Kraakman, Reinier --- "Economic policy and the vicarious liability of firms" [2013] ELECD 1221; in Arlen, H. Jennifer (ed), "Research Handbook on the Economics of Torts" (Edward Elgar Publishing, 2013) 234

Book Title: Research Handbook on the Economics of Torts

Editor(s): Arlen, H. Jennifer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848441187

Section: Chapter 9

Section Title: Economic policy and the vicarious liability of firms

Author(s): Kraakman, Reinier

Number of pages: 28

Abstract/Description:

This chapter addresses the legal and policy issues arising from the vicarious liability of organizations (“firms”) for the torts of their agents. After reviewing basic aspects of tort liability from a law-and-economics perspective, I offer an analysis of vicarious liability with particular attention to the liability of large firms. In particular, this chapter focuses on two clusters of related issues. The first concerns the likely social costs and benefits of vicarious liability, considered as a rule of tort liability. For example, how exactly does a corporation’s liability for the carelessness of its agents reduce the social costs of torts—or why do we think that it does? Do the benefits result in part because tort damages are too blunt a tool to influence the corporate agents who actually cause torts? Or do we believe that these agents are simply insensitive to tort liability, perhaps because they lack sufficient assets to pay tort damages or perhaps for some other reason such as ignorance or cognitive bias? These questions aim at assessing the merits of vicarious liability as a liability rule. By contrast, a second cluster of issues addressed here relates to the scope and implementation of vicarious liability when the principal is a firm rather than an individual.