Should Liability be Based on the Harm to the Victim or the Gain to the Injurer?
AbstractShould the level of liability imposed on an injurer be based on the harm he caused or instead on the gain he obtained from engaging in the harmful act? The main point of this article is that there is a strong reason to favor liability based on harm rather than gain when account is taken of the possibility of legal error. Notably, even a small underestimate of gain can lead an injurer to commit a harmful act when the harm greatly exceeds his gain, causing a large social loss. In contrast, a comparable error in the estimate of harm will not lead an injurer to engage in the harmful act when the harm significantly exceeds his gain. The general superiority of harm-based liability is shown to hold under the rules of negligence and strict liability and regardless of whether potential injurers know the error that will be made.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4586.
Date of creation: Dec 1993
Date of revision:
Publication status: published as Journal of Law, Economics & Organization, Vol. 10, No. 2 (October 1994)pp. 427-437
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Find related papers by JEL classification:
- K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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American Law & Economics Association Annual Meetings
1030, American Law & Economics Association.
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- Timothy Stanley, 1995. "Optimal Penalties for Concealment of Crime," Law and Economics 9507001, EconWPA, revised 27 Dec 1995.
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