The Hand Rule and United States v. Carroll Towing Co. Reconsidered

Brown University Department of Economics Working Paper No. 2002-27

19 Pages Posted: 4 Apr 2003  

Allan M. Feldman

Brown University - Department of Economics

Jeonghyun Kim

Korea University

Multiple version iconThere are 2 versions of this paper

Date Written: October 2002

Abstract

Judge Learned Hand's opinion in United States v. Carroll Towing Co. (1947) is canonized in the law and economics literature as the first use of cost-benefit analysis for determining negligence and assigning liability. This paper revisits the original case in which the famous Hand formula was born, and examines whether Judge Hand's ruling in that case would truly provide correct incentives for efficient precaution. We show that the original rule specified by Judge Hand is different from the usual application of the Hand formula by modern law-and-economics theorists in the standard continuous care model. Through a game theoretic analysis of the case, we show that Judge Hand's negligence rule from United States v. Carroll Towing Co. may in fact produce games with inefficient equilibria. Such a possibility of inefficiency does not depend on the specific liability rule that governed the original case. It is even more ironic that there exist cases where the equilibrium is efficient, but the equilibrium requires that the victim not have a "bargee" on board, which flies in the face of Judge Hand's opinion.

Keywords: Learned Hand rule, negligence, liability rules, negligence-based rules

JEL Classification: K13

Suggested Citation

Feldman, Allan M. and Kim, Jeonghyun, The Hand Rule and United States v. Carroll Towing Co. Reconsidered (October 2002). Brown University Department of Economics Working Paper No. 2002-27. Available at SSRN: https://ssrn.com/abstract=364102 or http://dx.doi.org/10.2139/ssrn.364102

Allan M. Feldman

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States
401-863-2415 (Phone)
401-863-1970 (Fax)

Jeonghyun Kim (Contact Author)

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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