The Failure of Decoupling Liability and Other Mistakes in Tort Law

baffi, enrico (2012): The Failure of Decoupling Liability and Other Mistakes in Tort Law.

Abstract

In this paper I want to demonstrate that it is not possible, with traditional liability rules, to have one party that takes an efficient level of precaution. Both parties, whaever is the rule, take an excessive level of precaution. The problem is that, when we try to calculate the costs of an activity, we dconsider also the cost of precaution of the other party, but this is not usually done. Also the introduction of a tax (the solution called as "decoupling liability") does not solve the problem because the party who pays the tax does not consider the cost of precaution of the other party. This way of reasoning is instead wrog in unilateral accident where a party does not take precautions. In this case an efficient level of activity is reached. Due to these considerations some traditional conclusions about tort liabiity should be reconsidered

• Item Type: MPRA Paper
• Language: English
• Keywords: The ineffciency of decoupling liability; the impossibility of a have a party to take an efficient level of precaution; some problems with Shavell Theorem
• Subjects: D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General; K - Law and Economics > K1 - Basic Areas of Law > K13 - Tort Law and Product Liability ; Forensic Economics

References

Buchanan Jams M. & Craig M., Stubblebine, (1962), Externalities in Economica New Series, Vol. 29, No. 116. pp371-384.

Coase, Ronald H. (1960), ‘The Problem of Social Cost’, 3 Journal of Law and Economics, 1-44.

Cooter, Robert D. & Thomas S. Ulen, (2004), Law and economics, 4th ed., Reading, Massachusetts, [etc.]: Addison-Wesley.

Dari-Mattiacci Giuseppe, Tort Law and Economics (2003), Utrecht University Working Paper. Available at SSRN: http://ssrn.com/abstract=347801 or http://dx.doi.org/10.2139/ssrn.347801

Dari-Mattiacci, Giuseppe & Francesco Parisi (2006), The Economics of Tort Law: A Precis. THE ELGAR COMPANION TO LAW AND ECONOMICS (2nd ed.), Edward Elgar Publishing; George Mason Law & Economics Research Paper No. 03-49. Available at SSRN: http://ssrn.com/abstract=458701 or http://dx.doi.org/10.2139/ssrn.458701

Miceli, Thomas J. (1997), Economics of the Law: Torts, Contracts, Property, Litigation, Oxford, Oxford University Press.

Polinsky, A. Mitchell & Yeon-Koo, Che, (1991), ‘Decoupling Liability: Optimal Incentives for Care and Litigation’, 22 Rand Journal of Economics, 562-570.

Posner Richard (2011), Economic Analysis of Law, (8th ed) (Aspen Publishers:)

Schäfer Hans-Bernd & Claus Ott, (2004), The Economic Analysis of Civil Law, Northampton: Edward Elgar Publishing Ltd; New edition

Shavell, Steven (1980a), ‘Strict Liability versus Negligence’, 9 Journal of Legal Studies, 1-25. ID (1980b), Economic Analysis of Accident Law, Cambridge (Mass.). ID (1987), Economic Analysis of Accident Law, Cambridge (MA): Harvard University Press.

ID (2006), Liability for Accidents, HANDBOOK OF LAW AND ECONOMICS, A. Mitchell Polinsky and Steven Shavell, eds., Vol. 1, 2006; Harvard Law and Economics Discussion Paper No. 530. Available at SSRN: http://ssrn.com/abstract=849285