A Broader View of the Cathedral: The Significance of the Liability Rule, Correcting a Misapprehension

I Recent years have seen a resurgence of Torts viewed as a purely private legal arrangement: whether described in terms of compensatory justice--the right of an injured party to be made whole (1)--or of redress for civil wrongs--the right of an injured person to get back at the one who injured him. (2) These positions reject the approach of the system builders (to use Izhak Englard's felicitous phrase), (3) those who see torts as part of a legal-political-economic structure of a polity. This latter, "public," view of torts has been dominant, at least since my first article, (4) and Walter J. Blum and Harry Kalven's answer to it, aptly titled Public Law Perspectives on a Private Law Problem. (5) It is of the relationship between these approaches, and of the inevitability of the public-law (and hence, in part, economic) view of torts that I wish to write today. In doing so, however, I mainly want to correct an error that many system builders have made: that is, of viewing the liability rule (in torts and in its cognates) as a "second best" way of mimicking markets when markets "will not work," or "are not available." I want to claim a more significant economic role for the liability II Interestingly, the new privatists distinguish torts from contract and criminal law, by recognizing the public-law role of the latter two (while essentially ignoring their private roles) and suggesting that torts instead has primarily a private role. As to torts, they seem to say that if a direct Injurer-Victim relationship is destroyed, the field would be gone. (6) I, instead, will contend that although something might be lost, an essential part of torts would remain alive and well even without that relationship, as is the case in New Zealand. (7) But let us first look at the privatists' strangely limited view of contract and criminal law. At least when they are contrasting these fields to torts, the privatists seem to talk of contract and criminal law as if they only had a public function. Contracts is seen as a market way of regulating the economy--of shifting entitlements and deciding what is mine and what is yours--by consent of the parties. Criminal and regulatory law is viewed as a collectivist approach to doing the same thing--deciding by state command what is mine and what is yours. This way of speaking, however, ignores the very important private-law functions of both fields. In contracts, and in criminal or regulatory law--as in torts--once a way of determining when and how entitlements can be shifted has been established, a set of private expectations grow up around the means chosen. And these private expectations come to have a value of their own that cannot, at any given moment in the law's time, be ignored without significant harm. That is why Justice Holmes's position that anyone has a right to break a contract when performance is more expensive than breach (8) has historically been called a heresy. (9) His position ignored the private role of contract law. In fact, contracts is not only about its very important public function of shifting entitlements by consent, but comes, in time, also to protect the private expectation that promises are to be kept. As a result, it is in some sense wrong and perhaps even immoral not to do so. Similarly, criminal and regulatory law do not merely represent public, collective assignments of entitlements. Criminal law and regulatory law involve, as well, the right of the Victim and the Victim's family to invoke the state to punish those who have wronged them. Here, too, once the collectivity determines when and how what is mine can be taken by you, and when it cannot, all sorts of private expectations come to surround that decision. It follows that criminal and regulatory law do not merely represent the most efficient way of enforcing that collective decision, but must also do what is needed to "compensate" the feelings of those who have been privately wronged by the rule breaker. …