Revisiting the Learned Hand Formula and Economic Analysis of Negligence

The Learned Hand formula is enshrined in the law-and-economics literature as the centerpiece of the courts´ way of determining negligence. The orthodox interpretation of it is the conditional application of the Hand formula contingent on the other party´s assumed efficient behavior. Reviewing four tort cases, I show that more consistent explanation for the realized court decisions is the conditional application of the Hand formula contingent on the other party´s actual behavior. The games defined by the alternative approach show that social efficiency is achieved under negligence-based rules only in the case of discrete and joint care.