Tort Law and Criminal Law - David Friedman

Tort Law (Private Wrongs)

What is a Tort?

  • A tort = a wrong that one private person brings to court against another, usually asking for money (damages).

  • Crime vs. Tort:

    • Crime → prosecuted by the government, aims to punish.

    • Tort → prosecuted by the victim, aims to compensate.

Four Big Questions in Tort Law:

  1. What makes an act wrongful?
    Not every harmful act is a tort. Example: A new coffee shop opens and steals customers from you. That harms you, but it’s not a tort (it’s competition).

  2. What counts as causing harm?
    If lots of things led to an accident, how do we decide which matter legally?

  3. When is someone liable?
    Do we hold them responsible if the accident was unavoidable? What about shared fault?

  4. If liable, how much?
    Damages: how do we decide the right amount?

Key Concepts

  • Externalities: Costs or benefits your actions impose on others.

  • Tort damages = way to make people “internalize” those costs.

    • Example: If I dump garbage in a river, tort damages make me pay, so I think twice.

  • But not all costs are torts:

    • Pecuniary externality = just a transfer, not a net loss (e.g., competition).

Causation

  • But-for causation: “But for your action, would the harm have happened?”

    • Problem: sometimes too broad. Example: You delayed me 1 minute, then a safe fell on my head. True, but your delay didn’t increase the risk.

    • Law often ignores these coincidences.

  • Redundant causation: Two hunters shoot at the same time, both bullets would kill. Who caused death?

    • Economic view: each bullet didn’t marginally change the outcome → no liability.

    • But law sometimes says both are liable to avoid loopholes.

  • Probabilistic causation: If pollution gives you a 9% higher chance of cancer, can you sue?

    • Courts usually say no (can’t prove “more likely than not”).

    • Friedman suggests fractional damages or group lawsuits.

Liability Rules

  • Strict liability: You’re always liable for the damage.

  • Negligence: You’re liable only if you failed to take reasonable precautions.

  • Hand formula (test for negligence):
    If cost of precaution < (probability × harm), you must take the precaution.

  • Which rule is better?

    • Strict liability → good when courts can’t see all the precautions.

    • Negligence → good when courts can see and measure what counts as “reasonable care.”

    • That’s why ultrahazardous activities (like dynamite) usually use strict liability.

Damages

  • Compensatory damages: make victim “whole.”

  • Punitive damages: extra penalty, usually for deliberate/reckless acts.

    • Purposes:

      • Cover hard-to-measure harms (humiliation, reputation).

      • Multiply damages to fix low detection rates.

      • Deter “strategic torts” (like using lawsuits to scare competitors).

Eggshell Skull Rule

  • “You take your victim as you find him.”

    • If you lightly kick someone with a fragile skull and they die, you pay for the death.

    • Efficiency: gives people the right average incentive to be careful, even if specific outcomes are unforeseeable.

Product Liability

  • Caveat emptor (“buyer beware”) vs. caveat venditor (“seller beware”).

  • Who should bear risk depends on who can best prevent accidents:

    • If manufacturer knows risks → seller liable.

    • If consumer knows risks → buyer liable.

  • Reputation and contracts (warranties) also shape behavior.

Criminal Law (Public Wrongs)

What Makes It Criminal?

  • Tort law: private, about compensation.

  • Criminal law: public, about punishment.

  • Economically, criminal law enforces property rules (“don’t take without permission”) rather than liability rules (“pay for what you took”).

Efficient Crime

  • Sometimes breaking the law gives more benefit than harm.

    • Example: Lost hiker breaks into a cabin to survive. Owner loses some food, but hiker gains life.

  • Law sometimes allows this through necessity defenses.

Enforcement and Punishment Costs

  • Fines = efficient (cost victim, benefit state → no net loss).

  • Prison = expensive (costs taxpayers + hurts criminal).

  • Why not infinite punishments with tiny chance (Becker’s puzzle)?

    • Because extreme punishments require costly methods (like prison or execution).

  • Optimal punishment:
    Expected punishment = harm done – cost of deterring one more crime.

Counting Criminals’ Benefits

  • Economic analysis counts criminals’ gains too (maximizing total welfare).

  • Example: Speeding to save wife in labor. The driver’s benefit counts.

  • But moral intuitions sometimes reject this (e.g., “efficient murder”).

Stigma

  • Stigma = punishment by reputation loss.

  • Efficient because:

    • It costs society nothing.

    • It gives others useful information.

  • But only if convictions are accurate → explains higher burden of proof in criminal law.

Punishment and the Rich

  • Should rich pay higher fines?

    • If fines are flat, they don’t deter the rich.

    • Rich may need bigger fines for equal deterrence.

    • But trials are more expensive against the rich (better lawyers).

Incapacitation

  • Another reason for prison: it prevents further crimes while they’re locked up.

  • Even if deterrence is costly, incapacitation can be efficient.