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Cited by 104Law, Economics, and Judicial SystemsLegal principles and applicationsLegal and Constitutional Studies

Economic Theories of Legal Liability

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Cooter, Robert D·1991·Journal of Economic Perspectives
DOI 10.1257/jep.5.3.11
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Abstract

This essay synthesizes and re-conceptualizes some central results of the economic analysis of liability law and sketches the legal details that drive them. Three different legal mechanisms for creating efficient incentives are examined in turn. The first mechanism uses the legal rule of strict liability to internalize costs. The second mechanism uses a negligence standard to create and enforce efficient standards of behavior. The third mechanism uses law to channel transactions into voluntary exchange. The initial explanation of the three mechanisms makes simplifying assumptions of perfect information, solvency, costless dispute resolution, and risk neutrality, before examining the results of relaxing these assumptions. The rules of the three major bodies of liability law—property, contracts, and torts—will be analyzed as examples within these three mechanisms. Property law concerns appropriation of ownership rights or interference with them; contract law concerns broken promises; tort law concerns accidental or intentional harm to people or property.

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Authors
Cooter, R. D.
Affiliations
University of California, Berkeley (US)
Corresponding author
Cooter, Robert D
Venue
Journal of Economic Perspectives
Publisher
American Economic Association
Published
1991-08-01
Volume
5
Issue
3
Pages
11-30
ISSN
0895-3309 (ISSN-L)
DOI
10.1257/jep.5.3.11
OpenAlex
W2021655814
Cited by
104
References
50
Citations by year
2026: 4 · 2025: 1 · 2024: 4 · 2023: 7 · 2022: 8 · 2021: 2 · 2019: 3 · 2018: 2 · 2017: 2 · 2016: 2 · 2015: 2 · 2014: 5 · 2013: 4 · 2012: 4
FWCI
7.77
Type
journal article
Language
en
Open access
Locations
  • The Journal of Economic Perspectives (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Berkley Law Scholarship Repository (University of California, Berkeley) (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Law, Economics, and Judicial Systems
  • Social Sciences › Law › Legal principles and applications
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Legal and Constitutional Studies
Keywords
strict liability, negligence standard, internalization of external costs, property law, contract law, tort law, perfect information, risk neutrality, solvency, dispute resolution costs, ownership rights

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