Working Paper: NBER ID: w18418
Authors: Steven Shavell
Abstract: Regulation and the negligence rule are both designed to obtain compliance with desired standards of behavior, but they differ in a primary respect: compliance with regulation is ordinarily assessed independently of the occurrence of harm, whereas compliance with the negligence rule is evaluated only if harm occurs. It is shown in a stylized model that because the use of the negligence rule is triggered by harm, the rule enjoys an intrinsic enforcement cost advantage over regulation. Moreover, this advantage suggests that the examination of behavior under the negligence rule should tend to be more detailed than under regulation (as it is).
Keywords: negligence rule; regulation; enforcement costs
JEL Codes: K13; K20; L5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| negligence rule (K13) | lower enforcement costs (K40) |
| harm occurs (I12) | negligence rule compliance assessed (K13) |
| negligence rule compliance assessed (K13) | more detailed assessments of behavior (D91) |
| lower enforcement costs (K40) | more detailed assessments of behavior (D91) |
| negligence rule (K13) | control more dimensions of behavior (C99) |
| negligence rule enforcement cost advantage (K13) | society benefits (P17) |
| regulation compliance checked (K23) | independent of harm (I12) |
| negligence rule (K13) | cheaper means of achieving compliance (Q52) |