In this paper I want to demonstrate that it is not possible, with traditional liability rules, to have one party that takes an efficient level of precaution. Both parties, whatever is the rule, take an excessive level of precaution. The problem is that, when we try to calculate the costs of an activity, we should consider also the cost of precaution of the other party, but this is not usually done. Also the introduction of a tax (the solution called as “decoupling liability”) does not solve the problem because the party who pays the tax doe not consider the cost of precaution of the other party. This way of reasoning is instead wrong in unilateral accident where a party does not take precautions. In this case an efficient level of activity is reached. Due to these considerations many traditional conclusions, in my opinion, about tort liability must be reconsidered.
Baffi, Enrico, The Failure of Decoupling Liability and Other Mistakes in Tort Law (October 27, 2012).