area of the EU, there is hardly any economically relevant activity which is not somehow related to another. This implies that any technological change introduced in any one economic activity will induce substitution effects in other economic activities, and these effects will in turn rip through the entire network of the economy. Hence any particular effect will spread over the entire economy as a consequence of market interaction, and in the total absence of contractual relations between the affected parties. It is very likely that many of these effects, some of which will be large and concentrated on very few, will be considered unfair by those who have to suffer the loss as a consequence of market activity which bring benefit to some. If an insulation material such as cork can be substituted more cheaply and the cork oak from which the cork used to be peeled is thereby rendered useless, the benefit from this new technology is spread over all those economic activities which require such insulation from shipping to building, the hotel and restaurant business and so forth. Yet the owners of the cork oak forests, whose trees have become obsolete, suffer the full burden of the economic change. With them suffer their labourers who used to peel the trees, as well as all those who used to be employed in the line of producing the cork-based insulation materials. However, the economic effect is intended and no compensation requirement can exist without endangering market dynamics.

Looking at the cases

In illustrating the cases with the foregoing analysis, we can note for Case 1 (‘Cable I – The Blackout’) that there is neither an uninternalizable externality nor a specific rent involved. Transaction costs are low and therefore rectifications are easy. Compensation turns on fault and not on any responsible market activity. Cutting a cable is a risk inherent in any excavating activity. The operator is best positioned to reduce this risk and thereby optimize the cost inflicted on others. Insufficient care would externalize those costs of operation. The costs of damages caused by excavation can be reduced by hiring competent personnel, adequate supervision, adequate business routines and the firm’s own interest in its professional record. With all these instruments at its disposal, the firm is finally best positioned to buy insurance for liability.

Case 2 (‘Cable II – Factory Shutdown’) is different. Since the damage imposed on Cato is considered an externality, the risk of power failure is a normal risk of business operations. Only the business operator himself

loss of power from the general provider. Alternative forms of marketing cattle are available.

Case 7 (‘The Careless Architect’) yields no specific new insights, and in Case 8 (‘The Cancelled Cruise’), the collision of two ships is a standard tort case with the consequence of compensation requirements according to fault. No specific issues of transactions costs or protected economic rents arise.

As to Case 9 (‘Fire in the Projection Booth’), the economic approach yields no additional consequences to the standard tort result. However, any reference to the causation link under the circumstances seems superfluous as the proximate cause cannot be adequately judged by the manufacturer, and the consequences are totally beyond his control. Again, the operator has an easy remedy in having backup equipment available.

In Case 10 (‘The Dutiful Wife’), the notion of pure economic loss becomes apparent. The tortfeasor is responsible for the market value of the healthcare services, but not for the entire loss suffered by the wife who was looking after her husband and therefore was deprived of business income. This is the correct result from an economic point of view, as the couple faced the choice between hiring help and doing the care work themselves. The choice they made is their own responsibility, but the damage inflicted is the responsibility of the tortfeasor. Put differently, the choice of the couple reveals their expectation that the additional value in the spouse’s care to both husband and wife exceeds the business income foregone. Had there not been an expected consumer surplus in non-market care, i.e. care by the spouse, the spouse would have continued her business activities and hired the respective help.

Case 11 (‘A Maestro’s Mistake’) involves harm imposed on two parties. The artist suffers a loss in his reputation and his earning ability when skilful forgeries appear on the market and compete with the original work. Obviously, the artist has a claim against the forger, and so does the art buyer. But there is no connection through any sequence of choices made in the market between the artist and the art buyer in this case, and hence from an economic point of view, no compensation is required. The existence of forgeries so accomplished that they even fool the artist is a serious threat to the artist’s ability to earn a living. He has therefore a strong interest in taking protective measures, such as marks of authenticity, working closely with experts or his main art dealer, keeping a register of the art and where it has been sold, etc. Such remedies are available, and they are useful for both the artist and the art buyer. Since