Negative Liability

an alternative institution by Robin Hanson

There is a great deal of "illegal" behavior, such as polluting or causing accidents, which our law doesn't try to fully deter. Instead of assigning a fine or punishment level which is so high that no one would even think of intentionally breaking such laws law, the "victim" is instead awarded "damages" which are intended to be something like the average level of harm suffered in cases of this sort. "Injurers" are then pretty much invited to break these laws as long as they are willing to pay the damages when someone sues them for being "liable".

People have justified these liability rules by arguing that the ability to "injure" is often worth more to the injurer than the "harm" is worth to the vicitm, and so had these two people been able to bargain, the victim would have agreed to allow the injury for some compensation value in-between. In many cases, however, the costs of bargaining are very high. It might be very hard to negotiate deals with all people you might pollute on or have a car accident with, for example. When such "market" bargains are unlikely, a second best solution, it is argued, is for law to be a "market subsitute" -- setting a damage price which the injurer must pay if some problem should occur.

There are a lot of issues to consider in debating whether this justifications for liability law makes sense. Here, I just want to note that this same argument applies to negative liability (also known as "unjust enrichment"), cases where you help someone instead of hurt them. If it would have been hard for you to negotiate a deal where someone might pay you for your help, the law might also want to let you sue that person, asking for some estimate of the value of the help you gave.

If you helped save someone's car from theives or a flood, you might later sue them for compensation for your aid. If patent law or copyright didn't apply, you might still sue someone for the benefit they gained from your intellectual insight. You might even sue for introducing someone to their future spouse.

Modern economic theory of growth places a heavy emphasis on positive externalities, the way that people in some city or country all gain from the efforts and progress of their neighbors. Such positive externalities are arguably a larger effect than the mostly negative externalities, such as theft and accidents, which most law focuses on. We should be on the look out for better ways to encourage actions that have such positive externalities, and this may be such a better way.