Basically, the ordinance affected the migration rights of people outside the jurisdiction where it was adopted. Now, as usual, you can cast nearly everything as implicating a federal constitutional right. The goal is trying to get serious review.
Here, instead of taking the Mt. Laurel approach, and having to take over all growth-related cases, the court sees the market as closer to the desired result.
The constitutional question is who decides whether the political process (zoning) or the market rules? And the available choices are the political process (i.e., just let the regulation stand) or the courts.
There's another side as well-- most local judges are elected, and this is a hot-button issue.
The supreme court has indicated that it wants to look at exactions, but it's strange to do that unless you're willing to look at all of zoning in general.
Exactions provide some room for bargaining on issues that might otherwise simply be foreclosed. So, in our tic-tac-toe board, suppose the developer (5) would be subjected to an $8K cost by a regulation, and everybody else would benefit by $500 (so a total of $4K). The developer can offer some money (presumably between $4K and $8K) in order to get an exception. Now the payment generally turns out to be closer to $4K than to $8K. Why is that? Because developers will just go and shop in another community, and we'll see competition between jurisdictions.
So there's a market for exactions. And there's some evidence that municipalities compete for development, so long as there's a good price to be exacted.
To be more general, note that P is never 0; so we're really looking at a reduction in probability, not an elimination of the possibility itself. So think in terms of ΔP.
Let's say we say if we win, there'd be a $4M verdict. The defendant offers $240K (easily divisible by 3). So this would mean we have to attack the custom itself... how are we going to explain to the client and the senior partner why we are leaving behind a sure thing which is a heck of a lot better than $0.
The rule is that custom is determinative, because of a comparison between the competencies of courts and markets in the context of medical malpractice. So the goal here would be to show that this particular situation is analogous to TJ Hooper, and that it's fit for resolution by a jury.
You can't make that finding unless you recognize that this is a comparative institutional analysis. You need to know why the default decision-maker is chosen: having done so, you can spot the implicit exceptions to that rule.
It is the character of producers to encourage consumers to buy their products. So do consumers know and understand about the risk?
Insurance is a means for rearranging risk. It converts catastrophic losses into predictable ones, at a slight cost. It doesn't prevent a harm; it just rearranges it.
To reiterate, the bottle hypothetical:
| Risk-neutral | Risk Averse | |
|---|---|---|
| Knowledgeable | Bottle: Thick Insurance: No |
Bottle: Thick (or, in extreme cases, super-thick) Insurance: Yes |
| Not Knowledgeable | Bottle: Thin Insurance: No |
Bottle: Thin Insurance: No |
And what's the cost of going from thick to super-thick? $0.30. And the benefits? A $0.02 reduction in losses. So failure to take that step would not represent negligence, and there would be no liability.
But what if there is absolute liability? They'd be liable even if there were super-thick bottles. But the company won't go to that level if the risk doesn't justify doing so. And the company can insure also.
The tort system can either deliver safety before the fact of an incident, or insurance after the fact.
Now we've been assuming that negligence liability and absolute liability function perfectly. But how good are the relevant decision-makers at balancing costs and benefits? Consider safety. In a negligence context, the jury does the balancing. In an absolute liability context, the potential injurer makes the decision, and they might have much better information, and an incentive to do things right. So that might be a reason to argue to a judge or legislature that absolute liability is better.
We'll also need to consider the costs associated with the different decision makers. Absolute liability creates a larger number of claims, but the cost per case is lower (i.e., simpler decisions: the outcome is known in advance). Also, absolute liability is more likely to produce new safety steps; in negligence, the plaintiff must show a step that the plaintiff didn't take-- it's hard to show safety steps that don't exist yet. Under absolute liability, however, safety steps may be cost-savers, so there's an incentive to search for them: producers bear both the avoidable and the unavoidable losses due to safety, so there's an incentive to minimize the avoidable losses.
Finally, absolute liability encourages producers to pass through the costs of loss onto consumers. So under absolute liability, thick bottles would cost $0.32. So prices go up slightly; consumers don't understand the risk, but they do see the price, so there might be a bit of consumer avoidance. Under negligence, cost does not equal price: the consumer gets a lower price, but bears some of the cost.
Next question: absolute liability effectively provides some insurance, but is it the kind of insurance that people want? The decision to purchase insurance is generally based on the price of the insurance and the coverage. So when we look at our "policy," we need to look at damages.