Two types of legal uncertainty

Abstract

Law-and-economics scholars analyse legal uncertainty as a choice between rules and standards. In doing this, they focus on individual laws that regulate and sanction conduct, or what Hart would call ‘primary rules’. Hart also spoke of ‘secondary rules’, that is, rules that determine the validity and precedence of other rules. Here, I introduce secondary rules into the law-and-economics framework. Two types of uncertainty emerge. I call the one covered in the literature ‘applicative uncertainty’ and the ‘new’ one ‘hierarchic uncertainty’. I show that the two always co-exist and, further, that there is a trade-off between them. I sketch out the economics of that trade-off and I discuss its implications for legal certainty in general.