Coase-Sandor Working Paper Series in Law and Economics

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Law & Economics Working Papers


In negligence law, the risks taken into account by courts when setting the standard of care are the same risks considered when imposing liability and awarding damages. I call this the "alignment principle." One objective of this Article is to expose exceptions to the alignment principle, which I call "misalignments." In cases of misalignment, the risks that are accounted for in setting the standard of care are different from the risks for which liability is imposed and damages are awarded. A second objective of this Article is to suggest modifications to the law when misalignments cannot be justified. The most important objective of this Article, however, is to offer a theory of how to evaluate and contend with misalignments. Five cases of misalignment are identified and discussed in the Article. The first case illustrates how courts set the standard of care independently of the victim's level of income, but award different amounts of damages to high- and low-income victims. The second case represents instances in which causation is inherently hard to prove. In such cases, courts set the standard of care according to the expected harm, but traditionally allow no compensation when the plaintiff suffers harm but cannot prove that it was caused by the defendant's negligence. In the third case, courts account for both risks increased and decreased by the injurer when setting the standard of care, but ignore the decreased risks when awarding damages. In the fourth case, courts set the standard of care by taking into account both ordinary and unusual risks, but often refuse to impose liability for harms that materialized from the ordinary risks. Finally, in the fifth case, courts set the standard of care by considering the risks the injurer created for others, but not the risks he created for himself, even though the negligent injurer bears harms that materialized from both the risks to others and the risks to self. In all five cases, the goals of tort law would be better served by removing misalignments and equally accounting for risks both in setting the standard of care and awarding damages.



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