A New Positive Economic Theory of Negligence

Abstract

Within the last generation, economic analysis has produced a wealth of insights into common law principles and especially into the common law of tort. 1 Two distinct traditions have emerged within the economic approach to tort law. The normative tradition attempts to evaluate the economic desirability of liability rules with a view toward reforming them. In contrast, the positive tradition uses economic concepts to explain common law liability rules with a view toward gaining a better understanding of the rules themselves and of their social consequences.' The hypothesis t Associate Professor of Law, University of Iowa. I wish to acknowledge the encouragement and assistance of Wesley J. Liebeler, James E. Krier, and George L. Priest in writing this Article. I am also grateful to the participants of the several workshops at which I presented it: the Chicago Law and Economics Workshop, particularly Richard Posner, Richard Epstein, and William Landes; the Yale Law and Economics Workshop, particularly George Priest, Guido Calabresi, Alvin Klevorick, and Henry Hansmann; the Iowa Economics Workshop, particularly Donald McCloskey and John Kennan. Thanks are also due to those others who provided helpful comments on earlier drafts, particularly

The Robustness Case for Proportional Liability

“…While full liability practically ignores the legal requirement of causation, negligence-based threshold liability, as first discussed by Grady (1983) and elaborated and formalized by Kahan (1989), incorporates causation in situations of certain causation. Under threshold liability, the injurer is liable for damages if he acted negligently and if his negligence caused the accident.…”

“…However, as Grady (1983) and Kahan (1989) point out, these results hinge on the notion that the scope of liability under the negligence rule is unrestricted; that is, a negligent injurer is liable for all harm done, including the harm that would have occurred even if the injurer had taken due care. They argue that this regime, known as negligence-based full liability or in short full liability, does not correspond to actual law since the scope of liability is legally restricted by the requirement that harm was actually caused by the injurer's negligence.…”

“…Therefore, an injurer is not liable for harm that would still have occurred even if the injurer had taken due care. Grady (1983) and Kahan (1989) showed that a negligence rule with a restricted scope of liability, referred to as a negligence-based threshold liability or in short threshold liability, is neither robust against the judgment-proof problem nor vulnerable to systematic court error.…”

“…The Robustness Case for Proportional Liability Schweizer (2009) shows, proportional liability follows from extending the causation requirement analyzed by Grady (1983) and Kahan (1989) to situations of uncertain causation. 9 The main result of our paper is that proportional liability is socially preferable to other existing negligence-based rules in a setting where injurers are potentially judgment proof and courts make errors in determining the standard of due care.…”

Disappearing Defendants v. Judgment Proof Injurers: Upgrading the Theory of Tort Law Failures

“…See for example Shavell (1987) and Landes and Posner (1987). 11 This interpretation of the negligence was initially proposed by Grady (1983), who argued that such a model would be closer to the reality of tort law litigation than the traditional one. Kahan (1989) subsequently provided an economic formalization of the model.…”