TY  - JOUR
AU  - Polinsky,A. Mitchell
AU  - Shavell,Steven
TI  - Should Liability be Based on the Harm to the Victim or the Gain to the Injurer?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4586
PY  - 1993
Y2  - December 1993
UR  - http://www.nber.org/papers/w4586
L1  - http://www.nber.org/papers/w4586.pdf
N1  - Author contact info:
A. Mitchell Polinsky
Stanford Law School
Stanford University
Stanford, CA  94305
Tel: 650/723-0886
Fax: 650/723-3557
E-Mail: polinsky@stanford.edu

Steven Shavell
Harvard Law School
1575 Massachusetts Avenue
Hauser Hall 508
Cambridge, MA  02138
Tel: 617/495-3668
Fax: 617/496-2256
E-Mail: shavell@law.harvard.edu
AB  - Should the level of liability imposed on an injurer be based on the harm he caused or instead on the gain he obtained from engaging in the harmful act?  The main point of this article is that there is a strong reason to favor liability based on harm rather than gain when account is taken of the possibility of legal error.  Notably, even a small underestimate of gain can lead an injurer to commit a harmful act when the harm greatly exceeds his gain, causing a large social loss.  In contrast, a comparable error in the estimate of harm will not lead an injurer to engage in the harmful act when the harm significantly exceeds his gain.  The general superiority of harm-based liability is shown to hold under the rules of negligence and strict liability and regardless of whether potential injurers know the error that will be made.
ER  -