Due Process and Punitive Damages: An Economic Approach

Abstract

This paper sets out a public choice (rent-seeking) theory of the Due Process Clause, which implies that the function of the clause is to prevent takings through the legislative or common law process. This view of the clause's function supports a preference for expanding rather than contracting the set of entitlements protected by the clause. The Supreme Court's application of due process reasoning in the punitive damages case law is in some respects consistent and in other respects inconsistent with this theory. For the most part, the Court has failed to develop a set of doctrines that would enable lower courts to distinguish takings from punishment consistent with reasonable regulation. This paper suggests general guidelines for developing such doctrines.

Keywords: torts, law and economics, litigation, rent-seeking, due process clause, public choice, Philip Morris v. Williams, Lochner

JEL Classification: K00, K13, K41