Welfare improving ignorance and negligence rule

The literature considers that the ignorance of activity levels by the courts is a major source of inefficiency to minimize the social costs of accidents. In this paper, we show that the inefficiency of the negligence rule based on a standard of care (and correlatively ignoring the activity level) is not established if certain dimensions of care are not verifiable. In other words, if care and activity levels are the only relevant variables of the injurer's set of actions to reduce the risk of accident, it is true that inefficiency arises when the court ignores one element of this set. But, considering that some dimensions of care are in practice not verifiable, it can be efficient for the judge not to take into account the activity level of the defendant. We propose a simple model with three variables: observable and unobservable precautionary measures and activity level.