Rules versus Standards

Just like contracts, laws are of necessity incomplete. Lawmakers cannot effectively foresee all the particular circumstances to which their laws could apply. Incompleteness of law is not only a matter of unavoidable necessity. At times, incomplete laws can be purposefully enacted as a way to delay the decision-making process, transferring to the judiciary some of the tasks otherwise carried out ex ante by the legislature. Lawmakers can choose the level of incompleteness of the laws that they write by formulating laws with different degrees of specificity. The law and economics literature refers to the choice of specificity of legal rules as a choice between "rules" (laws with high levels of specificity) and "standards" (laws with low levels of specificity). The present study concerns the functionality of these rules or standards, the consequences of their incorporation into laws, and their significance from an economic perspective.