Optimal Liability for Libel

Bar-Gill Oren () and Hamdani Assaf ()
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Bar-Gill Oren: Harvard Law School, John M. Olin Center for Law, Economics and Business; and Harvard University, The Society of Fellows
Hamdani Assaf: Harvard Law School, John M. Olin Center for Law, Economics, and Business

The B.E. Journal of Economic Analysis & Policy, 2003, vol. 2, issue 1, 1-26

Abstract: Although courts justify the constitutional law of libel with consequential reasoning, the true consequences of liability for harmful speech have never been fully explored. We construct an analytical framework for studying libel law, emphasizing both the positive and negative externalities generated by the publication of information. Our model highlights two distinct decisions that a publisher faces, the verification decision and the publication decision. We first demonstrate that a single damage measure for publication of false libelous information, such as the "damages equal harm" measure, cannot simultaneously induce socially optimal decisions regarding verification and publication. We then argue that the damage measure should depend on the efficacy of the verification process. Interestingly, when verification is reasonably effective, the damage award should be set equal to the social benefit from truthful publication. Our analysis provides a theoretical foundation for important elements of current libel law. It also suggests practicable avenues for reform.

Keywords: Libel; Externalities; Liability; Tort Law; Constitutional Law (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (5)

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DOI: 10.2202/1538-0645.1065

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