The Allocative Efficiency and Distributional Desirability of Comparative Negligence : Some Partial and Preliminary Third-Best Analyses

The "comparative negligence" doctrine provides that tort-law-covered losses that have been proximately caused by an injurer's negligence and a victim's contributory negligence are to be divided between them proportionate to their "fault." This Article analyzes the allocative efficiency and distributional desirability of shifting to different variants of comparative negligence from contributory negligence (a doctrine that bars any faulty victim from recovering). The Article begins by explaining that comparative-negligence doctrines vary along two dimensions?the circumstances in which they apply and the metric they use to measure the relevant parties' fault (economic metrics, state-of-mind metrics, mixed metrics). Economic fault-metrics measure fault by the misallocation the relevant party's failure to avoid should be deemed to have caused on otherwise-Pareto-perfect assumptions. These metrics vary according to their premises about what each party knew or should have known about the other party's likely response to his non-avoidance at the time at which each party made his decision not to avoid. The Article explains that in practice most economists have premised their analyses of comparative negligence on the assumption that the doctrine employs an economic fault-metric that is based on the often-counterfactual assumption that each party should assume the other will not avoid if he does not. It also explains how the economic fault-metric should be defined?how the ex ante allocative inefficiency of each party's failure to avoid should be assessed. The Article then determines the conditions under which in individual-care cases (in which avoidance by one party is most-allocative-efficient) a shift from a first-best-allocatively efficient contributory-negligence doctrine to the standard economist-defined comparative-negligence doctrine will misallocate resources by deterring most-allocatively-efficient avoidance (on otherwise-Pareto-perfect assumptions) if no surrounding tort-law doctrines are altered. The Article next executes a partial and preliminary third-best-allocative-efficiency analysis that concludes that this misallocative tendency of comparative negligence is not eliminated and may not even be reduced by the other Pareto imperfections in the system. After that, the Article demonstrates that the misallocative tendency of comparative negligence will disappear if another tort doctrine is altered. To explain this last point, some vocabulary must be introduced. Conventional tort-law scholarship uses the expression "cheapest cost-avoider" to refer to the party whose avoidance would be most-allocatively-efficient. This terminology is misleading for two reasons: (1) the party with the lowest cost of avoidance might not be the party whose avoidance-move would generate a reduction in certainty-equivalent accident-costs??[PL+R] where "R" stands for potential victims' risk costs?that most exceeded its private cost to the actor?B?and (2) in a Pareto-imperfect world the avoidance-move for which (?[PL+R]-B) was greatest might not be the most-allocatively-efficient avoidance-move. Nevertheless, the Article continues to employ the standard terminology. In fact, it adds to it a cognate expression?the "second-cheapest cost-avoider." In this somewhat misleading terminology, the expression "second-cheapest cost-avoider" refers to the party whose avoidance would be inferior-allocatively-efficient?i.e., would be more allocatively efficient than no avoidance by anyone though less allocatively efficient than the most-allocatively-efficient avoidance of the "cheapest cost-avoider." In these terms, the Article demonstrates that the misallocative tendency of comparative negligence would be eliminated if tort-law doctrine were altered to entitle second-cheapest cost-avoiders to recover the cost of making an avoidance-move that was rendered ex ante allocatively efficient (on otherwise-Pareto-perfect assumptions) by the cheapest cost-avoider's failure to avoid or faulty creation of a probability of his not avoiding. The Article concludes by executing a third-best analysis of the distributional desirability of shifting from a first-best-allocatively-efficient variant of contributory negligence to a liberal-ideal variant of comparative negligence. This section argues that ours is a liberal, rights-based society; that all members of such a society have a moral duty to treat the equivalent-dollar loss they impose on others in a tort-law context as if it were a loss that they sustained themselves; that although this conclusion does imply that an actor's non-avoidance is faulty if and only if it would be allocatively inefficient (on the assumptions he should make about the Pareto imperfectness of the economy), it does not imply that the fault of a faulty accident-participant is proportionate to the ex ante allocative inefficiency his non-avoidance would generate on those assumptions; that liberalism does imply that a non-avoiding party's fault depends on his state of mind (on whether he did or did not advert to his choice's tendency to harm others, made his choice because he discounted the equivalent-dollar loss it imposed on others though he did not desire to harm others, made his choice because he discounted the equivalent-dollar loss it imposed on others though he did not desire to harm others, or actively desired to harm one or more of his victims as well as on the percent by which he discounted the consequences of his failure to consider the effects of his choice on others or of the impact of his non-avoidance on others); and that, even though the economy contains many other distributional imperfections, their presence does not reduce the distributional desirability from a liberal perspective of the redistribution that would be generated by a shift from a first-best-allocatively-efficient variant of contributory negligence to a liberal-ideal variant of comparative negligence