At first glance, the economics of tort law, as it has developed in the Coasean tradition, appears to be an area of analysis that is, in large part, consistent with the Austrian alternative presented here. In his 1960 article “The Problem of Social Cost,” Coase, like the Austrians, was critical of Pigouvian analysis for ignoring the importance of property rights in both assessing the social consequences of harmful effects and in formulating public policy remedies. Furthermore by stressing the role of opportunity costs, Coase touched upon themes that have always been associated with the Austrian school. In fact, Buchanan (1981 & 1969) places the approach taken by Coase squarely within a mode of analysis that, he argues, was initiated by Hayek’s 1937 article, “Economics and Knowledge.” Finally, in a general sense, both the “Coaseans,” in areas such as environmental economics and law and economics, and the Austrians have consistently advocated market-based, as opposed to centralized, solutions to economic problems. Recognizing this, Farrell (1987) presented and criticized Coase’s 1960 article and Hayek’s “The Use of Knowledge in Society” as completely consistent arguments for the decentralized decision-making of a market economy.1


Corrective Justice Strict Liability Liability Rule Coase Theorem Eminent Domain 
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  1. 1.
    For a response to Farrell that makes important distinstions between Coase and Hayek see Boettke (1989).Google Scholar
  2. 2.
    This assumption is made wxplicit and reitersted at several points during Coase’a analysis (see pp. 2, 6, & 32).Google Scholar
  3. 3.
    The issue of causality will be discussed in Chapter 5 within the context of a theory of torts. But within the framework of the IIS the problem of joint causality (see Kelman, 1987) is not an issue.Google Scholar
  4. 4.
    For a clearly presented example of this see Shavell (1980).Google Scholar
  5. 5.
    Made explicit by Judge Learned Hand in United States v. Carroll Towing Co., 159 F. 2d 169 (2d Cir. 1947).Google Scholar
  6. 10.
    For analysis that is explicitly based on this distinction see Whitman, 1980.Google Scholar

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© Springer Science+Business Media New York 1992

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  • Roy E. Cordato

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