Economic Models of Legal Complexity and Liability Rules

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Economic considerations shape the contours of litigation and may serve as deterrents to negligent behavior which in turn could lead to litigation. Estimates of the magnitude and probability of gain may be expected to shape lawyers' preferences for a given level of complexity of legal doctrines. Such estimates also operate through liability rules to affect incentives to take care to avoid accidents. Specifically, Dr. White focuses on two topics in the area where law and economics intersect: 1) modeling the level of complexity of legal doctrines and 2) re-examining the dominant liability rule in U. S. law, the comparative negligence rule in accident law, and conducting empirical analysis of the application of negligence rules using a data set of automobile accidents in Calfornia. The investigation of the model of legal complexity and how it affects the behavior of lawyers and litigants and the outcome of cases includes consideration of the implications of different modes of payment for lawyers and of cases involving tax law in which the plaintiff is always the IRS, which has the double objective of maximizing the amount of unpaid taxes collected via audits or litigations and of minimizing taxpayers' incentives to evade taxes in the first place. Also, the study draws the important distinction between substantive and procedural legal complexity. In the specification of a model of the effects of liability rules on accident avoidance incentives, account is taken of the possibility that both parties may consider themselves victims, that courts make errors in deciding liability, that the due care standard used by courts to determine liabililty may vary widely across cases, and that drivers themselves may make mistakes. The theoretical and empirical analyses on these topics promise to illuminate our understanding of the existence of economic efficiencies and inefficiencies of the law and their impact. Most of the examinations of the complexity of legal doctrines have assumed it as given. In contrast, one portion of this study focuses on legal complexity as an element manipulable by lawyers in their roles as legislators and judges and having an effect on lawyers in their role as litigators. It examines the patterns of the relationship between the level of complexity and the predicted outcome of litigation. The project has the potential to increase our knowledge of the economic and social implications of legal complexity, particularly by means of developing a normative model, which considers whether there is any social gain, that is, any increase in the probability of an accurate verdict, from adopting legal objectives that are more than minimally complex. The project's empirical analysis of the application of negligence rules in the context of a reconsideration of the incentive structure for avoiding accidents will contribute to our understanding of liability under circumstances where it cannot be determined in advance who is the injurer and who is the victim.