Visscher, Louis T. --- "Tort Damages" [2009] ELECD 292; in Faure, Michael (ed), "Tort Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Tort Law and Economics

Editor(s): Faure, Michael

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847206596

Section: Chapter 6

Section Title: Tort Damages

Author(s): Visscher, Louis T.

Number of pages: 48

Extract:

6 Tort damages
Louis T. Visscher*


6.1 Introduction
In the economic analysis of tort law, minimization of primary accident
costs (deterrence), secondary accident costs (optimal risk spreading and
risk bearing) and tertiary accident costs (administrative costs) is regarded
as the central objective (Calabresi, 1977, pp. 24 ff). The prospect of being
held liable and having to pay damages provides potential tortfeasors with
behavioral incentives. Obviously, these incentives are greatly determined
by the amount of damages the liable injurer has to pay. The desired incen-
tives might also be provided by compensation in other forms than money
damages, such as the duty to repair damaged property or to demolish an
unlawfully built structure (Zervogianni, 2004). However, in this chapter,
only literature regarding money damages will be discussed.
In this chapter, I will focus on the primary cost reduction, but in Section
6.17 I will discuss secondary cost reduction. Throughout the whole chapter,
where relevant, remarks on tertiary cost reduction are made.
Even though the economic analysis of tort law in general and the differ-
ences between negligence and strict liability in particular will be discussed
in detail in other chapters of this Encyclopedia, it is useful to provide a
short summary of these insights at this point, in as far as they are relevant
to the topic of tort damages.
In engaging in activities, people create externalities, that is, a probability
that others will suffer losses as a result of this activity. Tort law is regarded
as an instrument ...