Risk Distribution and the Law of Torts: Carrying Calabresi Further

In a seminal article written almost 50 years ago, Guido Calabresi explained that risk distribution is an ambiguous concept that can refer to the manner in which tort liability affects the allocation of scarce resources, the spreading of losses across society, or the attainment of normatively desirable distributive outcomes. The first two conceptions are combined in the (now) conventional economic analysis of tort law, a methodological approach that is routinely associated with Calabresi. In contrast, the remaining conception of risk distribution that Calabresi identified—the attainment of normatively desirable distributive outcomes—is not ordinarily associated with the economic analysis of tort law, and yet this conception is the one that Calabresi has repeatedly invoked as being of decisive importance. In doing so, Calabresi has described how economic analysis can inform distributive questions within tort law, although he never fully developed this approach.\nIn this article, I try to carry Calabresi further by more rigorously showing how distributive economic analysis can be relevant to the normative evaluation of tort law. In contrast to Calabresi’s conclusion about the “pointlessness of Pareto,” I first argue that the Pareto principle embodies an autonomy-based compensatory norm that tort law can rely on to implement corrective justice under nonideal conditions that foreclose fully consensual compensatory exchanges. Within the context of these forced exchanges, a compensatory payment satisfies a compensatory obligation, which in turn is defined by the correlative compensatory right. Consequently, I next identify the substantive properties of a compensatory tort right and show how the right holder’s compensatory demands can be fully satisfied by the duty holder’s exercise of reasonable care in a wide range of cases. A compensatory norm can be fully implemented by the distribution of risk without an entitlement to compensatory damages in the event of injury, a conclusion that sheds new light on Calabresi’s original insight about the varied meanings of risk distribution within tort law.\nFinally, I employ distributive economic analysis to show how the tort system can be conceptualized as a compensatory mechanism. Tort compensation is not merely a form of accident insurance as assumed by the conventional economic analysis of tort law; it fits readily into Calabresi’s taxonomy of desirable legal innovations that shift the Pareto frontier outwards. By expanding the feasible set of fully compensatory outcomes that can be attained under existing social conditions, the tort system enables individuals to engage in new risky activities while adequately compensating those who are disadvantaged by the risky behavior. The tort system has a normative dimension that is brought into sharp relief by the type of distributive economic analysis that has been championed by Calabresi but neglected by the conventional economic analysis of tort law.

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