The comparative law and economics of pure economic loss

Abstract

Law and economics shows that a key factor in determining the optimal economic loss rule is found in the relationship between pure economic loss and social loss. Economic loss should be compensable in torts only to the extent that it corresponds to a socially relevant loss. In this paper we undertake a comparative evaluation of the economic loss rule to verify whether modern legal systems, although not formally adopting the economic criterion, define the exclusionary rule in light of efficiency considerations. The comparative analysis reveals that the substantive applications of the economic loss rule in European jurisdictions are consistent with the predicates of economic analysis.

The Evolution of a Legal Rule

“…Research in law and economics, including comparative work by Busani and Palmer, eds. (2003), Busani, Palmer, and Parisi (2003), Dari-Mattiacci and Schafer (2007), Gomez and Schafer (2007), and Parisi, Palmer, and Bussani (2007), confirms that the ELR covers diverse situations in which courts consider whether to allow recovery in tort for "economic loss".…”