Negative liability

Negative and positive externalities pose symmetrical problems to social welfare. The law
internalizes negative externalities by providing general tort liability rules. According to such
rules, those who cause harm to others should pay compensation. In theory, in the presence
of positive externalities, negative liability should apply: those who produce benefits should
be paid a compensatory award by the gainers. Nevertheless, the legal system does not display
such general negative-liability rules. Rather, it tackles the problem of internalizing positive
externalities by implementing a set of different and often indirect solutions. My explanation
for this asymmetry in legal remedies rests on three features of a negative-liability regime,
relating to intent, incentives, and evidence. These features explain the scope and design of
restitution rules, liability for nonfeasance, and other mechanisms for the internalization of
positive externalities.