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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)

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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Bibliographic Info

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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Web page: http://www.bepress.com/gwp/default/

Related research

Keywords: economic loss; financial loss; tort; damage; compensation;

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Cited by:
  1. Parisi, Francesco & Palmer, Vernon Valentine & Bussani, Mauro, 2007. "The comparative law and economics of pure economic loss," International Review of Law and Economics, Elsevier, vol. 27(1), pages 29-48, March.
  2. Schweizer, Urs, 2007. "Tortious acts affecting markets," International Review of Law and Economics, Elsevier, vol. 27(1), pages 49-69, March.
  3. Guiseppe Dari-Mattiacci & Hans-Bernd Schäfer, 2006. "The Core of Pure Economic Loss," Tinbergen Institute Discussion Papers 06-068/1, Tinbergen Institute.
  4. Schweizer, Urs, 2006. "Tortious Acts Affecting Markets," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 106, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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