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The Common Law Advantage

Without question, the U.S. legal system, from the structure and operations of the judicial branch to the governing laws of the nation, was founded in the common law legal tradition. Common law, for those unfamiliar with the concept, is law that develops organically over time and is based on the accepted customs and shared values of a society. More specific to its history, common law was developed in England as it emerged from the Middle Ages, where the legal systems of the disparate regions were united by royal decrees and the decisions of judges based not on the wisdom of the given monarch or judge, but on previous decisions made in other legal cases. Thus the ultimate foundation in a common law system is legal precedent established by impartial judges and juries. In this way the law evolves naturally from real and specific cases, and the law guarantees certainty for citizens in their affairs as they can look to precedent as a way to anticipate the outcome of their actions in relation to the law, government, and society as a whole.

Many overlook the importance of such certainty, but prominent free market economists argue that it is integral to a flourishing economy. “Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law,” stated F.A. Hayek in his timeless work The Road to Serfdom. He elaborates, “this means that government in all its actions is bound by rules fixed and announced beforehand--rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.”

This is the tradition that the founding fathers intended to leave to Americans when authoring the Constitution and other early laws at the state and federal level. As James McClellan highlights in his book Liberty, Order, and Justice: An Introduction to the Constitutional Principles of American Government, “the language of both Federal and State constitutions in the United States cannot be fully understood without reference to the English Common Law.” In this common law system, law was primarily created where it was found to be necessary: in the disagreements between citizens. Legislation and regulation served only an auxiliary role, to fill only the most obvious gaps in the code; hence the system of checks and balances where legislation faced the almost impossible task of gaining the consensus of the people, the states, the president, and the courts.

The American adoption of the British common law system may seem counter-revolutionary, but, in a global context, to have a system where law was able to develop organically via the affairs and customs of the citizenry instead of being handed down from government philosopher kings was truly revolutionary indeed. While common law ruled the British Isles and its colonies, a different legal tradition developed out of the ashes of the Roman Empire in rest of Europe. In ancient Rome, a lay-judiciary existed where average citizens were appointed at random to serve as judges and magistrates, not unlike the modern jury system. However, instead of giving deference to the decisions reached in court cases which these citizens provided over, Romans isolated court decisions to their specific cases. As a result, decisions in similar cases could be wildly different. Further, this lack of a formal judicial structure left a void. If law was not being created in the courts based on the customs of society, it had to be instead handed down from the government. As a result, Roman law became heavily influenced by the opinions of wealthy and well educated citizens that lent their advice to the lay judiciary. Elites thus centralized power and could effectively create laws and shape society to their will. This system, with deference to legislation and rules handed down from central authority instead of legal precedent is called civil law. Traced back to its Latin origins this means law that applies to the citizens. This is a stark contrast to the common law of the citizens.

This system of mass regulation and legislation in anticipation of society’s needs rather than in response to society’s needs is inefficient. When government tries to anticipate society, society cannot anticipate government. As a result, actors in the society’s economy lose precious certainty in the outcome of their affairs, causing slower economic growth.

Unfortunately, evidence of this relationship between an aggressive civil law system and the economy is readily apparent in the modern United States, despite the nation’s common law history. Progressive administrations and congresses have developed an enormous administrative state through rampant legislating. As a result, Americans are now subject to arbitrary rules and regulations handed down effectively at random and in high volume from the dozens of bureaucracies and agencies that now comprise the federal leviathan. Today, the Federal Register, the unified document of all federal rules and regulations, is nearly 80,000 pages long. By contrast, the document was a mere 2,600 pages in the mid-1930s. The economic toll of such complexity is not insignificant. Regulatory compliance costs alone were measured at nearly $1.9 trillion in 2013.1 This does not account for trillions more in potential investments and transactions not made due to the burden of compliance and the uncertainty with the law and federal code.

It is needless to say that America has enjoyed unparalleled economic prosperity. While not all of it can be attributed to a legal system rooted in common law, the common law system’s foundation in society’s agreed upon customs and traditions helped facilitate and accelerate economic growth by guaranteeing effective and certain rule of law for economic actors. However, this tradition and its accompanying economic benefits is under threat from a shift in the definition of law in America, away from the common and certain customs of society, to the whims of bureaucratic elites.

  1. Clyde Wayne Crews, "Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State," Competitive Enterprise Institute, 2013.,000%20Commandments%202013.pdf