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Total Liability for Excessive Harm

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  • Robert Cooter
  • Ariel Porat

Abstract

The total social harm caused by everyone is often verifiable, and the harm that each actor causes is often unverifiable. In these circumstances, the authorities lack the information necessary to implement the usual liability rules or externality taxes. We propose a novel solution: hold each participant in the activity responsible for all of the excessive harm that everyone causes. By excessive harm we mean the difference between the total harm caused by all injurers and the optimal total harm. We show that the rule of total liability for excessive harm creates incentives for efficient precaution and activity level. Consequently, actual harm is not excessive and actual liability is nil. The authorities gain control over social harm without having to monitor individuals, and individuals do not have to pay damages or conform to bureaucratic regulations. This rule has many practical advantages, especially in cases involving harm to the environment.

Suggested Citation

  • Robert Cooter & Ariel Porat, 2007. "Total Liability for Excessive Harm," The Journal of Legal Studies, University of Chicago Press, vol. 36(1), pages 63-80, January.
  • Handle: RePEc:ucp:jlstud:v:36:y:2007:p:63-80
    DOI: 10.1086/508270
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    File URL: http://dx.doi.org/10.1086/508270
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    References listed on IDEAS

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    1. Aaron S. Edlin & Pinar Karaca-Mandic, 2006. "The Accident Externality from Driving," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 931-955, October.
    2. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    3. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    4. Robert Cooter & Lewis Kornhauser & David Lane, 1979. "Liability Rules, Limited Information, and the Role of Precedent," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 366-373, Spring.
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    Cited by:

    1. Daniel Carvell & Janet Currie & W. Bentley MacLeod, 2012. "Accidental death and the rule of joint and several liability," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 51-77, March.
    2. Marco Alan C. & Van Woerden Adon S. & Woodward Robert M., 2009. "The Problem of Shared Social Cost," Review of Law & Economics, De Gruyter, vol. 5(1), pages 137-153, April.

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