Law and Economics-Charles W. Upton Errors in Application

Law and Economics-Charles W. Upton

Errors in Application


Tie Breakers

• Levels of Activity

• Errors in Application


Second Tie Breaker- Errors

• In the case of measuring xi* and xv*, courts have traditionally held to a “reasonable man” rule, defining these two variables in terms of the precautions a reasonable man would take.


Second Tie Breaker- Errors

• In the case of measuring xi* and xv*, courts have traditionally held to a “reasonable man” rule, defining these two variables in terms of the precautions a reasonable man would take.

This rule is sometimes referred to as the Hand Rule, worked out by Judge Learned Hand, one of the

most distinguished American Jurists of all time.


The Issue

• Courts Make Mistakes

• They Award the Wrong Amount of Damages

• They mis-estimate xi* and xv*


Types of Errors

Liability Rule Error by Court Strict Liability Excessive

Damages Strict Liability Random Error in

Damages Negligence Excessive

Damages Negligence Excessive Legal

Standard Negligence Random Error in

Legal Standard


Types of Errors






Legal Standard


Types of ErrorsLiability Rule Error by Court

Strict Liability Excessive Damages

Strict Liability Random Error in Damages

Negligence Excessive Damages

Negligence Excessive Legal Standard

Negligence Random Error in Legal Standard

Sets Damages above

the true economic damages


Types of Errors






Legal Standard

Makes an unbiased error in setting

damages


Types of Errors






Legal Standard


Types of Errors






Legal Standard

Sets damages above true economic

damages


Types of Errors






Legal Standard Sets standard of

precaution too high


Types of Errors






Legal Standard

Makes errors in setting standards of precaution


ConsequencesLiability Rule Error by Court Injurer’s Error

(How the Injurer responds to the

court’s error)

Effect on Injurer


Overestimates Damages

Excessive Precaution


Random Error in Damages

None



None. Since the court is setting the legal standard properly, why worry?


Overestimates Legal Standard



Random Error in Legal Standard





court’s error)

Effect on Injurer






None













court’s error)

Effect on Injurer






None













court’s error)

Effect on Injurer






None













court’s error)

Effect on Injurer






None











Consequences

• Suppose you know you make random errors in the legal standard. You might then favor a policy of strict liability over one of negligence.


Consequences

• Suppose you know you make random error in the legal standard. You might then favor a policy of strict liability over one of negligence.

• If you are stuck with vague standards, you can compensate for the errors in a negligence case by erring on the side of the defendant.


End

©2004 Charles W. Upton

Documents

Law and Economics-Charles W. Upton Errors in Application