and measurement Simon Deakin University of Cambridge - - PowerPoint PPT Presentation

Legal complexity: theory, models and measurement

Simon Deakin University of Cambridge (s.deakin@cbr.cam.ac.uk) Conference on Empirical Legal Studies in Europe Leuven, 31 May – 1 June 2018

Legal theory in the 21st Century

• Legal positivism: aimed to develop a theory of law which took

seriously the autonomy of the legal system and of ‘legal science’ as a discipline distinct from the physical and social sciences (Kelsen, Hart)

• But ultimately failed to produce a theory of legal validity which did

not fall back on ad-hoc sociological reasoning, leaving the field open to more reductive approaches (‘law and economics’, ‘critical legal studies’)

• Need for a new theory of law which accounts for legal autonomy

while more effectively integrating legal method with insights from the behavioural and cognitive sciences (and with empirical methods…)

Legal ‘complexity’

• Legal complexity = evolutionary game theory and systems theory

applied to law

• Self-reference (‘autopoiesis’) and non-linearity (treating outputs as

inputs)

• Emergence of macro-structures not reducible to their component

parts: macro and micro linked in recursive loop

• Adaptation and coevolution of systems (law, economy, politics)
• Non-ergodicity: contingency and path dependence

The Mandelbrot set

• Basic function: f(x) = c + x2, where c is fixed and x is variable
• Repeat the function by treating the output as a new input beginning

with x = 0

• So f(x) = c + x2 = c: x is now c
• Then f(x) = c + c2
• And then f(x) = c + (c + c2)2 … and so on…

The shape of the legal system

When the Mandelbrot set is represented as a two-dimensional figure consisting of points on a plane, what is revealed is an

• bject consisting of an infinite

number of resemblances of itself, visualised at different levels of magnification… a fractal

Legal reasoning

• ‘If legal practice closes itself in a temporal continuity, if it is ready to be

guided by self-produced rules and if the task in the individual case is to measure the case against the rules and the rules against the case, evolutionary selection achieves a very specific form. In each case one has to ask whether the case, when seen from the perspective of the rules, is equal to other cases or not. If it is equal to them, then and only then can

• ne “subsume” it, namely apply the rules to that particular case. If the

case is not equal to other cases, then new rules have to be developed. It is this practice that provides the platform for understanding justice not as just the idea of equality but as the normative form of equality, that is, as the requirement to distinguish between equal and unequal, and to treat what is equal equally and what is unequal unequally’ (Luhmann, 2004)

Legal evolution

• Litigation ensures the selection out of inefficient rules (Rubin, 1977;

Priest, 1977)

• But, how to account for legal continuity?
• Variation, selection, retention algorithm applied to law (Luhmann,

2004)

‘Code’

Law constitutes the market

‘Il y a pour le service de la Bourse un crieur public… il annoncera les cotes des effets publics negocies sur le parquet…’ Ordonnance de 29 germinal, an 4 (1801)

Law protects itself from the market

Nulli vendemus, nulli negabimus, aut differemus, rectum aut justiciam [‘To no one will we sell, to no-one will we delay, or deny, justice’] Magna Carta, 1215

The ontology of corruption

• Corruption = application of the logic of the market within the public

sphere

• Because in the absence of a public-private divide, corruption is

nothing more than ‘rational, utility-maximising’ behaviour

The rule of law

• The rule of law as a ‘social grundnorm’
• ‘Correlated equilibrium’ (Aumann, 1974, Gintis, 2009)
• Legal validity = actors’ strategic observance of a commonly

understood ‘public signal’

• Dogma or convention?
• Coevolution of the rule of law state with the market economy

Separation and coevolution of law and market

‘La garantie des droits de l‘homme et du citoyen nécessite une force publique…’ [‘The protection of the rights of the person and citizen requires the institution of a public power…] La Declaration des droits de l’homme et du citoyen (1789)

Legal ‘efficiency’

• The evolution of law ‘does not mean that the level of happiness of

social life generally has been raised effectively, let alone that law reflects correctly the factual state of a given society. The counterfactual structure of norms indicates otherwise, and even the political guarantee of law cannot ensure that every expectation will be fulfilled. One has to resort to compensation for non-fulfillment, and above all to punishment and penalties. However, what has undoubtedly been achieved is the creation of an internal complexity built on the foundation of differentiating the legal system through

• perative closure’ (Luhmann, 2004)

Legal empirics

• ‘For the rational study of law the black letter man may be the man of

the present, but the man of the future is the man of statistics and the master of economics’ (Holmes, 1897)

• ‘On my appointment to the Department of Sociology established at

the University of Bielefeld in 1969, I was asked what research projects I had running. My project was, and ever since has been, the theory of society; term, thirty years; cost, none’ (Luhmann, 1997)

Application: ‘leximetric’ analysis of labour laws

• Quantitative analysis of legal systems
• Data coding using content analysis of legal texts

Research questions

‘Laws created to protect workers

• ften hurt them’ (World Bank,

Doing Business, 2008) ‘Employment regulations are unquestionably necessary not just to protect workers from arbitrary

• r unfair treatment but to ensure

efficient contracting between employers and workers’ (World Bank, Doing Business, 2015)

Principles for constructing leximetric datasets

• Theoretical priors should be spelled out
• Choices on identification and definition of indicators need to be

justified

• Weighting and aggregation issues should be addressed
• Primary sources should be fully sourced
• The means by which values were derived from primary sources

should be transparent

Steps in data coding

(i) identification of a general phenomenon of interest (‘labour law’) (ii) development of a conceptual construct (‘regulation’ of labour market relations, both individual and collective) (iii) identification of indicators or variables which, singly or together, express the construct in numerical terms (iv) development of a coding algorithm which sets out a series of steps to be taken in assigning numerical values to the primary source material (v) identification of a measurement scale which is embedded in the algorithm (vi) allocation of weights, where necessary or relevant, to the individual variables or indicators (vii) aggregation of the individual indicators in an index which provides a composite measure of the phenomenon of interest

CBR Labour Regulation Index

• 117 countries, 44 years (1970-2013)
• 40 indicators
• 5 sub-indices: different forms of employment, working time,

dismissal, employee representation, industrial action

• Dataset publicly available for downloading and use:

Adams, Z., Bishop, L. and Deakin, S. (2017) ‘CBR Labour Regulation Index (Dataset of 117 Countries)’, in J. Armour, S. Deakin and M. Siems (eds.) CBR Leximetric Datasets https://www.repository.cam.ac.uk/handle/1810/263766 (Cambridge: University of Cambridge Data Repository).

Coding algorithms

Indicator Coding algorithm

• 5. Fixed-term workers have the right to equal

treatment with permanent workers Equals 1 if the legal system recognises a right to equal treatment for fixed-term workers (as, for example, in the case of EC Directive 99/70/EC). Equals 0.5 if the legal system recognises a more limited right to equal treatment for fixed-term workers (via, e.g., more general right of workers not be treated arbitrarily in employment) Equals 0 if neither of the above. Scope for further gradation between 0 and 1 to reflect changes in the strength of the law.

• 6. Maximum duration of fixed-term contracts

Measures the maximum cumulative duration of fixed-term contracts permitted by law before the employment is deemed to be permanent. The score is normalised from 0 to 1, with higher values indicating a lower permitted duration. The score equals 1 if the maximum limit is less than 1 year and 0 if it is 10 years or more or if there is no legal limit.

Trends by legal origin

1 2 3 4 5 .2 .4 .6 .8 Overall Protection (CBR-LRI) Civil Law Common Law

Year 1986

1 2 3 4 5 .2 .4 .6 .8 Overall Protection (CBR-LRI) Civil Law Common Law

Year 2000

1 2 3 4 5 .2 .4 .6 .8 1 Overall Protection (CBR-LRI) Civil Law Common Law

Year 2008

1 2 3 4 .2 .4 .6 .8 1 Overall Protection (CBR-LRI) Civil Law Common Law

Year 2013

Selected OECD countries vs. selected BRICS

.2 .4 .6 .8 1970 1980 1990 2000 2010 Year

France Japan Sweden UK Germany US

.2 .3 .4 .5 .6 1970 1980 1990 2000 2010 Year

Brazil Russia India China South Africa

Use in econometric analysis

• No presumption for or against a particular theory of labour law’s

impact on the economy

• Suitable for panel data and time series analysis
• Should be used in conjunction with other institutional datasets, e.g.

World Bank, Freedom House data on ‘rule of law’

• ‘Cambridge equation’ (pooled mean group regression model) most

appropriate for dynamic panel data analysis capable of distinguishing between short-run and long-run effects of a regulatory change (Pesaran, Shin and Smith, 1999)

Trends in laws governing different forms of employment (DFE) and employment protection (EPL)

Pooled mean group estimation with different forms of employment

Labour force participation Employment to population Self-employment Productivity per worker Labour share Unemployment rate Long run DFE 0.0120** 0.2393***

• 0.0471***
• 0.3886

0.0274***

• 0.0763***

GDP growth 0.0020*** 0.0399***

• 0.0025***

0.6572***

• 0.0026***
• 0.0208***

Population 0.0003*** 0.0006**

• 0.0008***

0.0089***

• 0.0002***
• 0.0059***

Freedom House

• 0.0011
• 0.0238**
• 0.0037**
• 0.0531
• 0.0014
• 0.0177***

Short run Error correction

• 0.1417***
• 0.0360***
• 0.2406***
• 0.0116***
• 0.4071***
• 0.0986***

Δ DFE

• 0.0008
• 0.0210**

0.0592 0.0162

• 0.0369

0.0210** Δ GDP growth

• 0.0003***
• 0.0006***

0.0005** 0.0003

• 0.0001

0.0008*** Δ Population

• 0.0439
• 0.0758

0.0626

• 0.0649
• 0.4559**

0.0176 Δ Freedom House 0.0008 0.0016* 0.0006

• 0.0041*

0.0004

• 0.0015

Constant 0.0841*** 0.0150*** 0.1136*** 0.0949*** 0.2003*** 0.0321*** Observations 2386 2386 2386 2386 1336 2386

Pooled mean group estimation with employment protection legislation

Labour force participation Employment to population Self-employment Productivity per worker Labour share Unemployment rate Long run EPL 0.0572*** 0.3468*** 0.0349*** 0.3733 0.0374***

• 0.2281***

GDP growth 0.0020*** 0.0195***

• 0.0020***

0.5588***

• 0.0026***
• 0.0239***

Population 0.0003*** 0.0076***

• 0.0008***

0.0080***

• 0.0002***
• 0.0006***

Freedom House

• 0.0019*

0.0091* 0.0056**

• 0.0517
• 0.0009
• 0.0144***

Short run Error correction

• 0.1428***
• 0.0714***
• 0.2354***
• 0.0138***
• 0.3789***
• 0.0864***

Δ EPL

• 0.0336
• 0.0815

0.0402 0.1156 0.0032 0.0405 Δ GDP growth

• 0.0002***
• 0.0006***

0.0004 0.0002

• 0.0002

0.0007*** Δ Population

• 0.0493
• 0.0495

0.1364

• 0.0836
• 0.4575**
• 0.0267

Δ Freedom House 0.0008 0.001

• 0.0002
• 0.0036*

0.0015

• 0.0012

Constant 0.0812*** 0.0166*** 0.0964*** 0.1068*** 0.1861*** 0.0283*** Observations 2386 2386 2386 2386 1336 2386

Limitations

• Difficult to infer causation from correlation even with lags and

instruments

• National context mostly invisible: cross-national heterogeneities =

‘unknown unknowns’?

• Inter-temporal effects only partially captured even with a ‘dynamic’

regression model

Complexity as a limit to measurement and estimation

• ‘The atomic hypothesis which has worked so splendidly in Physics

breaks down in Psychics. We are faced at every turn with the problems of Organic Unity, of Discreteness, of Discontinuity – the whole is not equal to the sum of the parts, comparisons of quantity fails us, small changes produce large effects, the assumptions of a uniform and homogeneous continuum are not satisfied. Thus the results of Mathematical Psychics turn out to be derivative, not fundamental, indexes, not measurements, first approximations at the best; and fallible indexes, dubious approximations at that, with much doubt added as to what, if anything, they are indexes or approximations of…’ (Keynes, 1926)

Alternative empirical approaches

• Regression discontinuity models
• Randomised controlled trials
• Experiments
• Agent based modelling
• Multiple methods

Conclusion

• Law as complexity: a work in progress…
• But one capable of producing a new synthesis of law and the

behavioural sciences

• And a new theory of legal autonomy