The Simple Economics of Class Action: Private Provision of Club and Public Goods
University of Eastern Piedmont -A. Avogadro - Department of Public Policy and Public Choice
Giovanni Battista Ramello
University of Piemonte Orientale - A. Avogadro - Department of Public Policy and Public Choice; International Centre for Economic Research (ICER)
June 1, 2011
Forthcoming, European Journal of Law and Economics, 32:205–224
ICER Working Paper No. 6/2011
This article uses economic categories to show how the reorganization of civil procedure in the case of class action is not merely aimed at providing a more efficient litigation technology, as hierarchies (and company law) might do for other productive activities, but that it also serves to create a well defined economic organization ultimately aimed at producing a set of goods, first and foremost among which are justice and efficiency.
Class action has the potential to recreate, in the judicial domain, the same effects that individual interests and motivations, governed by the perfect competition paradigm, bring to the market.
Moreover, through economic analysis it is possible to rediscover not only the productive function of this legal machinery, but also that partial compensation of victims and large profits for the class counsel, far from being a side-effect, are actually a necessary condition for reallocation of the costs and risks associated with the legal action.
Number of Pages in PDF File: 29
Keywords: class action, collective litigation, mass tort, club, liability
JEL Classification: K41, D71, D74, K13, H41
Date posted: June 3, 2011 ; Last revised: October 11, 2012