Calculus of negligence

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Tort law II
Part of the common law series
Negligent torts
Negligence  · Negligent hiring
Negligent entrustment
Negligent infliction of emotional distress
Doctrines affecting liability
Duty of care  · Standard of care
Proximate cause  · Res ipsa loquitur
Calculus of negligence  · Eggshell skull
Vicarious liability  · Attractive nuisance doctrine>Attractive nuisance
Rescue doctrine  · Duty to rescue
Comparative responsibility
Duties owed to visitors to property
Trespassers  · Licensees  · Invitees
Defenses to negligence
Contributory negligence
Comparative negligence
Assumption of risk  · Intervening cause
Strict liability
Ultrahazardous activity
Products liability
Nuisance
Other areas of the common law
Contract law  · Property law
Wills and trusts
Criminal law  · Evidence

In the United States, the calculus of negligence, or "Hand rule," is a term coined by Judge Learned Hand and describes a process for determining whether a legal duty of care has been breached (see negligence). The original description of the calculus was in U.S. v. Carroll Towing, 159 F.2d 169 (2d Cir. 1947), in which an improperly secured barge drifted away from pier and sank. Hand stated:

[T]he owner's duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that she will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions.

This relationship has been formalised by the law and economics school as such: an act is in breach of the duty of care if:

[B

where B is the cost (burden) of taking precautions, and P is the probability of loss (L). L is the gravity of loss. The product of P x L must be a greater amount than B to create a duty of due care for the defendant.

Rationale

The calculus of negligence is based on the Coase theorem. The tort system acts as if, before the injury or damage, a contract had been made between the parties under the assumption that a rational, cost-minimizing individual will not spend money on taking precautions if those precautions are more expensive than the costs of the harm that they prevent. In other words, rather than spending money on safety, the individual will simply allow harm to occur and pay for the costs of that harm, because that will be more cost-efficient than taking precautions. This represents cases where B is greater than PL.

If the harm could be avoided for less than the cost of the harm (B is less than PL), then the individual should take the precautions, rather than allowing the harm to occur. If precautions were not taken, we find that a legal duty of care has been breached, and we impose liability on the individual to pay for the harm.

This approach, in theory, leads to an optimal allocation of resources; where harm can be cheaply avoided, the legal system requires precautions. Where precautions are prohibitively expensive, it does not. In marginal-cost terms, we require individuals to invest one unit of precautions up until the point that those precautions prevent exactly one unit of harm, and no less.

 

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