Mass Harm from a Law and Economics Perspective - The Case for Collective Action

In situations of mass harm, victims may not bring suit because the costs and risks outweigh the
expected benefits, so that they stay ‘rationally apathetic’. Or they wait for others to start a
procedure on which they can free-ride, with the possible result that no one actually brings suit.
This is a problem from the perspective of compensation, but also from the perspective of
confronting tortfeasors with the losses they have caused to incentivise them to change their
behaviour.
We analyse collective actions as a possible remedy for these problems. We do not distinguish
between various forms of collective actions but focus on the common general principle of
collective actions, namely that one collective claim instead of a series of individual claims is
brought.
We discuss the possible advantages (Section 2) and disadvantages (Section 3) of collective actions.
We spend specific attention to the issue of the financing of collective actions (Section 4). By way
of example, we briefly comment on the recent EU Directive1 (Section 5), and then we conclude
(Section 6).