Whenever I grade exams or papers, I have to adopt a set of grading standards, which may be lenient or harsh. On the lenient end, I could let students get away with vaguer or less complete answers while giving more generous partial credit; on the harsh end, I could require more precise and comprehensive answers while giving less generous partial credit. Even if I hold my grading standards constant, I still have to decide (when writing an exam) the difficulty level of the questions asked.
Assuming that students are aware of my grading standards and exam difficulty (which they generally are after the first exam), they have to choose how hard to work. Some will work hard regardless. Some will work just hard enough to pass (or to get some target grade). And some will fail. Call these categories I, II, and III.
Now, suppose I decide to raise my standards. The behavior of Category I and III students will likely remain unchanged; those who work hard regardless continue to work hard, and those who would fail under easier standards continue to fail under harder ones. Category II is more complex. Some of these students will increase their effort level so as to meet the new standards; they are the argument for raising standards. But some other Category II students will be unwilling or unable to meet the higher standard, and they might well decrease their effort – falling into Category III.
Similar results apply to tort liability. Under a negligence rule, the courts require potential defendants to take a certain level of “due care” in order to avoid paying damages to plaintiffs. Assuming (plausibly) that potential defendants are heterogeneous in their interests, costs of taking care, and so on, we have a familiar division: some potential defendants will take more than the required care regardless; some will take just enough care; and some will not take enough care. These are, again, Categories I, II, and III.
If the courts raise the required level of care – perhaps by requiring more care, perhaps by switching to a strict liability rule – then the effects will be similar to those of higher grading standards on students. Categories I and III are largely unaffected, while Category II divides into two parts. Some of the potential defendants in Category II will take more care in order to keep in line with the court’s new standard, while others will find it’s no longer worthwhile to try. Their care level will actually fall, since they no longer expect to meet the legal requirement for avoiding liability; they will fall into Category III and simply plan to pay damages instead.