The Cost of Accidents: A Legal and Economic Analysis (1970) by Guido Calabresi is a very important work in the law and economics tradition because it provides an economic efficiency analysis of the rules of tort law. The important goal of tort law may not be the absolute minimization of the occurrence of loss from accidents because the total accident cost of any economic activity (i.e., production of electricity from various power plants or windfarms or individual solar powered homes) includes both the expected cost of the accidents that do occur and the costs expended by the society in avoiding the accidents. Judge Guido Calabresi (born 1932 in Milan, Italy) is currently a judge on the United States Court of Appeals for the Second Circuit. ... Law and economics, or economic analysis of law, is the term usually applied to an approach to legal theory that incorporates methods and ideas borrowed from the discipline of economics. ... There are several measures of economic efficiency: Pareto efficiency Kaldor-Hicks efficiency X-efficiency Allocative efficiency For applications of these principles see: Efficient market hypothesis Welfare economics Production theory basics See also Business efficiency Inefficiency ...

For any given level of expenditure to prevent accidents, there is an associated level of expected accidents and associated expected losses. The total cost at that given level of precaution is the sum of both the expenditures on precaution plus the losses from the accidents that were not prevented. If you want to minimize the total costs of accidents, you should not neglect to include the costs of precaution.