1) Consider some of our historical case studies.
(a) Regarding “Hammurabi’s Code”, what was the economic problem? How did it address this
problem?
(b) Regarding the “Writ of Right”, explain how it overcame the Coase Theorem’s transaction
costs? Why don’t we use this institution today?
(c) Regarding feud law, in the Icelandic system it was up to the victim to identify and prosecute
the tortfeasor. That could be a problem for a victim with insufficient resources (defined mostly
in terms of the ability to use force) to enforce the verdict. How did Icelanders solve this
problem?
(2) The economic theory of tort law is based on the idea that liability for accidental injuries should be
assigned so as to minimize the expected costs of accidents, including the harm suffered by victims, the
cost of precautions by injurers and victims, and the administrative costs of assigning liability.
(a) Considering only the unilateral care model, what are the effects on strict liability and
negligence rules regarding the investment in precaution if (1) there are errors in determining the
due standard of care, or (2) there are errors in determining victim damages?
(b) Summarize the types of liability assignments, and describe whether they are efficient with
respect to the bilateral care model.
(c) In the bilateral care model, both simple negligence and contributory negligence achieved the
efficient investment of care by both parties. If contributory negligence is more expensive to
implement, why, until recently, was contributory negligence the predominant tort rule in the
United States?
(3) Every year a certain number of consumers are hurt using lawn mowers. Installation of a safety lever
reduces the risk of an accident from .002 to .001 but costs $50 per mower. Suppose the damages from
an accident are $45,000 on average.
(a) Should the manufacturer be held liable for failure to install the lever according to the Hand
rule?
(b) Would the manufacturer install the lever under strict liability?
(4) The case of New York Cent. R. Co. v. Thompson concerned a woman who accidentally caught her foot
in some railroad tracks and was injured when a train failed to brake in time and struck her. Suppose the
liability rule is negligence with a defense of contributory negligence.
(a) Will the woman be able to recover her damages if the court determines that she was
negligent for walking on the tracks?
(b) Under what doctrine will the woman be able to recover, despite her negligence, if the court
determines that the train saw her predicament and had time to brake but did not? Explain the
economic rationale for this doctrine.
(5) In cases where the injurer’s actions are