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Optimal Line-Drawing for Legal Rules

Author

Listed:
  • Jacob Goldin
  • David Weisbach

Abstract

Line drawing is a pervasive feature of legal systems. Across many domains, the applicable legal treatment turns on whether an activity falls above or below some threshold. We characterize the economic forces that determine the optimal placement of such thresholds, both generally and in specific legal settings involving monetary and non-monetary sanctions, prohibitions, and mandates. We apply our results to two important line-drawing questions in private law: the optimal due-care threshold for negligence liability and the optimal threshold for whether a shortfall in contract performance constitutes breach. In both applications, the optimal line takes the form of a population-level marginal cost-benefit rule, with the relevant costs and benefits weighted over the actors whose behavior the line induces to change.

Suggested Citation

  • Jacob Goldin & David Weisbach, 2026. "Optimal Line-Drawing for Legal Rules," NBER Working Papers 35868, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35868
    Note: LE
    as

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • K1 - Law and Economics - - Basic Areas of Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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