• Video

Best Cost Avoider

Professor Irina Manta talks about the concept of the "best cost avoider" in tort law. A principle that shapes our understanding of liability and efficiency in legal disputes. How does a utilitarian approach help us evaluate issues like property rights and pollution? In the tension between strict liability and economic efficiency, how does the “best cost avoider” principle incentivize safer practices while balancing societal costs? https://youtube.com/watch?v=xjX8wBtqa6E

Transcript

A concept that is crucial to understanding tort law, generally from a utilitarian lens, is that of the “best cost avoider.” This is sometimes also called the “cheapest cost avoider” or “least cost avoider.” The origin of this notion is attributed to Guido Calabresi and his book “The Costs of Accidents: A Legal and Economic Analysis.” He argued that in some situations, the entity that can prevent or remedy a situation the most cheaply is the one that should pay for it to be prevented or remedied. One of the classic examples where this might come up is that of a factory whose pollution interferes with the ability of a household to continue living nearby. If it’s cheapest for the factory to move or to install technology that will sufficiently reduce the pollution, the factory would be the best cost avoider. If it’s cheapest for the household to move, then the household would be the best cost avoider. The principle underlies much of product liability law. The idea of the best cost avoider at times clashes with our intuitive notions of moral “fault.” In the example with the factory and the household, some may be outraged that anybody would propose having the household move when it was kind of sitting there not bothering anyone. But because society wants goods produced and the production of said goods will sometimes result in pollution, utilitarian theory dictates that the household might still need to budge in service of society. Under the principle of the cheapest cost avoider, we still sometimes impose so-called strict liability when we say that the factory was in the best position to prevent pollution from happening as it has the greatest information about and control over the functioning of the factory. This prospect of strict liability is supposed to incentivize manufacturers to make their products and factories as safe as possible. The flip side, of course, is that the fear of liability could lead to overinvestments in safety that result in inefficient costs that get passed down to consumers. This is why utilitarians generally don’t want to impose strict liability across the board, but rather only where it will reduce overall costs to society. Propertarians are usually critics of the imposition of best cost avoider principles. In the example of the factory and the household, propertarians would say that the factory ought to stop interfering with the property rights of the household if the factory’s pollution is having that effect. They would impose liability on the factory even if it does not lead to the most efficient outcome for society.

Related Content