Research Handbook on Economic Models of Law

Research Handbook on Economic Models of Law

Research Handbooks in Law and Economics series

Edited by Thomas J. Miceli and Matthew J. Baker

One of the great successes of the law and economics movement has been the use of economic models to explain the structure and function of broad areas of law. The original contributions to this volume epitomize that tradition, offering state-of-the-art research on the many facets of economic modeling in law.

Chapter 2: The economics of activity levels in tort liability and regulation

Nuno Garoupa and Thomas S. Ulen

Subjects: economics and finance, history of economic thought, law and economics, methodology of economics, law - academic, law and economics


More than 25 years ago, when law and economics was just beginning and its analyses were still at an attention-grabbing but incomplete stage, there was a vigorous scholarly search for the efficiency and equitable differences between negligence and strict liability. The accepted doctrinal distinction between the standards was reasonably clear, but those differences did not map clearly onto efficiency and equity differences. For a period of years, Richard Posner, in his field-defining text, asserted that the central principle for tort law generally, and negligence particularly, was to identify and assign liability to the ëleast-cost avoiderí so as to create an incentive for future, potential tortfeasors and victims to investigate their comparative precaution costs and for whichever of them had the lower avoidance costs to take care. Strict liability was much more straightforward ñ an instance of almost absolute liability for the injurer, who was presumed to be, always, the ëleast-cost avoider.í Of course, in the intervening 30 or 40 years much but not all of this early analysis has changed. There are, as we will see, some fundamental problems with the earlier views. Nonetheless, those earlier views have had a remarkably strong staying power. The ëleast-cost avoiderí as the touchstone for assigning liability under negligence and as the central explanatory variable for distinguishing strict liability from negligence has remained very strong.

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