Abstract

http://ssrn.com/abstract=57655
 
 

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Property Rules versus Liability Rules


Louis Kaplow


Harvard Law School; National Bureau of Economic Research (NBER)

Steven Shavell


Harvard Law School; National Bureau of Economic Research (NBER)


Harvard Law Review, Vol. 109, No. 4, February 1996.

Abstract:     
Should property rights be protected absolutely -- by property rules -- or instead by the requirement that infringing parties pay for harm done--that is, by liability rules? In this article, we present a systematic economic analysis of this fundamental question. Our primary object is to explain why liability rules are often employed to protect individuals against harmful externalities (such as pollution and automobile accidents), whereas property rules are generally relied upon to protect individuals from having their possessions taken from them, thereby ensuring a basic incident of ownership.

In the course of our analysis, we suggest that a variety of commonly held beliefs about property and liability rules are in error, and we also derive results bearing on legal policy. Notably, we show that, for controlling some important externalities, liability rules (and pollution taxes) are superior to property rules (including many forms of regulation) even when damages must be set using only limited information about harm.

JEL Classification: D23, K11

Accepted Paper Series


Not Available For Download

Date posted: February 6, 1998  

Suggested Citation

Kaplow, Louis and Shavell, Steven, Property Rules versus Liability Rules. Harvard Law Review, Vol. 109, No. 4, February 1996.. Available at SSRN: http://ssrn.com/abstract=57655

Contact Information

Louis Kaplow (Contact Author)
Harvard Law School ( email )
1575 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-4101 (Phone)
617-496-4880 (Fax)
HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=32&show=bibliography
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Steven Shavell
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3668 (Phone)
617-496-2256 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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