Is Adjudication a Public Good? “overcrowded Courts” and the Private Sector Alternative of Arbitration

Courts are underfunded, dockets are crowded, and litigation is slow. These observations lead many lawyers and judges to call for increased court funding. While I would like to see a significantly higher percentage of government spending go to courts, I do not believe that is likely to happen. So I suggest we think about “underfunded” courts differently. Courts provide a service—binding adjudication—to disputing parties. This service is heavily subsidized by tax dollars, as only a portion of courts’ costs are covered by fees paid by litigants. This public subsidy, basic economics suggests, causes demand for this service to exceed supply so disputing parties queue up to receive the subsidy. A court’s time and other resources are allocated among parties according to their willingness to wait. In contrast, other goods and services are, in a market economy, allocated according to willingness to pay. If parties had to pay more to use the court system, fewer would use it, and thus those who did would not have to wait so long. In short, the related phenomena of “underfunded” courts, crowded dockets and justice delayed are caused by the public subsidy for litigants. Focus on this subsidy for parties in litigation enables a contrast with the absence of a subsidy for parties in the private sector alternative to litigation, arbitration, which (like litigation) also provides disputing parties with binding adjudication. While the public-sector court system provides binding adjudication virtually free of charge to the disputing parties, the private sector arbitration system generally charges them something like market rates for it.