Sparks cases in contemporary law and economic scholarship

“Sparks cases†arose in the late 19th century, when sparks from newly laid railroads caused fire damage to adjacent landowners. Sparks cases have become a staple example in law and economics scholarship over the last generation. This chapter uses those cases to contrast the differences between leading approaches to law and economics and Austrian economics. Sparks cases illustrate concretely important differences between welfare-maximizing and order-securing legal theories of regulation. Many leading law and economic works assume that legal actors can maximize the welfare created from incompatible resource disputes; in sparks cases, such theories assume that legal actors may and should choose the regime of tort liability most likely to maximize the joint product from a railroad right of way and adjacent land. Austrian economics focus on basic ordering, for it presumes that information shortfalls, subjective value, and changing resource uses all make it prohibitively difficult for legal actors to identify the highest and best uses of resources in conflict. In such constraints, the tort principles that regulate sparks disputes should be designed around simple and clear property boundaries, so that railroad operators are strictly liable for fires caused on land owners’ lots by sparks from their trains. This basic Austrian critique may be applied in other, more recent, and more complex fields of regulation. If scholars hope to expose a wider audience of legal scholars to this critique, however, they must integrate Austrian themes better into the normative frameworks and scholarly categories applied by legal scholars.