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  • Toward a Study of the Ecology of Judicial Activism?
  • John C. Reitz (bio)

I Introduction

In reaction to the so-called legal origins literature that has dominated a good part of the comparative law and economics literature for the past decade, Gillian Hadfield has written a creative and stimulating paper proposing a new direction for this kind of research that typically relies on multi-country statistical correlations to investigate what it is about the legal systems of countries with the strongest economic performance that may contribute to that performance. The legal origins thesis asserts that whether a legal system traces its lineage to a civil or common law origin is a chief factor in determining how well that legal system supports economic welfare. Instead of focusing on legal origins, Hadfield's paper proposes studying the impact of a set of procedural and institutional characteristics of each legal system, which she calls 'the institutional determinants of the quality of law' and 'the levers of legal design.'1

The legal origins literature has stimulated an important comparative law debate. While the initial papers may have employed some rather simplistic assumptions, the legal origins advocates and their critics have developed increasingly sophisticated analyses of real legal systems, so the debate should be of great interest to all scholars who study comparative law, even those of us, like me, who are not adept at the use of statistical methods. Perhaps Hadfield's paper, which attempts to look at more detailed levels of how legal systems actually function, will help to stimulate broader interest in this debate. While I think she initiates an investigation into important issues, I have some reservations about her project. Her interesting paper undoubtedly deserves a more complete response than is possible within the space constraints of this brief comment. After a brief explication of the legal origins thesis and how Hadfield's response fits into that literature, therefore, I will focus my attention on what I [End Page 185] think are the most important problems raised by her thesis concerning institutional determinants.

II The legal origins thesis and Hadfield's response

Because Hadfield's paper was written in direct response to the legal origins thesis and its critics, we have to understand that thesis and the controversies surrounding it in order to appreciate Hadfield's response.

A The Legal Origins Thesis

The legal origins thesis, advanced by scholars working in the 'new institutional economics, . . . starts with the presumption that legal rules affect economic growth according to how far they support the formation of markets and the protection of property rights, particularly in the context of the rules governing the business enterprise. . ..'2 The first complete version of the thesis appears to have been advanced in 1998 in a paper by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny,3 often collectively referred to as 'LLSV,' in which the authors constructed an 'anti-director rights index' to measure shareholder protection by coding forty-nine countries with respect to a variety of arguably relevant factors, such as whether the country in question allows proxy voting by mail, whether there is cumulative voting, and whether there are mandatory dividends. They also constructed a 'creditor rights index' for creditors of bankrupt corporations that involved coding countries for such factors as whether there are restrictions for going into reorganization, whether management stays in such a case, and whether the law provides an automatic stay on secured assets. Finally, they coded each of these countries as to the origin of their legal system in one of the major families or traditions of legal systems. On the basis of these statistics, as validated by regression analyses, they concluded that countries in the common law tradition do a significantly better job than those in the civil law tradition of protecting shareholders and creditors. Within the civil law tradition, those legal systems within the French family of legal systems scored the lowest. The German family of legal systems and the Scandinavian family scored in the middle. Thus, this first version of the legal origins thesis, which is 'perhaps still the most influential[,] was to the effect that systems [End Page 186] of common law origin...

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