Private Production of Public Goods: Liability for Unrequested Benefits
Tel Aviv University; University of Chicago - Law School
January 1, 2008
Michigan Law Review, Vol. 108, 2009
U of Chicago Law & Economics, Olin Working Paper No. 388
U of Chicago, Public Law Working Paper No. 202
Suppose Owner can improve his property at a cost of 15, thereby creating benefits of 10 for himself and 10 for his Neighbors. Since each Neighbor expects to reap the benefits regardless of whether she pays Owner or not for this enhancement, all Neighbors may refuse to share the burden and the welfare enhancing activity will not take place. This paper advocates correcting this failure by recognizing an Expanded Duty of Restitution (EDR) that obligates recipients of benefits, under certain, well-defined conditions, to compensate benefactors for unrequested benefits voluntarily conferred upon them.
Part I of the paper compares the law's approach to harm cases with its treatment of benefit cases and offers a novel explanation as to why injurers are commonly allowed to create risks and internalize the resulting harms, while benefactors are not entitled to internalize the unrequested benefits they create. This explanation derives from the different types of obstacles that may preclude reaching agreements between injurers and victims, on the one side, and between benefactors and recipients of benefits on the other.
By elucidating the differences between harm and benefit cases, and notwithstanding the explanation offered in Part I, the paper proceeds in Part II to advocate recognition of an Expanded Duty of Restitution. Here, the framework of the duty is outlined, and a wide range of examples is presented to illustrate in which cases such a duty would be warranted.
Number of Pages in PDF File: 40
Keywords: Restitution, torts, damages, positive externalities, negative externalities, property enhancement, common funds, free riding, holdout
Date posted: January 31, 2008 ; Last revised: October 30, 2014
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