Working Paper No. 05-12:
The Comparative Law and Economics of Pure Economic Loss

Author(s):

Francesco Parisi, Vernon Palmer, Mauro Bussani

Date Posted: June 2005

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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.