A basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the...

Liability and safety regulation are examined as means of controlling risks in a theoretical model of the occurrence of accidents. According to the model, regulation does not result in appropriate reduction of risk -- due to the regulator's lack of knowledge about risk -- nor does liability...

Discretion is examined as a feature of the design of rule-guided systems. That is, given that rules have to be administered by some group of persons, called adjudicators, and given that their goals may be different from society's (or a relevant organization's), when is it socially desirable to...

This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law %u2013 the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our...

An important result in the economic theory of enforcement is that, under certain circumstances, it is optimal for a fine to be as high as possible - to equal the entire wealth of individuals. Such a fine allows the probability of detection to be as low as possible, thereby saving enforcement...

Much legal advice is provided after individuals have committed acts -- when they come before a tribunal -- rather than at the time they decide how to act. This paper considers the effects and social desirability of such legal advice. It is emphasized that 1egl advice tends to reduce expected...