Torts, Negligence and Economic Analysis

1
Torts, Negligence and Economic Analysis

• Professor Alfred C. Yen
• Boston College Law School

2
Question Does BltPL accurately identify the
person who is responsible for the costs of an
accident?
3
Hypo 1

• In the absence of precaution (bargee on board),
  average of .5 accidents per year at cost of
  40,000 per accident
• Cost of bargee is 10,000 per year
• Is the barge owner negligent?

4
Answer 1

• Yes, hes negligent because
• B 10,000 (cost of bargee)
• P .5
• L40,000
• PxL20,000
• 10,000 lt 20,000, so B lt PxL

5
Hypo 2

• Is the tugboat operator negligent?

6
Answer 2

• Tugboat operator is negligent because
• B 10,001 (cost of bargee plus bribe)
• PxL 20,000

7
Question Does it matter if liability is based
on fault?
8
Thoughts

• How does the barge owner behave under negligence?
• How does the barge owner behave if he bears the
  loss, no matter what (strict liability)?
• How does the tugboat owner behave under
  negligence?
• How does he behave under strict liability?

9
Some observations

• BltPL doesnt resolve who is responsible. Both
  parties appear negligent.
• Determination of negligence doesnt change
  ultimate result because precaution will be taken
  regardless of the liability rule adopted.
• When, if ever, does this line of thinking lead to
  policy recommendation?

10
Examples of when it might matter

• Information inequality.
• Cost of bargain too large.

11
Policy recommendations depend greatly on market
structure one assumes

• If you think that markets are pretty good, then
  the cheapest thing to do is let losses fall
  where they do.
• If you think that markets are significantly
  flawed, then you place the obligation of
  precaution on the person most able to make the
  relevant calculation of risks and take
  precautions. Examples manufacturer knows and
  can do more about safety of product, landlord may
  know more than tenant

12
More policy ideas

• Strict liability may be cheaper than negligence
  because one need not litigate the issue of
  liability. If (and its a big if) we can easily
  identify the right person to hold liable, the
  legal system has less to do.
• This may join with the idea let the loss lie
  where it falls. Victims always pay because
  theyre easy to identify. Identifying the
  cause is much harder.

13
Objections

• Distributional consequences go unconsidered, or
  at least submerged to the cost idea.
• Fault is a valuable concept. This whole line of
  analysis eviscerates it. Unreasonable behavior
  should have its consequences.
• No just society arranges its affairs in relation
  to money or its equivalent.
• Unsupportable assumptions about human behavior
  and the relative costs of accidents underly this
  whole scheme. Can pain and suffering be measured
  in money?