The History and Economic Thought of Products Liability : What policy suits the Austrian economist best?
Part of : Αρχείον οικονομικής ιστορίας ; Vol.XI, No.1-2, 2000, pages 41-54
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41-54
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The article looks at products liability (the history and economic thought thereof) from the mainstream neoclassical and from the Austrian point of view. For a neoclassical, costs are objective and are known to the judge. So the judge can balance expected accident costs against the cost of making the product safer. For an Austrian, since costs are subjective and knowledge cannot be centralized, contract law: the old rule of caveat emptor, seems to be he best. The parties can then arrange the expected costs and benefits beforehand from their own subjective point of view and entrepreneurial insights. The utter stranger whose property rights are violated can claim compensation. The amount of compensation is for the judge on ethical grounds, and not the economist, to decide.
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