Product Liability: A Neo-Austrian Based Perspective

The paper is an exercise in a neo-Austrian based economic analysis of product liability. After a short historical introduction, we take two of the basic premises of Austrian economic thought and see which system of product liability results. If costs are subjective and entrepreneurship is the essence of an efficient market process, a system of caveat emptor and vendor results. For judges to assess damages, in the way others advocate judges to do, judges would need to measure costs, something that cannot be done according to Austrian economics. The paper also answers some possible criticisms from the mainstream neoclassical perspective.