium. We also discuss the effect of investor protection laws on IPO underpricing.
{"title":"Comments on the Signaling Theory of IPO Underpricing and Investor Protection Laws","authors":"Jeong‐Yoo Kim","doi":"10.1515/ajle-2023-0153","DOIUrl":"https://doi.org/10.1515/ajle-2023-0153","url":null,"abstract":"\u0000 It has been widely known that good firms use lower IPO prices to signal their superior prospects to investors. The underlying intuition is that good-type firms signal their type by underpricing their initial issue of shares, because investors can rationally infer that only the best can recoup the signaling cost from subsequent issues. In this paper, we argue that the intuition is not complete. We show that a good firm always has an incentive to deviate to raise the IPO price slightly from its equilibrium price if the price is the only signaling device, implying that signaling by underpricing is not an equilibrium phenomenon in the case of one-dimensional signal. Then, we show that if the firm can choose the equity fraction to be sold as well, a good-type firm can signal its high profitability by choosing a low equity fraction. In this case, a good-type firm engages in underpricing, but it cannot be a signal because both types choose same prices in equilibrium. We also discuss the effect of investor protection laws on IPO underpricing.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139849851","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines marriage and family law in China from a diachronic perspective. It discusses three issues – the principal achievements over the last 70 years; the existing challenges since the 21st century; and its prospects for the future. The Marriage Law of the People’s Republic of China passed in 1950 was the first basic law after the founding of the People’s Republic of China and opened a new chapter in the development of Chinese marriage and family law. Significant development has been achieved both in systematic structure and institutional contents after undergoing three major revisions in 1980, 2001 and 2020. Despite the achievements made, great challenges remain since the 21st century, especially the difficulties in family formation and maintenance; population aging with fewer children; application of assisted reproductive technology; and prevalence of divorce, remarriage, and cohabitation. The future improvement of marriage and family law may focus more on maintaining family stability and building family civilization.
{"title":"Seventy Years of Marriage and Family Law in China: Achievements, Challenges and Prospects","authors":"Qingmin Guo","doi":"10.1515/ajle-2023-0166","DOIUrl":"https://doi.org/10.1515/ajle-2023-0166","url":null,"abstract":"\u0000 This article examines marriage and family law in China from a diachronic perspective. It discusses three issues – the principal achievements over the last 70 years; the existing challenges since the 21st century; and its prospects for the future. The Marriage Law of the People’s Republic of China passed in 1950 was the first basic law after the founding of the People’s Republic of China and opened a new chapter in the development of Chinese marriage and family law. Significant development has been achieved both in systematic structure and institutional contents after undergoing three major revisions in 1980, 2001 and 2020. Despite the achievements made, great challenges remain since the 21st century, especially the difficulties in family formation and maintenance; population aging with fewer children; application of assisted reproductive technology; and prevalence of divorce, remarriage, and cohabitation. The future improvement of marriage and family law may focus more on maintaining family stability and building family civilization.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139791251","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines marriage and family law in China from a diachronic perspective. It discusses three issues – the principal achievements over the last 70 years; the existing challenges since the 21st century; and its prospects for the future. The Marriage Law of the People’s Republic of China passed in 1950 was the first basic law after the founding of the People’s Republic of China and opened a new chapter in the development of Chinese marriage and family law. Significant development has been achieved both in systematic structure and institutional contents after undergoing three major revisions in 1980, 2001 and 2020. Despite the achievements made, great challenges remain since the 21st century, especially the difficulties in family formation and maintenance; population aging with fewer children; application of assisted reproductive technology; and prevalence of divorce, remarriage, and cohabitation. The future improvement of marriage and family law may focus more on maintaining family stability and building family civilization.
{"title":"Seventy Years of Marriage and Family Law in China: Achievements, Challenges and Prospects","authors":"Qingmin Guo","doi":"10.1515/ajle-2023-0166","DOIUrl":"https://doi.org/10.1515/ajle-2023-0166","url":null,"abstract":"\u0000 This article examines marriage and family law in China from a diachronic perspective. It discusses three issues – the principal achievements over the last 70 years; the existing challenges since the 21st century; and its prospects for the future. The Marriage Law of the People’s Republic of China passed in 1950 was the first basic law after the founding of the People’s Republic of China and opened a new chapter in the development of Chinese marriage and family law. Significant development has been achieved both in systematic structure and institutional contents after undergoing three major revisions in 1980, 2001 and 2020. Despite the achievements made, great challenges remain since the 21st century, especially the difficulties in family formation and maintenance; population aging with fewer children; application of assisted reproductive technology; and prevalence of divorce, remarriage, and cohabitation. The future improvement of marriage and family law may focus more on maintaining family stability and building family civilization.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139851000","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study explores the factors influencing the achievement of a mutually agreed solution (MAS) in international trade disputes, drawing insights and patterns from the WTO dispute experience. Through an in-depth examination of prevailing literature and compliance theories, the research pinpoints various factors that impact the achievement of MAS in WTO disputes, including the dynamics of economic size, experience in WTO litigation, reputation as a respondent, and costs in time. The results, obtained through a probit model, reveal the significance of economic size in achieving MAS, where the complainant’s GDP surpasses that of the respondent but not the per capita GDP and trade ratio. Originally, this study discloses that experience in WTO litigation as a disputing party and reputation as the respondent also influence the willingness to settle amicably. While this research primarily centres on the WTO, its findings, derived from WTO data, have broader implications. The identified factors are not only pertinent to WTO members but also hold relevance for solving trade disputes between states. Recognizing these factors is crucial for policymakers across different trade platforms to devise strategies that bolster collaboration and elevate the efficacy of their respective dispute-resolution mechanisms. By illuminating the complexities of the decision-making processes in achieving MAS, this study offers invaluable insights. These insights are instrumental for all stakeholders involved in trade disputes, guiding them towards forging consensus-driven solutions that uphold the principles of just and balanced international trade.
本研究探讨了在国际贸易争端中达成共同商定的解决方案（MAS）的影响因素，从世贸组织争端经验中汲取了启示和规律。通过对现有文献和合规理论的深入研究，研究指出了影响世贸组织争端中达成共同商定解决方案的各种因素，包括经济规模的动态变化、世贸组织诉讼经验、作为应诉方的声誉以及时间成本。通过 probit 模型得出的结果表明，经济规模对实现 MAS 具有重要意义，即申诉方的 GDP 超过应诉方的 GDP，但人均 GDP 和贸易比率不超过应诉方的 GDP。本研究还发现，作为争议方的世贸组织诉讼经验和作为应诉方的声誉也会影响友好和解的意愿。虽然这项研究主要以世贸组织为中心，但其从世贸组织数据中得出的结论具有更广泛的影响。所发现的因素不仅与世贸组织成员相关，而且对解决国家间的贸易争端也有意义。认识到这些因素对于不同贸易平台的政策制定者来说至关重要，有助于他们制定战略，加强合作，提高各自争端解决机制的效率。通过阐明实现多边贸易体制决策过程的复杂性，本研究提供了宝贵的见解。这些见解对所有参与贸易争端的利益相关者都很有帮助，指导他们形成以共识为导向的解决方案，维护公正和平衡的国际贸易原则。
{"title":"Unravelling Factors Influencing the Mutually Agreed Solution in International Trade Disputes: An Empirical Exploration Based on WTO Disputes","authors":"Christina Siyu Tao, Qi Shen","doi":"10.1515/ajle-2023-0149","DOIUrl":"https://doi.org/10.1515/ajle-2023-0149","url":null,"abstract":"\u0000 This study explores the factors influencing the achievement of a mutually agreed solution (MAS) in international trade disputes, drawing insights and patterns from the WTO dispute experience. Through an in-depth examination of prevailing literature and compliance theories, the research pinpoints various factors that impact the achievement of MAS in WTO disputes, including the dynamics of economic size, experience in WTO litigation, reputation as a respondent, and costs in time. The results, obtained through a probit model, reveal the significance of economic size in achieving MAS, where the complainant’s GDP surpasses that of the respondent but not the per capita GDP and trade ratio. Originally, this study discloses that experience in WTO litigation as a disputing party and reputation as the respondent also influence the willingness to settle amicably. While this research primarily centres on the WTO, its findings, derived from WTO data, have broader implications. The identified factors are not only pertinent to WTO members but also hold relevance for solving trade disputes between states. Recognizing these factors is crucial for policymakers across different trade platforms to devise strategies that bolster collaboration and elevate the efficacy of their respective dispute-resolution mechanisms. By illuminating the complexities of the decision-making processes in achieving MAS, this study offers invaluable insights. These insights are instrumental for all stakeholders involved in trade disputes, guiding them towards forging consensus-driven solutions that uphold the principles of just and balanced international trade.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140460238","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The article argues that the contours of the ‘business judgment rule’ (hereinafter, ‘the rule’ or ‘the doctrine’) have not been properly delineated and add avoidable transaction costs in terms of business decision-making. On the premise of ‘influence’ existing between Board Directors and countervailing requirements of legal compliance, it becomes imperative to study both components. In the absence of any clear legalese on the latter component incentivizes Directors in two ways – by inhibiting judgment or by incentivizing abuse for a perceived higher probability of economic gain.
{"title":"Law-and-Economics of Business Judgment Rule in India","authors":"Rahul Singh, Pratyay Amrit","doi":"10.1515/ajle-2023-0045","DOIUrl":"https://doi.org/10.1515/ajle-2023-0045","url":null,"abstract":"Abstract The article argues that the contours of the ‘business judgment rule’ (hereinafter, ‘the rule’ or ‘the doctrine’) have not been properly delineated and add avoidable transaction costs in terms of business decision-making. On the premise of ‘influence’ existing between Board Directors and countervailing requirements of legal compliance, it becomes imperative to study both components. In the absence of any clear legalese on the latter component incentivizes Directors in two ways – by inhibiting judgment or by incentivizing abuse for a perceived higher probability of economic gain.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139442315","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper aims to carry out empirical analysis of the viability of large language models (LLMs), specifically ChatGPT, in simulating the common law system and facilitating its evolutionary processes. Drawing on the Theory of Rules Evolution, it is understood that common law generates efficient rules by natural selection through constant litigation. Nonetheless, this evolutionary mechanism faces several hindrances. The process of change is typically slow and incremental. Courts often have to wait for a case that’s deemed ‘appropriate’ before they can change the law, leading to extended delays. Additionally, courts frequently struggle to make efficient decisions due to limited information. Other factors that decelerate the creation of efficient rules include judicial bias, unequal distribution of resources among litigating parties, and the diminishing presence of a competitive legal order. This study first assesses ChatGPT’s capability to embrace the essence of the common law system, namely the doctrine of stare decisis. We then assess its potential to overcome the hindrances in common law development and promote efficient rules. Through a series of meticulously designed hypothetical cases set in a virtual jurisdiction called the “Matrix Kingdom,” we observed that ChatGPT mimic the functions of a common law court by citing, following, and distinguishing its own precedents, but it accomplishes this with significantly fewer resources and in less time. This implies that humans can introduce hypothetical legal situations, enabling LLMs to replicate the natural selection process observed in the common law system but with a significantly accelerated pace. Given that LLMs are trained with diverse information sources, not just the factual contexts of cases, they could potentially lower the informational constraints in decision-making. As such, LLMs might significantly contribute to the evolutionary processes of common law development. However, it is important to remain cautious of certain limitations, such as the potential for AI Hallucination and inherent biases in LLMs, which require careful consideration and management.
{"title":"Catalyst for Common Law Evolution: Experiment with ChatGPT and a Hypothetical Common Law Jurisdiction","authors":"Kwansai Iu, Ziyue Zhou","doi":"10.1515/ajle-2023-0114","DOIUrl":"https://doi.org/10.1515/ajle-2023-0114","url":null,"abstract":"Abstract This paper aims to carry out empirical analysis of the viability of large language models (LLMs), specifically ChatGPT, in simulating the common law system and facilitating its evolutionary processes. Drawing on the Theory of Rules Evolution, it is understood that common law generates efficient rules by natural selection through constant litigation. Nonetheless, this evolutionary mechanism faces several hindrances. The process of change is typically slow and incremental. Courts often have to wait for a case that’s deemed ‘appropriate’ before they can change the law, leading to extended delays. Additionally, courts frequently struggle to make efficient decisions due to limited information. Other factors that decelerate the creation of efficient rules include judicial bias, unequal distribution of resources among litigating parties, and the diminishing presence of a competitive legal order. This study first assesses ChatGPT’s capability to embrace the essence of the common law system, namely the doctrine of stare decisis. We then assess its potential to overcome the hindrances in common law development and promote efficient rules. Through a series of meticulously designed hypothetical cases set in a virtual jurisdiction called the “Matrix Kingdom,” we observed that ChatGPT mimic the functions of a common law court by citing, following, and distinguishing its own precedents, but it accomplishes this with significantly fewer resources and in less time. This implies that humans can introduce hypothetical legal situations, enabling LLMs to replicate the natural selection process observed in the common law system but with a significantly accelerated pace. Given that LLMs are trained with diverse information sources, not just the factual contexts of cases, they could potentially lower the informational constraints in decision-making. As such, LLMs might significantly contribute to the evolutionary processes of common law development. However, it is important to remain cautious of certain limitations, such as the potential for AI Hallucination and inherent biases in LLMs, which require careful consideration and management.","PeriodicalId":41431,"journal":{"name":"Asian Journal of Law and Economics","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2024-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139382247","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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