For many products, we face a choice of who to hold liable for harms that would not have occurred if not for the existence of the product. For instance, if a person uses a gun in a school shooting that kills a dozen people, there are many legal persons who in principle could be held liable for the harm:

Which one of these is the best? I'll offer a brief and elementary economic analysis of how this decision should be made in this post.

The important concepts from economic theory to understand here are Coasean bargaining and the problem of the judgment-proof defendant.

Coasean bargaining

Let's start with Coaesean bargaining: in short, this idea says that regardless of [...]

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Outline:

(00:49) Coasean bargaining

(02:09) The judgment-proof defendant

(04:20) Transaction costs and economies of scale

(05:23) Summary and implications for AI

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Narrated by TYPE III AUDIO.