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Negative Liability

37 Pages Posted: 16 Jul 2003 Last revised: 7 Apr 2011

Giuseppe Dari‐Mattiacci

Amsterdam Law School; Amsterdam Business School; Tinbergen Institute

Date Written: January 27, 2010

Abstract

Negative and positive externalities pose symmetrical problems to social welfare. The law internalizes negative externalities by providing general tort liability rules. According to such rules, those who cause harm to others should pay compensation. In theory, in the presence of positive externalities, negative liability should apply: those who produce benefits should be paid a compensatory award by the gainers. Nevertheless, the legal system does not display such general negative liability rules. Rather, it tackles the problem of internalizing positive externalities by implementing a set of different and often indirect solutions. My explanation for this asymmetry in legal remedies rests on three features of a negative liability regime, relating to intent, incentives and evidence. These features explain the scope and design of restitution rules, liability for nonfeasance and other mechanisms for the internalization of positive externalities.

Keywords: liability, positive externality, enrichment, restitution, nonfeasance

JEL Classification: D62, K10, K13

Suggested Citation

Dari‐Mattiacci, Giuseppe, Negative Liability (January 27, 2010). Journal of Legal Studies, Vol. 38, No. 1, pp. 21-60, 2009; George Mason Law & Economics Research Paper No. 03-29. Available at SSRN: https://ssrn.com/abstract=422961 or http://dx.doi.org/10.2139/ssrn.422961

Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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