Regulation and the "Big Case"

Frederick Schauer and Richard Zeckhauser have posted "The Trouble With Cases" on SSRN. This article makes an interesting argument about the dearth of rigorous empirical basis for regulation - by litigation and by legislation as well.  CAFA is a wonderful example of the problem they point to.  Here is the abstract:

For several decades now a debate has raged about policy-making by litigation. Spurred by the way in which tobacco, environmental, and other litigation has functioned as an alternative form of regulation, the debate is about whether policy-making or regulation by litigation is more or less socially desirable than more traditional policy-making by ex ante rule-making by legislatures or administrative agencies. In this paper we enter the debate, but not to come down on one side or another, all things considered, of the litigation versus ex ante rule-making regulatory debate. Rather, we seek to show that any form of regulation that is dominated by high-salience particular cases is highly likely, because of the availability heuristic and related problems of representativeness, to make necessarily general policy on the basis of unwarranted assumptions about the typicality of one or a few high-salience cases or events. And although this problem is virtually inevitable in regulation by litigation, it is far from absent even in ex ante rule-making, because such rule-making increasingly takes place in the wake of, and dominated by, particularly notorious and often unrepresentative outlier events. In weighing the value of regulation by ex ante rule-making against the value of regulation by litigation, it is important for society to recognize that any regulatory form is less effective just insofar as it is unable to transcend the distorting effect of high-salience unrepresentative examples.

ADL