The Online Library of Liberty

A project of Liberty Fund, Inc.

• Associate Editors
• Editorial
• Bibliographical Essay: Ellen Frankel Paul, Laissez Faire In Nineteenth-century Britain: Fact Or Myth?
• I: Legal Philosophy
• The Minos: What Is Law?
• Obedience to Law
• Moral and Legal Justification
• Early First Amendment Theory
• The First Amendment & Freedom of Expression
• The First Amendment and Religion
• The First Amendment Vs. the Cpi
• The Economics of Strict Liability
• The Rule of Law In American Politics
• II: Political Analysis
• Society, State, and Right In Proudhon
• Human Rights and Political Change
• Carter's Human Rights Policy
• Locke's Tolerance: Prudence Or Right?
• Political Intolerance
• Hayek: Reason, Relativism, and Liberty
• Hayek On Coercion and Freedom
• “advanced Liberalism” As Managed Capitalism
• Common Good & Public Interest
• Uncrowding the “commons”
• Milgram: Obedience, Authority, & Legitimacy
• Syndicalism & “the Servile State”
• The Parisian League
• Conservatism In Spain
• Soviet Intellectual Orthodoxy
• The Clergy & the American Revolution
• Russian & American Defenses of Servitude
• Croce's Hegemony: How to Win Minds
• III: War and the State
• Just War and Rights
• Just Wars Vs. No Wars
• Walzer & Just War
• Wartime Propaganda Tactics
• Iran, Oil, and the Cold War
• The State and Oil Policy
• San Francisco & the Military Complex
• Protectionist Assaults On Developing Countries
• Government Military Behavior
• IV: Political Economy and Theory
• Three Kinds of “capitalism”
• Adam Smith: Economic Utilitarian
• Roepke: Laissez Faire and Social Order
• Government-induced Boom & Bust
• Austrian Vs. Neoclassical Methodology
• Professor Friedman's Instrumentalism
• Milton Friedman's Critics
• Entrepreneurship and Justice
• Externalities & Government Intervention

The Economics of Strict Liability

Mario J.Rizzo

• New York University

“Law Amid Flux: The Economics of Negligence and Strict Liability in Tort.” The Journal of Legal Studies 9(March 1980):291–318.

Professor Rizzo examines the efficiency rationale for negligence law and analyzes some of the economic aspects of a system of strict liability. He concludes that, since efficiency is an impossible goal for tort law and since the law cannot and should not aim for the impossible, we must reject both the normative and positive justification for the efficiency approach to tort law. Consequently a system of strict liability is preferable to one of negligence.

In a dynamic, real world the uncertainties of technological change, the ambiguities of foreseeability, and the absence of an objective measure of social cost make the efficiency paradigm an illusion. The strict liability standard introduces certainty in the legal order since courts do not have to grapple with such elusive problems as foreseeability, cheaper-cost avoider, social cost, and second best (all of which Rizzo discusses and illustrates as components in the dynamics of negligence). A system of strict liability, which holds a defendant tort feasor liable for damages proximally caused irrespective of the reasonableness of his behavior, is said to be superior to cost benefit analysis or judicial “fine tuning.” This is the case because we live in a dynamic world in which the information by the “fine-tuners” is not available.

Rizzo contends that strict liability would not necessarily increase the scope of liability. Since it is based on straightforward, commonsense causal paradigms, it would minimize the number of issues which must be considered in a given case. It should promote greater certainty about the locus of responsibility in accidents. This greater certainty promotes efficiency in the basic institutional sense because property rights become more clearly defined. By simplifying the grounds on which cases are decided, the parties to a dispute are more likely to agree on the probabilities of the outcome. This would result in less litigation and more out-of-court settlements.