Since the publication of The Cost of Accidents, the model of costs has been the dominant approach to tort theory. On the model of costs, tort law promotes efficiency by requiring agents to internalize the costs they impose on others when it is efficient to do so. Despite its success, the model of costs is deeply puzzling. Positive externalities are as inefficient as negative externalities. Therefore, if the model of costs provides a good explanation of tort law, one would expect that we would also have a legal regime oriented towards the recapture of the benefits we confer on others. In some instances, restitution allows the recapture of positive externalities, but compared to tort it is a trifling part of the law. The asymmetry between the legal consequences of harms and benefits is a fundamental, structural feature of our law. Any successful explanation of our legal institutions must account for it. Part One of this Essay explores attempts to explain law’s harm-benefit asymmetry from the perspective of the model of costs. I argue that the economic explanations offered to date are, in a variety of respects, unsatisfying. In Part Two, I develop an alternative to the model of costs, which I call the model of harms. On this model, tort responds to the harms that we inflict on one another, rather than the costs that we impose on one another. I show how harms are different from costs, and I explain how conceiving of tort law as an institution concerned with harms rather than costs make better sense of both tort doctrine and law’s harm-benefit asymmetry. Part Three explores Takings jurisprudence, which exhibits its own harm-benefit asymmetry. The Constitution requires the government to pay just compensation when it takes property. Abraham Bell and Gideon Parchomovsky have argued that we ought to have a givings jurisprudence, which would require the government to impose a fair charge when it gives away property. I argue that Bell and Parchomovsky’s suggestion makes sense only from the perspective of the model of costs, and that the model of harms better explains the Takings jurisprudence we actually have. I show that, like tort law, constitutional takings jurisprudence responds to the harm that government inflicts when it takes property, rather than the costs it imposes.
Hershovitz, Scott. "Two Models of Tort (and Takings)." Virginia Law Review 92, no. 6 (2006): 1147-1188. (Work published when author not on Michigan Law faculty.)