March 10, 2014

Politics, Markets, and Dispute Resolution

  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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Read the full paper at SSRN.com

In bringing economic analysis to bear on whether a dispute is settled without trial, the presumed institutional setting is typically one of private property where the parties are residual claimants to their legal expenses. Many disputes, however, are between private and public parties. In these disputes there is a conflict between substantive rationalities because public parties are not residual claimants. Just as the substantive content of action can vary depending on whether the actor operates within a context of private or common property, so can the substance of dispute settlement vary. While a public actor cannot pocket legal expenses that are saved through settlement, the expenses of trial can serve as an investment in pursuing future political ambitions.