Post by Keith Hylton
Causation has generated a great deal of theoretical writing in tort law. The most recent issue of the Journal of Tort Law (volume 7, Issue 1-2, Jan 2014, published online 10/31/2015) includes a three-article mini-symposium on the “economics of causation.” The JTL symposium authors are me, Mark Grady, and Richard Wright. The contributions from Grady and from me consist of new insights on the economic theory of causation, and Wright contributes a critique.
Post by Keith Hylton
Tony Sebok’s post on tort damages and discrimination presents a fascinating problem that I’ve often used as a basis for discussion in my torts classes. If race (or some other feature likely to be discriminated against) is taken into account in an attempt to predict the future earnings of a tort victim, then damages awards will reflect the wider discrimination in society, in a sense making the tort plaintiff who falls into a discriminated-against category a victim twice, once at the moment of injury and again at the moment of compensation.
Post by Keith Hylton
Causation is a topic that has generated a lot of interest from torts theorists. Law and economics has been a bit late to the party, but at least they have brought some interesting findings with them. The innovation offered by law and economics is a set of predictions about the incentive effects of causation rules. This distinguishes law and economics from traditional moral reasoning because the law and economics approach makes statements about the actual effects of causation rules on tortious conduct. To law and economics scholars, it is only after clear predictions can be made about incentive effects that we can start to make moral assessments of the law. From the perspective of economics, it is of little use to offer a moral assessment of some legal doctrine without being able to say anything about its effects on behavior. A law may seem morally ideal in its expression, but if its effect is to encourage socially destructive behavior, then the law must be considered a moral as well as an operational failure.
Post by Keith Hylton
In my last contribution to this blog, I discussed the different implications of waiving legal rights in standard one-on-one litigation and class action scenarios. I noted predispute waivers can be socially desirable in both settings, but the danger of welfare-reducing waivers is greater in the class action scenario.
Let me take some time to elaborate here. One of the basic results of the economic theory of litigation is that the private and social incentives to litigate diverge – this point was demonstrated in an article by Steve Shavell. In other words, an individual may have an incentive to file a tort claim in a setting where society’s welfare would be greater if litigation were prohibited. This proposition does not depend on people being uninformed or suffering from various judgment biases; it holds when litigants are rational and fully informed.
Post by Keith Hylton
Waiving or agreeing pre-dispute to arbitrate a potential legal claim has always been a controversial topic in tort law. It’s especially controversial in the class action setting, since the Supreme Court’s decision in AT& T v. Concepcion, 563 U.S. 321 (2011) (holding that the Federal Arbitration Act preempted California’s application of unconscionability doctrine as a bar to the enforcement of an agreement prohibiting class-wide arbitration). In a piece forthcoming in the Supreme Court Economic Review I examine the question whether class action waivers should be enforced. Here is the SSRN version.
To answer this question, it is helpful to start by asking whether society’s welfare can ever be enhanced by allowing pre-dispute litigation waivers. The answer is yes. Society benefits from the threat of litigation, because the threat induces potential tortfeasors to take care. But that benefit is not ever-increasing. In particular, there is a cost associated with it, the cost of litigation. If the value of the “deterrence benefit” is less than the cost of litigation, then the threat of litigation actually reduces society’s welfare (after netting out the litigation cost). A litigation waiver may be socially desirable in this case.