Torts - Cases, Principles, and Institutions Fifth Edition, 2016a

Witt & Tani, TCPI 4. Negligence Standard
by incurring that cost, society would be better off, in economic terms, to forgo
accident prevention. A rule making the enterprise liable for the accidents that occur
in such cases cannot be justified on the ground that it will induce the enterprise to
increase the safety of its operations. When the cost of accidents is less than the cost
of prevention, a rational profit-maximizing enterprise will pay tort judgments to the
accident victims rather than incur the larger cost of avoiding liability. Furthermore,
overall economic value or welfare would be diminished rather than increased by
incurring a higher accident-prevention cost in order to avoid a lower accident cost.
If, on the other hand, the benefits in accident avoidance exceed the costs of
prevention, society is better off if those costs are incurred and the accident averted,
and so in this case the enterprise is made liable, in the expectation that self-interest
will lead it to adopt the precautions in order to avoid a greater cost in tort judgments.
. . .
Perhaps, then, the dominant function of the fault system is to generate rules of
liability that if followed will bring about, at least approximately, the efficient—the
cost-justified—level of accidents and safety.
Richard Posner, A Theory of Negligence, 1 J. LEGAL STUD. 29, 32-34 (1972).
Negligence, in the Hand-Posner formulation, is a cost-benefit scheme designed to encourage
behavior that is rational from a cost-benefit perspective. It should induce rational decision-makers
to take into account the costs their behavior poses to others and to take all precautions that are
socially worthwhile in the sense that their social benefits exceed their social costs.
2. A cost-benefit analysis of cricket. What result if Learned Hand’s “BPL formula” (Burden
< Probability * Loss) had been used in Stone v. Bolton and Bolton v. Stone? Would the outcome
of the case have changed if the Lords had explicitly adopted the Hand approach?
Imagine, for example, two scenarios in which the probability of a ball causing damage on
Beckenham Road in any given season is 1 in 10. The expected harm from such damage is £100.
(Pounds rather than dollars, given that this is cricket after all.) Imagine further that the precaution
identified by plaintiff Bessie Stone is the building of a higher wall to prevent balls from flying
into the road. In scenario 1, the cost of such a wall is £15. In scenario 2, the cost of the wall is
£5. Under the Learned Hand test, the defendant cricket club would not be negligent for having
failed to build the wall in scenario 1, because the cost of building the wall (B = £15) is greater
than the expected cost of not building the wall (10% * £100 = £10). By contrast, the defendant
cricket club would be negligent not to have built a wall in scenario 2, because the cost of building
the wall (B = £5) is less than the expected cost of not building the wall (10% * £100 = £10).
Table 1 below presents the analysis:
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