NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation

Steven Shavell

NBER Working Paper No. 18418
Issued in September 2012
NBER Program(s):   LE

Regulation and the negligence rule are both designed to obtain compliance with desired standards of behavior, but they differ in a primary respect: compliance with regulation is ordinarily assessed independently of the occurrence of harm, whereas compliance with the negligence rule is evaluated only if harm occurs. It is shown in a stylized model that because the use of the negligence rule is triggered by harm, the rule enjoys an intrinsic enforcement cost advantage over regulation. Moreover, this advantage suggests that the examination of behavior under the negligence rule should tend to be more detailed than under regulation (as it is).

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