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42 Duke L.J. 557 (1992-1993)
Rules Versus Standards: An Economic Analysis

handle is hein.journals/duklr42 and id is 583 raw text is: RULES VERSUS STANDARDS: AN ECONOMIC ANALYSIS Louis KAPLOWt This Article offers an economic analysis of the extent to which legal commands should be promulgated as rules or stan- dards. Two dimensions of the problem are emphasized. First, the choice between rules and standards affects costs: Rules typically are more costly than standards to create, whereas standards tend to be more costly for individuals to interpret when deciding how to act and for an adjudicator to apply to past conduct. Second, when individuals can determine the application of rules to their contem- plated acts more cheaply, conduct is more likely to reflect the content of previously promulgated rules than of standards that will be given content only after individuals act. The Article considers how these factors influence the manner in which rules and stan- dards should be designed, and explores the circumstances in which rules or standards are likely to be preferable. The Article also addresses the level of detail with which laws should be formulated and applied, emphasizing how this question concerning the laws' relative simplicity or complexity can be distinguished from that of whether laws are given content ex ante (rules) or ex post (stan- dards). In so doing, it illuminates concerns about the over- and underinclusiveness of rules relative to standards. t Professor, Harvard Law School and Research Associate, National Bureau of Eco- nomic Research. I am grateful for comments from Lucian Bebchuk, James Boyle, Scott Brewer, David Charny, Erwin Chemerinsky, Stephen Choi, Richard Fallon, Marcel Kahan, Jeremy Paul, Richard Posner, Frederick Schauer, Steven Shavell, and participants in workshops at the University of Chicago, University of Connecticut, and Harvard Universi- ty law schools.