ABSTRACT
This chapter considers the relationship between changing tort liability rules and property rights in more detail. Government claims the authority to be the source of "the rules of the game" - property rights, liability rules - under which market players pursue their goals. Whether the end of traditional negligence standards and their replacement by strict liability have been movements in the direction of the theoretical "optimum" or not the movement itself has generated enormous investments in socially wasteful rent-seeking. Three required elements once characterized tort actions under common law: a breach of duty owed to the plaintiff by the defendant; a measurable harm suffered by the plaintiff; and evidence that the breach of duty caused the harm. All three elements have changed dramatically, particularly in product liability, creating considerable uncertainty about what the law is. Legal instability means that other parties have incentives to "rush in" and lay claim to the insecure property rights by filing lawsuits.
