Economic Theory of Negligence
Exercise
You are a Supreme Court Justice in the State of Loyola Supreme Court, hearing a case on appeal. Your small group represents the entire Loyola Supreme Court.
How do you rule? You are welcome to have majority opinions, concurring opinons, and dissenting opinions.
Proving Negligence
To establish that conduct fell below standard of reasonable care, plaintiff needs to prove:
- What defendant did or did not do.
- What defendant should have done.
How to use customs and statutes
Sword for proving negligence Prove two things:
- Custom or statute = reasonable care - Defendant failed to comply with custom or statute -————————————————— Shield for disproving negligence Prove two things:
- Custom or statute = reasonable care - Defendant complied with custom or statute
Negligence per se
- Actor violates a statute that is designed to protect against this type of accident and harm
AND
- the accident victim is within the class of persons the statute is designed to protect.
United States v. Carroll Towing Co.
A workable formula for reasonable care?
BPL
B = Burden of precautionary measures P = Probability of loss/harm L = Magnitude of loss/harm
IF B < PL AND defendant did not take on B THEN defendant was negligent
IF B > PL AND defendant did not take on B THEN defendant was NOT negligent
BPL Example
Railroad company with a 50% chance of causing $200k in damage to a farm beside the railroad tracks. (P * L = $100k). Solar panels are available as a possible precaution. Would reduce 100% of the harm to the plaintiff at cost of $200k to railroad company. Railroad company takes no precautions. Was the railroad company negligent?
| Possible Precautions for Defendant to Take | Cost of precautionary measure | Expected cost to plaintiff | Total cost to society |
|---|---|---|---|
| No Precaution | $0 | $100k | $100k |
| Solar Panels | $200k | $0 | $200k |
BPL Example
Same facts as before. But now spark arresters are also available as a possible precaution. Would reduce 50% of the harm to plaintiff at cost of $30k to railroad company. Railroad company takes no precautions. Was the railroad company negligent?
| Possible Precautions for Defendant to Take | Cost of precautionary measure | Expected cost to plaintiff | Total cost to society |
|---|---|---|---|
| No Precaution | $0 | $100k | $100k |
| Solar Panels | $200k | $0 | $200k |
| Spark Arresters | $30k | $50k | $80k |
Economic Theory of Negligence
Fault = economic inefficiency
Embodies a trust in private ordering and economic incentives
Driven by a goal of maximizing overall economic welfare
Critiques of Economic Theory
Incommeasurability of harms
Uncertainty of cost calculations
What we’ve learned…
Ways to determine reasonable care under the circumstances include:
- Foreseeability - The Reasonable Person - Custom - Statute - Cost-Benefit Analysis (Hand Formula: B < P*L)
Special Considerations - Judge and jury relationship