Giuseppe Dari Mattiacci-Francesco Parisi The economics of tort law a Precis ABSTRACT: Economic analysis has long been employed for the study of tort liability This paper revisits the main contributions to the subject emphasizing the inherent impossibility for tort liability to set perfectly efficient first-best incentives to take outcomes. The paper provides a pathfinder through the literature in various areas of tort law and economics The relatively simple structure of a tort problem provides one of the most fertile areas for the application of economic analysis to law. The positive economic theory of tort law maintains that the common law of torts is best explained as if judges are trying to promote efficient resource allocation, i.e maximize efficiency. The Coase (1960) theorem shows that if parties are allowed to tiate and transaction costs reallocated efficiently. In f tort acciden transaction costs are high. This is easily understood because the parties potentially involved in an accident are not easily identifiable ex ante, and the cost of acquiring the relevant information for bargaining can be high. This renders contractual arrangements a la Coase impracticable. In most tort situations the legal system thus needs to provide rules to give potential injurers and potential victims appropriate incentives to act as if they had to bear the total social cost of their activities. This is an important goal of tort law. Tort law is therefore justified when bargaining is not possible because high transaction costs are present, and banning an activity is undesirable given the social value of the risk-creating activity( Calabresi and Melamed, 1972)1 Giuseppe Dari Mattiacci – Francesco Parisi The Economics of Tort Law: A Précis ABSTRACT: Economic analysis has long been employed for the study of tort liability. This paper revisits the main contributions to the subject emphasizing the inherent impossibility for tort liability to set perfectly efficient first-best incentives to take precaution for all parties to an accident and the need to choose among second best outcomes. The paper provides a pathfinder through the literature in various areas of tort law and economics. The relatively simple structure of a tort problem provides one of the most fertile areas for the application of economic analysis to law. The positive economic theory of tort law maintains that the common law of torts is best explained as if judges are trying to promote efficient resource allocation, i.e., maximize efficiency. The Coase (1960) theorem shows that if parties are allowed to negotiate and transaction costs are sufficiently low, legal entitlements will be reallocated efficiently. In the case of tort accidents, transaction costs are high. This is easily understood because the parties potentially involved in an accident are not easily identifiable ex ante, and the cost of acquiring the relevant information for bargaining can be high. This renders contractual arrangements à la Coase impracticable. In most tort situations the legal system thus needs to provide rules to give potential injurers and potential victims appropriate incentives to act as if they had to bear the total social cost of their activities. This is an important goal of tort law. Tort law is therefore justified when bargaining is not possible because high transaction costs are present, and banning an activity is undesirable given the social value of the risk-creating activity (Calabresi and Melamed, 1972)