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A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation

Harvard Law, Economics, and Business Discussion Paper No. 731

Harvard Public Law Working Paper No. 14-01

30 Pages Posted: 11 Sep 2012 Last revised: 12 Mar 2014

Steven Shavell

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 10, 2012

Abstract

Regulation and the negligence rule are both designed to obtain compliance with desired standards of behavior, but they differ in a primary respect: compliance with regulation is ordinarily assessed independently of the occurrence of harm, whereas compliance with the negligence rule is evaluated only if harm occurs. It is shown in a stylized model that because the use of the negligence rule is triggered by harm, the rule enjoys an intrinsic enforcement cost advantage over regulation. Moreover, this advantage suggests that the examination of behavior under the negligence rule should tend to be more detailed than under regulation (as it is).

JEL Classification: K13, K20, L5

Suggested Citation

Shavell, Steven, A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation (September 10, 2012). Harvard Law, Economics, and Business Discussion Paper No. 731; Harvard Public Law Working Paper No. 14-01. Available at SSRN: https://ssrn.com/abstract=2144553 or http://dx.doi.org/10.2139/ssrn.2144553

Steven Shavell (Contact Author)

National Bureau of Economic Research (NBER)

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Harvard Law School ( email )

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