A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation
Harvard Law, Economics, and Business Discussion Paper No. 731
30 Pages Posted: 11 Sep 2012 Last revised: 12 Mar 2014
Date Written: September 10, 2012
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: Suggested Citation