formula of negligence, as applied, coincides with the economic model of due care Introducing fault means setting a due level of precaution, defined by the legislator or by the judge. The due level of precaution should be set to be equal to the efficient level of precaution. Under any negligence rule the judge has to perform such a test by confronting the level of precaution actually taken by the parties with the due level of precaution. This increases the administrative cost of adjudication compared to strict liability rules and generates some Among such complexities is the fact that, while some forms of precaution to assess and to compare with the legal standard of precaution. In the presence of non-observable precautions, it is clear that individuals would rationally limit their investment to observable precaution to avoid negligence and refrain from investing in non-observable precautions, since they could not draw much benefit from such investment In the law and economics literature the case of non-observable precautions is generally treated under the discussion of care levels versus activity level The most common example of activity level is the repetition of a dangerous action, as driving. Although courts may occasionally take into account the frequency of an activity in their assessment of negligence, often no threshold of optimal frequency" can be easily utilized by legal rules as a liability allocation mechanism, given the difficulty of pinpointing a critical value to efficient from excessive activity. Since courts cannot be asked to unascertainable costs and benefits and cannot be asked to evaluate non- observable precaution levels, it is clear that the types of precautions that are evaluated for the finding of negligence are generally confined to care levels, not8 formula of negligence, as applied, coincides with the economic model of due care. Introducing fault means setting a due level of precaution, defined by the legislator or by the judge. The due level of precaution should be set to be equal to the efficient level of precaution. Under any negligence rule the judge has to perform such a test by confronting the level of precaution actually taken by the parties with the due level of precaution. This increases the administrative cost of adjudication compared to strict liability rules and generates some complexities. Among such complexities is the fact that, while some forms of precaution are easily observable ex post, some others are very difficult, or even impossible to assess and to compare with the legal standard of precaution. In the presence of non-observable precautions, it is clear that individuals would rationally limit their investment to observable precaution to avoid negligence and refrain from investing in non-observable precautions, since they could not draw much benefit from such investment. In the law and economics literature the case of non-observable precautions is generally treated under the discussion of care levels versus activity levels. The most common example of activity level is the repetition of a dangerous action, as driving. Although courts may occasionally take into account the frequency of an activity in their assessment of negligence, often no threshold of “optimal frequency” can be easily utilized by legal rules as a liability allocation mechanism, given the difficulty of pinpointing a critical value to separate efficient from excessive activity. Since courts cannot be asked to balance unascertainable costs and benefits and cannot be asked to evaluate non￾observable precaution levels, it is clear that the types of precautions that are evaluated for the finding of negligence are generally confined to care levels, not