The Economic Structure of Tort Law

The economic structure of tort law is designed to allocate resources efficiently by encouraging individuals and companies to avoid harming others. It does this through liability: if someone causes damage, they may have to pay for it, incentivizing careful behavior. It also promotes bargaining—affected parties can negotiate compensation without lengthy lawsuits. The goal is to minimize total social costs—combining accident prevention costs and damages paid—by balancing the expense of safety measures against potential harm. Ultimately, tort law aims to ensure that the costs of harm are borne by those responsible, guiding activities toward safer and more efficient outcomes.