Efficient Rules for a Unicausal Accident Strict liability is the straightforward Pigouvian answer Negligence,as interpreted by economists,gives the right answer too You are liable if you failed to take all cost justified precautions If you are liable,it is in your interest to....So either you do or you do That assumes the court knows What precautions you took And what precautions you should have taken So it is a partly regulatory solution Strict liability only requires you to know-leverages your private information Activity level is shorthand for unobservable precautions Efficient Rules for a Unicausal Accident • Strict liability is the straightforward Pigouvian answer • Negligence, as interpreted by economists, gives the right answer too • You are liable if you failed to take all cost justified precautions • If you are liable, it is in your interest to … .So either you do or you do • That assumes the court knows • What precautions you took • And what precautions you should have taken • So it is a partly regulatory solution • Strict liability only requires you to know—leverages your private information • Activity level is shorthand for unobservable precautions