Document Type

Article

Publication Date

1-2003

Abstract

In the literature on legal transitions, the term "transition policy" is generally understood to mean a rule or norm that influences policymakers' decisions concerning the extent to which legal change should be accompanied by transition relief, whether in the form of grandfathering or phase-ins or direct compensation. Legal change within this literature is defined broadly, and somewhat counter-intuitively, to include any resolution of the uncertainty regarding what the law will be in the future or how the law will be applied to future circumstances. Thus, a legal change would obviously include an unexpected repeal of a tax provision, such as the home mortgage interest deduction, or a shift in tort law from a negligence or fault-based regime to a strict liability regime.' Perhaps less obviously, however, a legal change will also be said to have occurred under this framework in circumstances in which the statutory law or an existing common law rule remains unchanged, but is applied, either by courts or by some regulatory agency, in ways that the relevant private parties were not expecting. Thus, "a transition issue [and hence the need to choose a transition policy] will be said to arise whenever an act has future consequences and the legal regime applicable to those future consequences is not known with certainty at the outset." As it turns out, according to the consequentialist-or law-and-economicsframework that has come to dominate legal scholarship on transition issues, whether certain types of legal change should be applied retroactively or prospectively and, more generally, the extent to which the government should seek to eliminate transition losses and gains turns on the answers to two sets of questions. This Article focuses on these two questions and, in evaluating them, seeks to make the strongest possible consequentialist-here, incentive-based-argument in support of applying legal change retroactively in certain contexts. First, under what circumstances will private parties-whether individuals or firms-make unbiased assessments of the likelihood and nature of legal change and of the transition policy that will be applied? Second, should legal change be expected, over the long run, to move in a desirable direction? To put this second question differently, in what areas or with respect to what types of law can we assume that there will be "legal progress"?

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