The Simple Economics of Class Action: Private Provision of Club and Public Goods

Abstract: This article uses economic categories to show how the
reorganisation 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.

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