Economic Analysis of Tort Law: Austrian and Kantian Perspectives

Abstract

The first half of the chapter outlines positive criticisms of neoclassical law and economics from the viewpoint of Austrian economics. Because Austrians believe that calculation of economic costs and benefits requires a system of property rights, we cannot use economics to determine those very property rights. But Austrian economics itself offers no normative alternative. Whereas neoclassical law and economics includes positive and normative analysis of property rights, economists in the Austrian tradition must rely on a normative theory of property rights from outside economics. The second half of the chapter outlines one such alternative, based on Kantian ethics, represented by Kantian critiques of the standard approach to tort law in law and economics scholarship. When cases are decided by notions of justice rather than efficiency, judges would not be burdened with the thorny task of calculating all the economic consequences of their decisions. Because a deontological standard does nor face the same difficulties, it offers a clear substitute to the wealth-maximization standard.