Throughout its history, the economic analysis of tort law has been largely limited to one question: How should tort rules be formulated so as to minimize the social cost of accidents? Throughout its history, the economic analysis of tort law has also been controversial. The two phenomena are related. It is highly controversial whether tort law should minimize accident costs to the exclusion of fairness concerns, which in turn has fostered the belief that the economic analysis of tort law is controversial.

The controversy associated with the economic analysis of tort law was initially stirred up by the provocative work of Richard Posner. Although he was not the first to apply economic analysis to tort law, Posner strongly influenced the newly developing field by forcefully propounding the claim that tort law should maximize wealth by minimizing accident costs. The approach ultimately foundered as scholars, including Posner, recognized that cost–benefit analysis cannot determine initial entitlements, the basic architecture of any legal rule. The specification of initial entitlements, and thus the substantive content of any legal rule, depends on normative justification and not economic analysis.

This limitation of economic analysis was subsequently addressed by Louis Kaplow and Steven Shavell, who have constructed a proof showing that a “fair” tort rule can violate the Pareto principle by preventing the adoption of a welfare-maximizing, “unfair” tort rule.

The positive analysis of tort law is descriptive in the sense that it ascribes a purpose to tort liability, such as one based on corrective justice or wealth maximization, and then interprets tort law in those terms. An interpretation that adequately describes tort practice is thought to support the claim that the tort system serves the purpose upon which the interpretation is based, even if participants in the system do not consciously pursue that purpose.

This analytical approach is partially motivated by the role that precedent plays in the justification of legal decisions. If positive analysis shows that most of tort law maximizes wealth, for example, then one may have substantial precedent for justifying the wealth-maximizing outcome in the case at hand. Similarly, a greater ability to discern commonality in prior cases makes one more capable of predicting the outcome of future cases, insofar as “like” cases are supposed to be treated alike.

By enhancing the ability of the tort system to handle cases in a uniform and consistent manner, positive analysis promotes or protects the values of equality and reliance. Positive analysis has only limited normative value, however. Even if positive analysis shows that most of tort practice can be adequately described as serving some purpose, a purpose that is not morally justified probably does not provide a good reason for deciding the present case (Alexander 1989). Any purpose ascribed to tort law must be normatively justified, so the positive analysis of tort law cannot substitute for normative theory.