The Rule of Law

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The Rule of Law

• Russell S. Sobel, Ph.D.
• Professor of Economics
• James Clark Coffman Distinguished Chair
• West Virginia University

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First Book Unleashing Capitalism

• Over 5,000 copies sold
• Over 200 public presentations
• Presentations to 2 Governors
• Won Sir Antony Fisher Award

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Prosperity is the Result of Having Good
Institutions- Economic and Legal -
The Main Point
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Economic Growth is a Function of Both Inputs
and Institutions
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Route 50
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Our New Book

• Focuses on Legal Institutions
• Edited Volume - Similar to Unleashing Capitalism
• 12 Chapters
• 15 Authors
• Today Ill Summarize Ideas from the Book

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WVs Legal Rankings

• Institute for Legal Reform
• State Liability Systems
• Ranking Study
• (U.S. Chamber of Commerce)
• American Tort Reform Association (ATRA) has named
  the entire state of West Virginia as a Judicial
  Hellhole

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Legal System Quality and Economic Prosperity
Evidence
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What Exactly is a Good Legal System?
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The Rule of Law

• The rule of law is a broad concept that
  describes a society that is governed not by
  people, but instead by established, fair, and
  predictable rules of interaction
• WV Supreme Court Justice Robert Jackson, 1943
• One's right to life, liberty, and property, to
  free speech, a free press, freedom of worship and
  assembly, and other fundamental rights may not be
  submitted to vote they depend on the outcome of
  no elections."
• "The very purpose of a Bill of Rights was to
  withdraw certain subjects from political
  controversy, to place them beyond the reach of
  majorities and officials and to establish them as
  legal principles to be applied by the courts.
• Your rights to life, property, etc., shouldnt
  arbitrarily depend on who is in power in
  government (all branches)

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Laws as Rules of the Game

• For the game to go smoothly, the rules must be
  applied in a predictable fair mannerthey cant
  be changing in the middle of the game

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Reasons Why a Poor Quality Legal System Hurts an
Economy

• Increases the Cost of Doing Business
• Rulings can significantly increase business costs
• Even unsuccessful lawsuits cost money to defend
• Increases Business Risk
• Market Risk vs. Legal Risk
• With legal risk can lose more than invested
• Productive vs. Unproductive Entrepreneurship
• Draws the states resources out of productive,
  wealth creating activities and devotes them
  instead toward attempts to secure (and defend
  against) wealth transfers
• Other Unintended Consequences
• Example Prescription drug warning sheets

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Specific Reforms
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The Rule of Law Suggested Reforms

• End Partisan Judicial Elections
• Most states (including N.C. in 2004) have
  switched away from partisan elections
• In West Virginia, moving to nonpartisan can be
  done legislatively, moving to appointment would
  require a constitutional amendment
• Pros Cons (more independents, less perception
  of politics/money, information?)

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Legal Quality Judicial Selection
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Selected Quotes

• The Honorable Sandra Day OConnor, U.S. Supreme
  Court (Retired) (Ch.1)
• I wish you success as you consider reforms to
  the judicial selection methods used in West
  Virginia that will safeguard judicial
  independence and the rule of law in the years to
  come An appointment process for judges followed
  by periodic retention elections offers clear
  advantages over partisan judicial elections If
  contested judicial elections are to continue,
  they should be made non-partisan.
• The Honorable Wanda G. Bryant, North Carolina
  Court of Appeals (Ch. 2)
• I have run for election under the old partisan
  system which allowed private financing of
  judicial campaigns as well as the new public
  financing systemThe nonpartisan aspect of
  campaign reform is a welcome change.
• Alexander Tabarrok, Ph.D., George Mason
  University (Ch. 3)
• Awards against businesses in general are larger
  in partisan states than in non-partisan states,
  but the majority of the partisan effect is due to
  a particular bias against out-of-state business
  defendants.

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The Rule of Law Suggested Reforms

• End venue shopping by imposing meaningful venue
  requirements
• Within state venue shopping picking your
  judge
• Example Justice Warren McGraw in one of 9
  single-judge circuits (Wyoming Co.) so a case
  filed will necessarily and predictably be heard
  by that judge
• Other popular venues Brooke McDowell counties
• 15 other circuits (out of 31 total) have only two
  judges
• Out-of-state cases in our state courts (esp. mass
  tort litigation like asbestos, tobacco)

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The Rule of Law Suggested Reforms

• Eminent Domain Reform
• Enact legislation restricting the definitions of
  public use and blight, and the use of eminent
  domain for private benefit
• Create an intermediate appeals court system in
  conjunction with a right of first appeal
• West Virginia is the only state to provide an
  appeal solely at the discretion of its appellate
  court in all cases decided in its lower courts
• Bureau of Justice Statistics Study
• 15 of lower court cases are appealed
• 3 are reversed, remanded, or modified
• If goal is reducing error a second opinion
  always helps

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The Rule of Law Other Reforms

• Joint and several liability reform
• Impose limits on punitive damage awards
• Revise the standard for deliberate intent in
  workers compensation cases

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Thinking Properly About Reform

• In the end we are in competition with the other
  49 states and must have a competitive legal
  system

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Thank You / QA
Contact Information Russell S. Sobel,
Ph.D. Coffman Distinguished Chair Dept. of
Economics, WVU Russell.Sobel_at_mail.wvu.edu (304)
293-7864