Tort Theory
Eric E. Johnson
ericejohnson.com
Konomark
Most rights sharable
Some Theoretical/Scholarly
Perspectives
1.  Feminist
2.  Law and economics
3.  Law and society
1
Feminist Perspective
•  Leslie Bender
–  A Lawyer’s Primer on Feminist Theory and
Tort, 38 J. of L. Educ. 3 (1988)
–  (We read part of this last semester.)
Law and Economics
Perspective
•  Ronald Coase
•  Richard Posner
–  (We've read some of his jurisprudence.)
•  Many others …
2
Law and society perspective
with economic awareness:
•  Robert C. Ellickson
–  Of Coase and Cattle: Dispute Resolution
Among Neighbors in Shasta County,
38 Stan. L. Rev. 623 (1986)
The Coase Theorem:
•  Key concepts:
–  Externalities
–  Transaction costs
•  Theorem: If transaction costs are zero—
that is, if all mutually beneficial bargains
get made—then any setting of legal rights
leads to an efficient outcome.
•  Observation: Which rule you pick might
make one party or the other better off, but
the result will be efficient either way.
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Coase Theorem (various statements):
•  "If transaction costs are zero—if, in other words, any
agreement that is in the mutual benefit of the parties
concerned gets made—then any initial definition of
property rights leads to an efficient outcome."
— David D Friedman
•  "If there are zero transaction costs, the efficient outcome
will occur regardless of the choice of legal rule."
— A. Mitchell Polinsky
•  "When bargaining costs are zero, the initial assignment of
legal entitlements does not affect the efficiency of the
resulting allocation of resources." — Herbert Hovenkamp
•  "the delimitation of rights is an essential prelude to
market transactions; but the ultimate result (which
maximizes the value of production) is independent of the
legal decision." — Ronald H. Coase
4
Let's try the theory
out with strict
liability for
ultrahazardous
activities …
Too
t
No infringemen
An example using a nuclear plant, meltdown
risk, and strict liability.
Infringement
5
Too
t
No infringemen
Nuclear plant is worth $100M/yr to utility to operate.
A meltdown would cause $500B worth of damage
and has a 1-in-10,000 chance of happening in a year.
So, the cost of risk to the city is the probability times the loss: $50M/yr.
Infringement
Assuming this captures all costs and benefits, what is the efficient result?
The nuclear plant operates.
Too
Economically
efficient!
Nuke worth $100M/yr to utility. City risk is $50M/yr.
What if tort law requires the nuclear plant to pay
for all accidents (strict liability)?
The nuclear plant operates.
It's worth it for the utility to buy insurance
for $50M/yr (or self insure at same rate).
Infringement
6
Too g
Economically
efficient!
Nuke worth $100M/yr to utility. City risk is $50M/yr.
What if tort law does not require the nuclear plant to pay
for accidents (no liability)?
The nuclear plant operates.
The people in the city will buy insurance at
$50M/yr (or self insure at same rate).
The tort rule changes
who gets more money
(the utility
the
ly
Economicalor
efficient!
people in the city), but
either
way the efficient
Nuke worth $100M/yr to utility. City risk is $50M/yr.
Whatresult
if tort law does
require the nuclear
plant to pay
is not
reached:
The
for accidents (no liability)?
plant
operates.
The nuclear
plant operates.
The people in the city will buy insurance at
$50M/yr (or self insure at same rate).
Infringement
Infringement
7
Too
Economically
efficient!
E
NG
A
CH
Nuke worth $25M/yr to utility. City risk is $50M/yr.
What is the efficient result?
The nuclear plant does not operate.
Infringement
Too
Economically
efficient!
Nuke worth $25M/yr to utility. City risk is $50M/yr.
What if tort law requires the nuclear plant to pay
for all accidents (strict liability)?
The nuclear plant does not operate.
It's not worth it for the utility to buy insurance for $50M
(or self insure at same rate) to get $25M.
Infringement
8
Too
Economically
efficient!
Nuke worth $25M/yr to utility. City risk is $50M/yr.
What if tort law does not require the nuclear plant to pay
for accidents (no liability)?
The nuclear plant does not operate.
The people in the city will pay the utility between $25M and $50M to stop
operating the plant.
The tort rule changes
who gets more money
(the utility
or the
Economically
!
efficient
people in the
city),
but
either
way the efficient
Nuke worth $25M/yr to utility. City risk is $50M/yr.
Whatresult
if tort law does
require the nuclear
plant to pay
is not
reached:
The
for accidents (no liability)?
plant
doesn't
The nuclear
plant doesoperate.
not operate.
The people in the city will pay the utility between $25M and $50M to stop
operating the plant.
Infringement
Too
Infringement
9
The tort rule
changes
le, that
b
i
r
r
e
t
s
seemmore
to pay g
e
v
who
money
a
h
If thisgets
d
l
wou
a thin
g
n
i
o
eople utility
d
p(the
the
toompicalor
ly
to Ecson
then it ng
e
,
n
m
o
e
e
!
h
nt
ie
m
t
fic
so
eefns city),
ethi
people
in
but
eatthe
om
r
s
h
t
t
u
t
o
a
b
h
a
t
e
iency.
arthe
c
c
i
f
u
f
either
way
efficient
o
e
y
c
i
s
n $25M/yretocoutility.
Nuke
eaworth
nomCity risk is $50M/yr.
m
n
a
h
t
Whatresult
ifth
tort
law
does
not
require
the nuclear
plant to pay
r
is
reached:
The
o e for accidents (no liability)?
plant
doesn't
The nuclear
plant doesoperate.
not operate.
The people in the city will pay the utility between $25M and $50M to stop
operating the plant.
that
,
The tort rule
changes
e
l
b
i
r
r
s te e to pay
Inwho
sig :sT
eehm
more
in
ha
Iaf thhitsgets
gvomoney
fgoanethpinagrty
ulkdin
o
w
e
s
l
t
n
h
p
i
e
o
o
"utility
voicsttoim
e
d
p(the
p
or
" gethe
t,sthinenthite
t
Economicallyem
wsa
e
n
y
o
o
e
f
!
h
nt
u
ie
m
n
t
fic
d
ef
o
e
s
ernstacity),
ehtahting
noduin
people
but
m
eatthe
o
g
s
w
t
mtohsatt ethcroin
bll
.
cyis
n
eicaa
o
n
r
m
e
i
a
c
c
i
f
y
u
f
either
way
the
efficient
o
e
f
f
y
ic
c
ie
i
s
n
n
m
t
Nuke
eaworth $25M/yr
no City risk is $50M/yr. .
outility.
m
etocrequire
nnot
a
h
t
Whatresult
ifth
tort
law
does
the nuclear
plant to pay
r
is
reached:
The
e
o
for accidents (no liability)?
plant
doesn't
The nuclear
plant doesoperate.
not operate.
The people in the city will pay the utility between $25M and $50M to stop
operating the plant.
Too
Infringement
Too
Infringement
10
Let's try the theory
out with liability for
intentional face
punching …
If this
peop
someo
that t
means y
other t
e party
n th e
what is
cient.
s
y
ut
nt
e
e.
Too
Economically
efficient!
It's worth $40,000 for me to punch you in the face.
It's worth $200 for you to not be punched in the face.
What if tort law allows a battery cause of action?
What if it does not?
It doesn't matter – you'll get punched in the face either way.
Infringement
11
Credits, Sources, and Rights
Photo of nuclear power plant by U.S. Nuclear Regulatory Commission
Photo of city skyline by Eric E Johnson
Eric E. Johnson
ericejohnson.com
© 2017 Eric E. Johnson
Konomark. Most rights sharable. If you would like to re-use or modify these
slides, please ask. I am usually willing to provide permission without charge.
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