Saturday, May 05, 2007


First, May is Motorcycle Awareness Month. As a motorcyclist, the Author expects vehicle drivers to be aware of all other proximate vehicles, including motorcycles. Motorcycles (and bicycles) are less visible than autos or trucks, so motorcycles face a greater risk of not being seen by a driver. But unlike many other motorcyclists, the Author demands no special rights, such as the right to lane-split (ride down the lane dividing line(s) between autos and trucks on multi-lane roadways).


There is an entire scholarly discipline, or cross-discipline, devoted to the economic analysis of law, or more simply called “law and economics”. And as most readers know, the Author was educated as an attorney and acts like he knows something about economics. And he had the benefit of studying under several professors at Indiana University that incorporated such concepts in their legal instruction.[i]

The most prominent name in law and economics is probably Judge Richard Posner, a jurist on the United States Seventh Circuit Court of Appeals. But the economics analysis of law has been around for quite some time.

First-year law students take a course in tort law. In that course they are typically introduced to the legal decisions of Judge Learned Hand . (With a name like Learned Hand, he probably had only two career choices-appellate court judge or crooked card shark). Judge Hand introduced the “calculus of negligence” in an important case. The “calculus of negligence is expressed as follows:

The calculus requires that financial liability should be imposed for a negligent tort only if the burden of preventing the injury does not exceed the magnitude of the injury multiplied by its likelihood of occurring. The rule, also sometimes referred to as the "Hand Test," is most notable for its economic approach to a legal rule; an approach that is the foundation of the law and economics school of legal thought. The Hand Formula finds negligence when the actor's burden (B) is less than the probability (p) of harm, multiplied by the degree of loss (L).

B < P × L

Simply put
, the test says:
If (Burden < Cost of Injury x Probability of occurrence), then the accused will not have met the standard of care required.
If (Burden > Cost of injury x Probability of occurrence), then the accused may have met the standard of care.

In a nutshell, the “calculus of negligence” provides a framework for analyzing the economic efficiency of avoiding or incurring the cost of loss and injury. Is it cheaper to avoid a loss through preventive measures or accept the inevitability of loss and just compensate the loss? It is the stuff that economics and legal professorial careers are buried in.


Dan owns Dan’s Firearms, Fulminates and Adolescent Fun Emporium in Bippus, Indiana. Dan has a range behind his Emporium where customers may fire weapons and detonate ordinance. The land around Bippus is chronically flat. Dan got a bid for bulldozing an earthen bunker that would have stopped errant bullets and fragments from leaving the range and doing mischief upon the neighbors. The bid for the bunker was $500. Instead, Dan spent the $500 on a genuine, licensed Harley-Davidson beer mug. The leather-slathered mug, which was a limited edition to commemorate the movie “Wild Hogs” holds one-gallon of beer and comes with an optional chrome catheter for incontinent bikers.

One Sunday morning Dan is playing with rocket-propelled grenade launchers and his Harley-Davidson beer mug. Well, wouldn’t you know it, an errant grenade hits a bus of folks on their way to a tent revival in Swayzee. The earthen bunker that Dan did not build would have contained the rocket-propelled grenade. The human loss was incalculable; the financial loss to the dead and injured was 3.8 million, and the comedic value a little more than meager.


So if we run the negligence equation, Dan is uber-negligent. The burden to Dan of putting in the bunker was $500. The cost of a hypothetical injury is large (let’s say $2 million) and the probability of an injury is 50%. Dan, as we know, has frequent fun with his Harley-Davidson beer mug and weapons cache.

Burden ($500) < Probability of loss (.5) * Loss ($2 million)
$500 < ($2,000,000 * .5 = $1,000,000)

Under the calculus of negligence, Dan is very negligent.


MotoExpensia is an exclusive sport bike boutique and salon in Malibu, California. It offers a Sunday brunch, fashion show and offers test poses on the new $199,999 RZ AuggiDukki GigaLitre Bike.

The brunch is quite an affair. The table service is made from billet titanium. The Plates and finger bowls are carbon fiber. The linen is Dianese.

Across the road from MotoExpensia is a two-acre preserve where all the endangered and indigenous animal, bird and insect species have been forced to move. Through no fault of their own.

Well, wouldn’t you know it, a rare Penultimate Speckled Hawk is also brunching on a rat that it caught behind MotoExpensia (the rats always show up at the dumpster for post-brunch scrounging. This particular rat, an escaped lab rat, arrived a little early.)

While the hawk and the sportbikearatti are brunching, Jizzy James, custom chopper builder and celebrity sociopath, rides by on his Cummins diesel-powered chopper. The bike, “BJ and More Bare”, was built to commemorate the “B.J. and the Bear” 25th Anniversary television reunion special.

James blasts the chopper’s air horn when he rides by MotoExpensia and startles the hawk. The startled hawk takes off with his half-eaten rat in his talons. In the frightened bird’s escape, the bird drops the rat.

Well, despite the astronomical odds, the remainder of the rat falls into the intake of a customer’s RZ AuggiDukki while the motorcycle’s engine is running. Just any old rat parts would have run right through the engine and come out the exhaust pipe. But this rat, as you may recall, was a lab rat. And this rat had a metal band on its leg for tracking and research purposes.

The metal band was first caught in the motorcycle’s desmodemonic valve train. This froze the valves, causing a valve to hit the top of the piston. The metal band then got caught between the moving piston and the cylinder wall. This caused the piston to stop mid-stroke and the connecting rod to break. The inside of the engine looked like a titanium abortion.


Let’s work the calculus of negligence. Remember, the formula is:

B > P × L (we reversed the <> signs)

The plummeting rat could have been stopped by a Plexiglas dome covering the area where the brunch was held. In fact, MotoExpensia had considered installing such a Plexiglas enclosure and got a quote for $1,000,000. The original purpose of the dome was not to interdict earth-plunging rodents, however. The intended purpose of the Plexiglas dome was to shelter the attendees against the intemperate Southern California weather on those days when the temperature is below 70 degrees and above 80 degrees. Still, the million-dollar dome would have stopped the falling rat.

The damage to the motorcycle engine was $40,000. The probability of the loss occurring was calculated to be one in ten million. (.0000001). So under the calculus of negligence, MotoExpensia was not negligent in foregoing the Plexiglas dome.

Burden ($1,000,000) > Probability of Loss (.0000001) * Cost ($40,000)


As you might imagine, the preceding prattle was to generate a few laughs and to set up the analysis of whether the economic costs of unbuckled drivers or helmetless riders would be more efficiently addressed by laws mandating the use of these effective protections. Or, in the absence of legal mandates, should the economic cost of these actors be borne by these actors by legal requirements of higher insurance limits.

Stay tuned to the Desert of the Real. Seatbelts and lower-valued skulls come along in the next post. Along with the next prize contest.

i. The Author would like to mention the names of those professors that integrated economic concepts into the study of law, but fears that may embarrassed or their status eroded if their names appear in this Blog.