Tort Law and Economics (Encyclopedia of Law and Economics)

564 Pages·2009·2.83 MB·English

by  Michael Faure

TORT LAW AND ECONOMICS
ENCYCLOPEDIA OF LAW AND ECONOMICS, SECOND
EDITION
General Editor: Gerrit De Geest
School of Law, Washington University, St. Louis, MO, USA
1. Tort Law and Economics
Edited by Michael Faure
Future titles will include:
Labor and Employment Law and Economics
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Criminal Law and Economics
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Procedural Law and Economics
Edited by Chris William Sanchirico
Regulation and Economics
Edited by Roger Van den Bergh
Contract Law and Economics
Edited by Gerrit De Geest
Methodology of Law and Economics
Edited by Thomas S. Ulen
Property Law and Economics
Edited by Boudewijn Bouckaert
Corporate Law and Economics
Edited by Joseph A. McCahery and Erik P.M. Vermeulen
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Edited by Francesco Parisi
Intellectual Property Law and Economics
Edited by Ben Depoorter
For a list of all Edward Elgar published titles visit our site on the World Wide Web at
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Tort Law and Economics
Edited by
Michael Faure
Professor of Comparative and International Environmental
Law, University of Maastricht and Professor of Comparative
Private Law and Economics, Erasmus University Rotterdam,
The Netherlands
ENCYCLOPEDIA OF LAW AND ECONOMICS, SECOND
EDITION
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
© The Editor and Contributors Severally 2009
All rights reserved. No part of this pub li ca tion may be repro duced, stored
in a retrieval system or trans mit ted in any form or by any means,
elec tronic, mechanical or photo cop y ing, record ing, or oth er wise
without the prior permission of the pub lisher.
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.
William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA
A cat a logue record for this book
is avail able from the British Library
Library of Congress Control Number: 2009921525
ISBN 978 1 84720 659 6
Printed and bound by MPG Books Group, UK
Contents
List of contributors xvii
List of abbreviations xviii
General introduction xxi
PART I EFFICIENT LIABILITY RULES
1 Strict liability versus negligence 3
Hans-Bernd Schäfer and Frank Müller-Langer
1.1 Introduction 3
1.2 Unilateral accidents 5
1.2.1 Rule of no liability 6
1.2.2 Negligence 6
1.2.3 Relaxing assumptions 7
1.2.4 Strict liability 10
1.2.5 Relaxing assumptions for strict liability 10
1.2.6 Liability and uncertain legal standards of due
care 13
1.3 Bilateral accidents 15
1.3.1 The ‘cheapest cost avoider’ 16
1.3.2 Rule of no liability 17
1.3.3 Negligence 17
Simple negligence 17
Negligence with the defence of contributory
negligence 18
Comparative negligence rule 18
1.3.4 Strict liability 19
Simple strict liability 19
Strict division of losses 19
Strict liability with the defence of
contributory negligence 20
Strict liability with the defence of relative
negligence 20
1.3.5 Relaxing assumptions 20
1.4 Litigation costs 24
1.5 The decentralisation eff ect of strict liability and
negligence 24
1.6 The information-generating consequence of negligence 27
v
vi Tort law and economics
1.6.1 Negligence generates public information on
safety technology 27
1.6.2 Information generated by the negligence rule
alleviates principal-agent problems 28
1.7 Strict liability versus negligence if the injurer’s
wealth is lower than the damage 29
1.8 Liability and contracts 30
1.9 Negligence under the disguise of strict liability,
liability for design defects 31
1.10 Multiple tortfeasors 32
1.11 Risk aversion, liability law and insurance 33
1.12 Relaxing behavioural assumptions of rational choice 35
1.13 Comparing strict liability and negligence 36
Bibliography 39
2 Contributory and comparative negligence in the law and
economics literature 46
Mireia Artigot i Golobardes and Fernando Gómez Pomar
2.1 Introduction 46
2.2 The world of negligence 47
2.3 Contributory and comparative negligence: concepts
and evolution 48
2.3.1 Contributory negligence: origin, development
and later trend towards comparative
negligence 48
2.3.2 Comparative negligence: pure and modifi ed forms 52
2.4 Incentives to take care 53
2.4.1 Initial literature: contributory negligence and
the least-cost avoider 53
2.4.2 Haddock and Curran and Shavell: the
equivalence between contributory and
comparative negligence 58
2.4.3 Relaxing some of the initial assumptions and
moving away from fi rst-best analysis 59
2.4.3.1 Evidentiary uncertainty and court
error 59
2.4.3.2 Stochastic due care and the losses of
injurers and victims 66
2.4.3.3 Heterogeneous agents 67
2.4.3.4 Asymmetric information and liability
rules as mechanisms to reveal information 70
2.4.3.5 Convergence to equilibrium 72
Contents vii
2.5 Other grounds for criticism of comparative negligence 73
Ability to apportion negligence 73
Risk coverage 73
The role of jurors 74
The costly mechanism of adjusting the defendant’s
liability share both with respect to the plaintiff and with
respect to the other defendants 74
2.6 Empirical studies on the performance of contributory
and comparative negligence rules, and on pure
comparative versus modifi ed comparative negligence 74
2.7 Conclusions 77
Bibliography 77
PART II CAUSATION AND MULTIPLE TORTFEASORS
3 Causation and foreseeability 83
Omri Ben-Shahar
3.1 Introduction 83
3.2 Causation in early economic analysis of law 84
3.3 Prospective causation 85
3.4 Causation and socially optimal care 86
3.5 Causation under strict liability 87
3.5.1 The eff ect of the scope of liability on the level
of care 87
3.5.2 The eff ect of the scope of liability on the level
of activity 88
3.6 Causation under the negligence rule 89
3.6.1 The determination of the optimal standard of
care 89
3.6.2 The eff ect of the scope of liability on the actual
level of care 89
3.6.3 The scope of liability in an imperfectly
operating negligence system 89
3.7 Uncertainty over causation 91
3.8 The case for threshold probability rules 92
3.9 The case for the proportional liability rule 93
3.10 Risk-based liability and safety regulation 96
3.11 Causal apportionment among joint tortfeasors 97
3.12 Foreseeability in tort law 100
3.13 Foreseeability in contract law 102
3.14 Causation and litigation costs 104
Bibliography 105
viii Tort law and economics
4 Joint and several liability 109
Lewis A. Kornhauser and Richard L. Revesz
4.1 Introduction 109
4.2 Legal regimes 109
4.3 Settlements 110
4.3.1 Several only liability 112
4.3.2 Joint and several liability with two defendants 113
4.3.2.1 Independent probabilities 113
4.3.2.2 Perfectly correlated probabilities 115
4.3.2.3 The eff ects of limited solvency 115
4.3.3 Joint and several liability with n . 2
defendants 117
4.4 Deterrence: opening remarks 119
4.4.1 Full solvency 120
4.4.1.1 Negligence 120
4.4.1.2 Strict liability 122
4.4.2 Limited, exogenously determined solvency 122
4.4.3 Endogenous solvency 124
4.5 Fairness: several remarks 125
4.6 Size of the plaintiff ’s recovery 126
4.7 Division of the plaintiff ’s recovery 126
4.8 The eff ects of settlements 127
4.9 Division of the burden of insolvency 128
4.10 Insurance under joint and several liability 129
4.11 Conclusions 130
References 130
5 Vicarious and corporate civil liability 134
Reinier H. Kraakman
5.1 Introduction 134
5.2 The standard case for vicarious liability 135
5.3 Factors militating against strict vicarious liability 137
5.4 The interaction between principal and agent liability 140
5.5 Negligence and composite vicarious liability regimes 142
5.6 Reaching beyond the principal: alternative liability
targets 144
5.7 Corporate civil liability versus criminal liability 145
Bibliography 147
Contents ix
PART III DAMAGES
6 Tort Damages 153
Louis T. Visscher
6.1 Introduction 153
6.2 Full compensation of harm? 156
6.3 Pecuniary and nonpecuniary losses 158
6.4 Assessment of losses 159
6.5 Damages for fatal accidents 160
6.5.1 Introduction 160
6.5.2 Optimal amount that injurers should pay 160
6.5.3 Optimal amount that the surviving relatives
should receive 162
6.6 Compensation for nonpecuniary losses? 163
6.7 Uncompensated losses 165
6.8 Punitive damages 166
6.9 Pure economic loss 168
6.10 Harm to the victim or gain to the injurer? 170
6.11 Future losses 171
6.12 Role of defendants’ wealth 172
6.13 Mitigation of losses 173
6.14 Judicial moderation, limitation of damages and
insolvency 174
6.15 Loss of a chance 176
6.16 Multiple tortfeasors 178
6.17 Secondary accident cost reduction 180
6.18 Empirical research 181
6.19 Conclusion 182
Bibliography 184
7 Pure economic loss 201
Jef De Mot
7.1 Introduction 201
7.2 A taxonomy of pure economic loss cases 202
7.3 The insuffi ciency of explanations not based on
effi ciency 203
7.4 Private versus social loss 204
7.5 Private loss, social loss and market structure 206
7.6 Strict liability versus negligence 207
7.6.1 Unilateral precaution accidents 207
7.6.2 Bilateral and trilateral precaution accidents 208
7.7 Intentional versus negligent torts 209