Harvard University

Stare decisis allows common law to develop gradually and incrementally. We show how judge-made law can steadily evolve and tend to increase efficiency even in the absence of new information. Judges ’ opinions must argue that their decisions are consistent with precedent: this is the more costly, the greater the innovation they are introducing. As a result, each judge effects a cautious marginal change in the law. Alternative models in which precedents are either strictly obeyed or totally discarded would instead predict abrupt large swings in legal rules. Thus, we find that the evolution of case law is grounded not in binary logic fixing judges ’ constraints, but in costly rhetoric shaping their incentives. We apply this finding to an assessment of the role of analogical reasoning in shaping the joint development of different areas of law. (JEL: K13, K40) 1