The economic effects of judicial selection.

• Author: Dove, John A.
• Position: Symposium: The Role of the Judge in the Anglo-American Tradition

1. INTRODUCTION AND META-ANALYSIS

   I would like to thank you all for the opportunity to talk today, and I would like to add a special thanks to the Editorial Board of the Faulkner Law Review for extending the invitation. I am here today to speak about the judiciary and the method of selecting members of the judiciary. Specifically, I want to offer an overview of the economic theory and empirical evidence that support my contention: The appointment or merit-based selection of judges is preferable to judicial elections because of the importance of an independent judiciary.

   Now, I am an economist, and I may very well be the only economist in the room. That said, I might have a somewhat unique way of viewing the judiciary, the role it plays, and why it matters. I hope to address each of these issues and detail all of this through the economic lens and the economic way of thinking.

   Many of you may wonder why an economist would take interest in the judiciary and how the judiciary is actually important to economics. Given that, I hope to begin this talk with an initial meta-analysis of this issue, (1) recognizing that an independent judiciary plays a fundamental role through the incentives it creates. From this, it is necessary to analyze and to understand the incentives and constraints that the judicial selection process creates and how these incentives and constraints may help or hinder judicial independence. Then, I will provide some theoretical arguments as to why appointment or merit-based selection is expected to perform better relative to popular elections. Next, I will discuss a survey of the existing empirical evidence within economic and political science literature supporting the conclusion that merit-based selection and appointments do, in fact, perform relatively better compared to popular election. I will close with some additional research opportunities. Overall, while my contention is that appointments and merit-based selections are preferable to popular election, this argument is based solely in consequential terms. Further, it is important to temper this argument by emphasizing that it is a relative argument. In other words, while no method of selection is without benefit, no method of selection is without cost, either. Here, a simple weighing of those relative costs and benefits drives the conclusion I reach.

   Ultimately, why the judiciary is, and especially how individuals are, selected to the bench relates back to the importance of institutions and comparative institutional analysis. The literature has quite convincingly shown that it is the institutional environment and specific existing institutions that will promote or hinder economic growth and development. (2) While many other considerations can influence growth and development, these are of secondary importance relative to institutions. (3) Specifically, the evidence overwhelmingly indicates that jurisdictions where institutional arrangements are conducive to the protection of property rights and to the rule of law tend to grow more rapidly and enjoy greater prosperity relative to jurisdictions without such arrangements. (4) This is largely driven by the incentives created through adherence to those two particular constraints. (5)

   So, what do I mean when I refer to "institutions" and why do they matter? Nobel Laureate Douglass North spent most of his career dealing with this issue and, thus, probably provides the best economic definition. North suggested institutions could be the "formal rules, written laws, formal social conventions, informal norms of behavior, and shared beliefs about the world, as well as the means of enforcement." (6) Simply put, they are the "rules of the game" within which economic agents must operate and attempt to organize their private and public lives. (7)

   Why judicial selection matters has to do with some of the basic tenets of economic analysis, the most important of which (and one that I will return to later in more detail) are the incentives created and the role they play. Ultimately, the institutional environment in which economic agents operate creates particular costs and benefits (or, importantly, relative prices) for pursuing or avoiding particular behavior. Thus, when the institutional environment changes, the relative costs and benefits (the relative prices) that individuals face will change, which will lead to predictable changes in behavior. Raise the relative price and individuals will pursue less of the behavior. This is the Law of Demand in action. Further, this predictable change in behavior, based on the relative costs and benefits presented to individuals, is what economists refer to as a rational choice.

   When the institutional arrangements protect property rights and ensure the rule of law, this incentivizes individuals to capitalize on the dispersed bits of localized knowledge that they possess and to pursue productive and growth-enhancing activities. (8) It also ex ante creates known delimited spheres within which each individual is able to pursue diverse and particular activities free from the interference of others. (9) The end result is one in which the entrepreneurial process can be unleashed, which is the primary driver behind economic growth and change. (10) Most importantly, it incentivizes productive entrepreneurial activity and constrains both unproductive and destructive entrepreneurial activity. (11)

   The relevance of all of this relates back to Professor North's point about the means of enforcing those rules of the game, especially where disputes arise. (12) In order to impartially accomplish this enforcement, it requires an independent third-party that can objectively adjudicate and assign fault. (13) An independent and impartial adjudicator or judiciary minimizes the ex ante costs associated with taking on economic risk (thus, incentivizes entrepreneurial activity) and minimizes the risk of arbitrary expropriation.

   The importance of this fact cannot be overstated. In fact, Professor North suggested that, in this regard, courts are centrally important economic institutions. (14) Ultimately, courts serve to minimize transactions costs--or barriers to trade--and thereby facilitate and increase the gains from trade. (15) This is unambiguously wealth enhancing. Also adding to this, Rafael La Porta et al. found that more independent judiciaries are highly correlated with increased economic freedom, which is a necessary condition for economic growth. (16) My own research corroborated this result using United States state-level data. (17) Finally, Lars Feld and Stefan Voigt have also examined the effect de jure and de facto judicial independence have on economic growth across a large sample of countries and found that de facto judicial independence is positively associated with economic growth. (18)

2. ECONOMIC THEORY APPLIED TO THE JUDICIARY IN THE UNITED STATES

   Given all of the above, how does this play out, and what actual overall effect does this have in the United States? Assessing these questions requires a detailed analysis of economic theory and how these theoretical considerations can be applied to the judiciary. I think the best way to drill down and understand some of these issues is to consider the judiciary at the state level, given the variation that exists. This is important since analyzing state courts allows for detailed institutional analysis on many margins, especially given the uniqueness in how state courts actually select judges, whether it be by appointment, merit-based selection, or popular election. What economics can teach us about each of these methods (and the nuances that exist within them) is that each creates distinct incentives and constraints.

   Before I delve into these issues and what some of those differences are, it is imperative that I note several caveats. First, United States courts, no matter what method of selection is employed, are some of the most...