Abstract
THE class action may be viewed as a technique designed specifically to overcome some of the inherent handicaps of a legal system functioning in a world of scarce resources and positive transactions costs.' Consider, for example, the plight of 10,000 individuals illegally harmed by a large enterprise. Let the economic harm to each be relatively small-say $1,000. Assume also that by causing the harm, the enterprise benefits by $8,000,000. Then if the cost of joining the claims of the harmed individuals is great, and if the cost of bringing an individual action for damages is greater than $1,000, it will pay no one to litigate the issue. The enterprise will have an incentive to commit the harm, and the result will be an inefficient utilization of scarce resources (the harm is worth $8,000,000 to the firm but imposes costs of $10,000,000 on the harmed individuals) and a clandestine redistribution of wealth from the harmed individuals to the firm.
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