Trial Court Budgets, the Enforcer’s Dilemma, and the Rule of Law

Legal and economic scholarship generally assumes that people weigh costs and benefits in responding to legal rules. This same scholarship often assumes, however, that trial judges applying the law do not compare the costs and benefits of their own effort when implementing legal rules. Consideration of trial court effort results in the so-called enforcer’s dilemma, a similar problem that infects the decision of plaintiffs to bring suit. Suppose the trial court devotes lots of its own effort in every case fully to minimize errors; it never triages the cases, dismissing on the pleadings or on summary judgment. Knowing, for example, that negligence is apt to result in liability, relatively few will violate the legal rule if they could avoid doing so at a reasonable cost. The pool of defendants causing accidents will then consist mainly of those who were nonnegligent. Understanding as much, the trial court should not waste its own effort or judicial time confirming what it knows to be true. Instead, the trial court has an incentive to deviate, to dismiss the cases after a cursory investigation, contradicting our initial assumption about the trial court’s behavior. Given this profitable deviation, game theorists say that looking closely at every case that comes in the courthouse door cannot be an equilibrium. Instead, with trial courts operating under budget constraints we demonstrate that the only equilibrium involves treating like cases differently. Given the same facts, sometimes the court looks closely at the merits, meaning they let the case proceed beyond dismissal or summary judgment. Other times they do not. Yet this trial court strategy is inconsistent with the rule of law. After pointing out this persuasive feature of ex post adjudication, the conclusion turns to appellate review as a possible fix. It turns out that this “fix” suffers the same problem.