parent nodes: Negligence Torts | Net social loss
economic loss
Economic considerations
Recovery for economic loss is more likely the greater the transaction costs of shifting capital from one use to another. One example is the loss of jobs by workers, who can quickly and easily move to new jobs. (Bishop, "Economic Loss in Tort"). With low transaction costs for the use of capital, recovery for economic loss is likely to lead to overdeterrence, as parties closer to the accident, or parties that suffer a "tangible" harm to person or property, will likely recovery as well.
However, recovery for economic loss may increase aggregate utility where an injured party has high sunk costs that cannot be shifted to another part of the market, as where for example a partially completed project is hurt by a third party's negligence. Recovery for economic loss may also be useful where the negligent party injures a common resource or a public good. (Bishop, "Economic Loss in Tort")
Cases
[Robins Dry Dock]