Fault Lines in the Positive Economic Analysis of Tort Law

Abstract

Economists routinely engage in positive analysis to identify the efficiency properties of a practice without expressly taking any position on the normative question of whether the practice should be conducted in an efficient manner. Unlike positive economic analysis, the positive economic analysis of tort law is tied to a particular form of normative judgment. Because there is no consensus about the normative purpose of tort law, one must engage in an interpretive exercise in order to figure out the substantive rationale for tort liability. There is widespread agreement that any viable legal interpretation must first offer a minimally plausible description of the important doctrines and practices comprising the body of law in question. This question of “fit” is addressed by the positive economic analysis of tort law, making it necessarily relevant to legal interpretation. A number of critics have questioned the descriptive power of efficiency analysis, arguing that positive economic analysis cannot persuasively explain the bilateral structure of tort liability, the substantive content of important liability rules, and the form of judicial reasoning in tort cases. In this book chapter I show that the structure of tort liability does not pose a challenge to the efficiency interpretation; that challenge instead resides in the substantive content of the negligence rule and the form of judicial reasoning in negligence cases. Economic analysts have been studying a version of the negligence rule that fundamentally differs from the rule actually applied by courts. A positive analysis of the correct rule strengthens the efficiency properties of negligence liability vis-à-vis strict liability, thereby tightening the fit between allocative efficiency and the practice of tort law, but a more complete analysis of the negligence rule substantially undermines the positive claim that tort law can be plausibly interpreted as furthering a norm of allocative efficiency.