Study Questions: Unit V: Torts

A. The economics of tort liability

1.	Consider the condition for the efficient level of precautions.
	a.	Illustrate it in a supply and demand diagram.
	b.	Briefly explain how the Hand formula for negligence reflects the efficiency you have illustrated.

2.	Illustrate a situation in which an injurer can take both observable and unobservable precautions. The victim is not in a position to take any cost-effective precautions.
	a.	Indicate the level of precautions the injurer will take under a negligence liability rule.
	b.	Indicate the level of precautions the injurer will take under a strict liability rule.
	c.	Which is more efficient? Explain briefly.
	d.	How would your answer to part c change if the victim could also take some cost-effective precautions?

3.	Automobiles sometimes run over pedestrians, injuring the pedestrian but not the automobile. Three possible legal rules for dealing with such accidents are:
		(1)	The driver is liable to the pedestrian if and only if the driver was negligent.
		(2)	The driver is liable to the pedestrian if and only if the pedestrian was not negligent.
		(3)	The driver, negligent or not, must pay a fine to the state equal to the damage done to the pedestrian; the pedestrian receives nothing.
	a.	How would you label the liability rule(s) applied in each of these options?
	b.	Assume courts can cheaply and accurately observe accidents, judge negligence, and measure damages. Which of the three rules leads to an efficient level of precautions by both drivers and pedestrians? Explain your answer.

4.	Consider automobile accidents.
	a.	Consider a no-fault system, in which each party in an automobile accident covers their own costs from the accident. Does this lead to an efficient level of driving and precaution? Why or why not?
	b.	Suppose the legal rule is that whichever driver was going faster when an accident occurred is liable to the other for any damage done.
		(1)	Would this be an example of a negligence rule? Why or why not?
		(2)	Would this rule lead to efficient behavior? If so, explain why. If not, explain what sort of inefficiency would result.

B. Harm

1	a.	What's the difference between a tort and an accident?
	b.	Briefly discuss a case covered in class which illustrates the difference.

C. Causation

1	a.	What are the criteria for causation?
	b.	For each criterion you mentioned in part a, briefly discuss a case covered in class which illustrates the presence or absence of the criterion.

2.	Ordinarily, a potential accident victim is entitled to assume that potential injurers are using due care, and therefore need not take precautions that would be optimal only if potential injurers were behaving negligently. Suppose a traveler reaches a crossing and sees a train approaching at an excessive speed.
	a.	Does the law require the traveler to take more than ordinary care in this situation?
	b.	What doctrine does this illustrate?
	c.	What case(s) assigned for class would you apply to this situation? Briefly elaborate.
	d.	Assess the economic incentives that result from the answer you gave to part a.

3.	Suppose you run a stop sign and collide with an unlicensed driver.
	a.	Would you expect to be able to avoid damages on the grounds that the unlicensed driver should not have been in the intersection? Explain briefly.
	b.	What case(s) assigned for class would you apply to this situation? Briefly elaborate.
	c.	Assess the economic incentives that result from the answer you gave to part a.

4	a.	What does foreseeability mean?
	b.	Briefly discuss a case assigned for class which considers foreseeability in the determination of whether or not an injurer was negligent.
	c.	Briefly discuss a case assigned for class which considers foreseeability in the determination of liability for an injurer that has been deemed negligent.
	d.	Do both uses of foreseeability make economic sense? Explain briefly.

5.	Falling rocks land on a bus that was speeding down a mountain road, and some of the passengers were injured by the rocks. The injured passengers sue the bus company, claiming that if the bus had not been driving over the speed limit, it would not have been under the falling rocks.
	a.	If you were the judge in this case, how would you have ruled?
	b.	What case assigned for class would you have most likely cited in your decision? Why?
	c.	What is the efficiency goal of assigning liability for damages?
	d.	Does your decision in this case violate that goal? Why or why not?

6.	A retirement home burns down during a storm when two residents fall asleep while smoking cigarettes. The fire started by either resident would have been sufficient to burn down the retirement home. The retirement home sues the two residents for damages.
	a.	If you were the judge in this case, how would you have ruled?
	b.	What case assigned for class would you have most likely cited in your decision? Why?
	c.	Suppose that a power line that snapped off during the storm had also caused a fire sufficient to burn down the home. Would that have affected your decision? Why or why not?

D. Liability

1.	Consider the meaning of negligence.
	a.	What does "negligence" mean in tort law, as interpreted by economists?
	b.	What is the Hand formula, and how does it relate to the economic interpretation of negligence?
	c.	Briefly discuss the case assigned for the class in which the Hand formula was first specified.

2.	a.	Do plaintiffs always have the burden of proof that a defendant committed a negligent act? If so, explain why. If not, discuss a specific exception allowed under the common law.
	b.	Briefly discuss a case assigned for the class which illustrates your answer to part a.

3.	Consider each of the following alternative legal approaches to negligence: (1) simple negligence, (2) contributory negligence, and (3) comparative negligence.
	a.	Briefly describe the difference between the three.
	b.	Briefly discuss a case assigned for the class to illustrate each one.
	c.	How, if at all, do the three alternatives differ in motivating efficient precautions by injurers and victims?
	d.	How, if at all, do the three alternatives differ in their litigation implications?

4.	People using power lawnmowers are sometimes injured by them.
	a.	What determines whether a rule of caveat emptor (the consumer bears the cost of the injury) is better or worse than a rule of caveat venditor (the seller is liable for damages)? Explain.
	b.	What cases assigned for class apply to this situation? Briefly elaborate.

5.	Why might strict liability be the right rule for ultra-hazardous activities, such as blasting or keeping dangerous wild animals as pets?

6.	What's the difference between strict liability and product liability?

7.	Consider joint liability.
	a.	Briefly describe the legal rule for liability in cases of joint liability.
	b.	Use a supply and demand diagram to illustrate the efficient level of safeguards in a situation in which there are two potential injurers.
	c.	Briefly discuss a case assigned for the class which illustrates joint liability.
	d.	How can plaintiffs establish a preponderance of evidence in a case in which neither causation nor the identity of the injurer is certain?

E. Damages

1.	People using power lawnmowers are sometimes injured by them.
	a.	What is the normal rule for determining the size of the damage payment awarded in a civil suit?
	b.	What are the key advantages and disadvantages of this rule from an efficiency perspective?
	c.	Propose an alternative rule, and discuss its key advantages and disadvantages from an efficiency perspective.

2.	Suppose that a victim suffers a disability that prevents her from working for three years. She suffers no other losses.
	a.	Show the formula you would use to calculate her damages. For simplicity, assume that she would have been paid at the end of each year.
	Attorney Melvin M. Belli challenges the practice of discounting future earnings to present value. Belli argues that the plaintiff's earnings should be multiplied by the period of the disability and then multiplied again to reflect the estimated increase in the cost of living during the period of disability.?
	b.	Illustrate how the Belli formula would work for the situation described in this problem.
	c.	Does the Belli formula match the formula you specified in part a? If not, which formula makes more economic sense, and how would you explain that to a judge?

3.	Consider the assigned case, Rickards v. Sun Oil Co. (1945) in which the defendant's negligence put the only bridge between an island and the mainland out of commission.
	a.	Use a supply and demand diagram for goods bought by consumers from mainland and island merchants to illustrate the consequences that resulted from the lost access to island merchants. Be sure to indicate in your diagram (1) the change in consumer surplus, (2) the change in producer surplus for mainland merchants, (3) the change in producer surplus for island merchants, and (4) the net social loss.
	Now consider the following discussion of the outcome by Posner:
			Although the island merchants did lose..., their loss was a gain to mainland merchants who picked up business from the island merchants when customers could no longer reach the island. Since the defendant could not seek from the mainland merchants restitution of the gains he had conferred upon them, it would have been punitive to make him pay the losses of the island merchants.     But the analysis is incomplete. It leaves out of account the customers.... [T]he closing of the bridge will result in higher prices to ... consumers, so that the gain in producer surplus will be offset, to some extent anyway, by a reduction in consumer surplus.
	b.	(1) What area in your diagram corresponds to Posner's "loss" suffered by the island merchants? What area corresponds to the "gain to mainland merchants"? Do you agree that the gain to mainland merchants came out of the loss suffered by island merchants? If so, explain why. If not, explain where the "gain to mainland merchants" does come from.
	c.	Consider the last sentence of the passage. Based on the passage, which does Posner consider to be larger, the gain in producer surplus of mainland merchants or the "reduction in consumer surplus"? Do you agree? Support your answer.
	d.	If you were the judge in this case, would you have awarded damages to the plaintiffs? If not, explain why not. If so, explain why, and discuss how you would have determined the size of the damages.

4.	Consider a case of wrongful death.
	a.	Under the common law, what damages is the injurer liable for in a case of wrongful death?
	b.	Is this result efficient or inefficient? Why?
	c.	Briefly discuss a case assigned for the class which illustrates wrongful death.
	d.	If you were hired as an expert witness to estimate the value of a life lost due to a wrongful death, what formula would you recommend for estimating that value? Explain it briefly.