The Economics Of Pure Economic Loss And The Internalisation Of Multiple Externalities

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The Economics Of Pure Economic Loss And The Internalisation Of Multiple Externalities

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Giuseppe Dari Mattiacci (Utrecht University)

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Giuseppe Dari-Mattiacci

Abstract

This study emphasises the divergence between the legal approach to pure economic loss and the economic one, and focuses on the latter. Traditional economic theory is grounded on the divide between social and private loss and is employed in formulating policy recommendations for an efficient outcome. However, it fails to explain why pure economic loss cases are treated differently in different legal systems. This study suggests that pure economic loss should be regarded as the internalisation of positive externalities through a mechanism (tort law) primarily designed for negative externalities. The pure economic loss problem is a problem of choosing between secondbest solutions, because tort law generally fails to provide first-best internalisation of both types of externalities. Within this framework, some new hypotheses on the comparative law and economics of pure economic loss will be discussed.

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Paper provided by Berkeley Electronic Press in its series German Working Papers in Law and Economics with number 2003-1-1053.

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Handle: RePEc:bep:dewple:2003-1-1053

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Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability

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repec:bep:dewple:2007-1-1173 is not listed on IDEAS
Guiseppe Dari-Mattiacci & Hans-Bernd Schäfer, 2006. "The Core of Pure Economic Loss," Tinbergen Institute Discussion Papers 06-068/1, Tinbergen Institute. [Downloadable!]
Other versions:
- Giuseppe Dari-Mattiacci & Hans-Bernd Schäfer, . "The Core Of Pure Economic Loss," German Working Papers in Law and Economics 2005-1-1124, Berkeley Electronic Press. [Downloadable!]
Urs Schweizer, 2006. "Tortious Acts Affecting Markets," Discussion Papers 106, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]

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This page was last updated on 2009-11-28.

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