NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Private Versus Socially Optimal Provision of Ex Ante Legal Advice

Louis Kaplow, Steven Shavell

NBER Working Paper No. 3868 (Also Reprint No. r1750)*
Issued in October 1992
NBER Program(s):   LE

This article considers whether the demand for legal advice about potential liability for future acts is socially excessive. using the standard model of accidents, we find that the answer depends on the type of advice and the form of liability. When advice provides information about properly determined liability, the demand for advice is socially optimal under strict liability but is socially excessive under the negligence rule. When advice identifies errors the legal system is expected to make, the demand for advice is socially excessive under both liability rules.

*Published: The Journal of Law, Economics, & Organization, Vol. 8, No. 2, pp. 306-320,(1992).

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