A response to David Gilo & Ehud Guttel, Negligence and Insufficient Activity: The Missing Paradigm in Torts, 108 Mich. L. Rev. 277 (2009). Within the law and economics field, there often surfaces a near hypnotic attraction to the Hand formula as the one and only tool that drives tort law toward economic efficiency. Hand's intuition was, of course, that the test for efficiency requires a balancing of three variables. The burden of taking particular precautions is compared to the expected loss from some activity, which in turn consists of the likelihood of some particular harm multiplied by its anticipated severity. Liability attaches only where the burden of precautions is lower than the anticipated accident costs. By forcing cost-effective precautions and no others on potential tortfeasors, so the story goes, tort law weeds out desirable from undesirable conduct.
Richard A. Epstein,
Activity Levels Under the Hand Formula: A Comment on Gilo and Guttel,
Mich. L. Rev. First Impressions
Available at: http://repository.law.umich.edu/mlr_fi/vol108/iss1/13