Case law develops gradually through the rulings of appellate judges who have heterogeneous preferences but are partially bound by stare decisis. We show that its evolution converges toward more efficient and predictable legal rules. Since statutes do not share this evolutionary property, case law is the best system when the efficient rule is time invariant, even if the legislature is more democratically representative than individual judges are. In the presence of social change, the ideal legal system includes both legislation and judicial decisions as complementary sources of law. Our model thus explains the modern history of common law and the observed cross‐country correlation between legal origins and economic outcomes. It also predicts the gradual convergence of civil law and common law toward a mixed system.
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