Taking Outcomes Seriously

This Article has challenged the narrow understanding of outcomes that commonly underlies efficiency analysis. Standard economic analysis of law disregards the fact that individuals—whose preference satisfaction it aims to promote—may in fact embrace a much broader conception of outcomes, extending beyond the end results of any event. The new experimental findings reveal that certain factors, such as how an outcome was brought about, the identity of the parties involved, the voluntariness or nonvoluntariness of their behavior, and the intentionality or nonintentionality of their acts, are frequently regarded by both laypersons and businesspeople as part of the outcome and significantly affect its valuation. These factors are not moral considerations that thwart the attainment of efficiency.

Quite the contrary: best outcomes may be promoted and efficiency maximized if one pays heed to the factors that affect the perceived goodness or badness of outcomes. Since there is nothing in efficiency analysis that dictates a narrow definition of outcomes or precludes the adoption of a broader one, this deficiency in standard economic analysis can easily be corrected. Taking into account the way people actually perceive outcomes bears on several legal issues, such as remedies for breach of contract, takings compensation, and decentralization schemes.