The law and economics of class actions

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More than four decades ago in The Logic of Collective Action, Olson (1965) provided the evidence that in specific circumstances the uncoordinated action of individuals can be less efficient than coordinated action. He was essentially targeting public goods. Nonetheless, this attitude sometimes extends to different goods even though a large number of individuals have a common interest. The Olson contribution was therefore a meaningful explanation for the formation of groups and, as a by-product, for the emergence of specific institutions devoted to making coordination possible. However, co-operation and organization can not only better serve the private interest of individuals but can be ‘‘the most powerful tools human reason can employ’’ for expressing human liberty (Von Hayek 1960, p. 37) in a wide number of settings, from the market to the political and government systems where other means are ineffective. An important question is thus whether the previous reasoning equally applies to the judiciary: certainly this is an important topic for law and economics research. Generally speaking, in a number of cases legal actions can be brought collectively and imply some coordination, such as for criminal lawsuits involving a number of victims or for litigations fostered by a public company, involving, albeit indirectly, all the investors. However, this only concerns limited situations.