University of Chicago Press
In a series of articles, Mark Grady considers the problem of discontinuity under a tort negligence regime. The discontinuity can be described as follows. A potential injurer who adopts the optimal level of precaution is completely shielded from liability under the negligence system even though accidents occur. A very small decrease in the level of precaution below the optimal level suddenly exposes the potential injurer to liability for those accidents. This discontinuity makes the expected cost of under-investment in precaution greater than the expected cost of overinvestment. In a world where there is uncertainty about the optimal level of precaution to be used by the court, such an asymmetry could lead to an overinvestment in precaution. Grady has investigated the role of causation in mitigating, an even eliminating, the problem caused by asymmetries of this sort. More specifically, Grady considers three liability rules that differ in their conception of causation.
Stephen G. Marks,
Discontinuities, Causation, and Grady's Uncertainty Theorem
Journal of Legal Studies
Available at: https://scholarship.law.bu.edu/faculty_scholarship/2786