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Optimal Liability for Libel

Author

Listed:
  • 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)

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.

Suggested Citation

  • Bar-Gill Oren & Hamdani Assaf, 2003. "Optimal Liability for Libel," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-26, June.
  • Handle: RePEc:bpj:bejeap:v:contributions.2:y:2003:i:1:n:6
    DOI: 10.2202/1538-0645.1065
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    Citations

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    Cited by:

    1. Bignon, Vincent & Flandreau, Marc, 2011. "The Economics of Badmouthing: Libel Law and the Underworld of the Financial Press in France Before World War I," The Journal of Economic History, Cambridge University Press, vol. 71(3), pages 616-653, September.
    2. Giuseppe Dari-Mattiacci, 2009. "Negative Liability," The Journal of Legal Studies, University of Chicago Press, vol. 38(1), pages 21-59, January.
    3. David J. Acheson & Ansgar Wohlschlegel, 2021. "Libel Bullies, Defamation Victims, and Litigation Incentives," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 177(2), pages 135-166.
    4. Baum Ido & Feess Eberhard & Wohlschlegel Ansgar, 2009. "Reporter's Privilege and Incentives to Leak," Review of Law & Economics, De Gruyter, vol. 5(1), pages 701-715, November.

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