Discussion Questions for Week 5 Torts I Theory

Economics Department Economics 66 Fall 2009 Discussion Questions for Week 5 Torts I : Theory 1. The “Hand rule” for determining negligence standards was introduced in the famous case of United States v. Carroll Towing. What were some of the details of this case? Explain how Judge Hand articulated his negligence standard. Are there circumstances where this standard might not be efficient? 2. In some countries certain products (e.g. automobiles, private planes, guns) are regarded innately dangerous. Any user of these is subject to strict liability under law. In the U.S., however, it is usually the case that some sort of negligence standard is used. Which approach seems more efficient? How does Shavell’s analysis of “activity levels” contribute to choosing an optimal policy? 3. The Polinsky & Shavell paper completely summarizes the economic theory of punitive damage awards. Why do the authors believe that such awards are justified in some cases and not in others. How would they compute punitive damages in cases in which such damages were justified? The authors are particularly controversial in their view that no punitive damage award was justified in the famous Exxon Valdez case. What is their argument? Why do you think large punitive damages ($5 billion) were actually assessed in this case? 4. The “English Road cases” (such as Butterfield v. Forrester and Davies v. Mann) provide valuable insights into the issue of sequential precautions. Explain the details of these two cases and then describe why the law sometimes has adopted a “last clear chance” approach to liability determination. (Note: The English Road cases are summarized as part of a longer paper about contributory liability that I have included on the website – there is no need to read all of this paper). 5. The case of Palsgraf v. Long Island Railway Company is frequently studied as an example of the law’s seeking to define “proximate causation” in liability cases. Explain the finding in this case and describe whether this sort of finding will lead to efficient or inefficient precautions in similar cases 6. Some economists have suggested that the law should permit a “market for torts”. In this market an injured party would be able to sell the rights to his/her claim to someone else. Such sales are illegal currently under laws that ban “champerty”. What would be the advantages of a market for torts? What would be the disadvantages?