Thursday, June 23, 2011
Professors Alberto Cassone and Giovanni Battista Ramello (Universita del Piemonte Orientale) have posted on SSRN a draft of their article, The Simple Economics of Class Action: Private Provision of Club and Public Goods. Here’s the abstract:
This article uses economic categories to show how the reorganization of civil procedure in the case of class action is not merely aimed at providing a more efficient litigation technology, as hierarchies (and company law) might do for other productive activities, but that it also serves to create a well defined economic organization ultimately aimed at producing a set of goods, first and foremost among which are justice and efficiency.
Class action has the potential to recreate, in the judicial domain, the same effects that individual interests and motivations, governed by the perfect competition paradigm, bring to the market.
Moreover, through economic analysis it is possible to rediscover not only the productive function of this legal machinery, but also that partial compensation of victims and large profits for the class counsel, far from being a side-effect, are actually a necessary condition for reallocation of the costs and risks associated with the legal action.