EclectEcon

I think you might be confusing "strict liability" with "product liability." The latter, which is at issue here, is actually a negligence-based regime: The product must be either (a) negligently designed (e.g., the plaintiff's claim here), (b) negligently manufactured (e.g., the soda bottle that randomly explodes for no apparent reason) or (c) negligently labeled (e.g., "Do not use this hair dryer in the shower!")

The quirk with product liability relative to traditional negligence was the joint liability of the entire distributive chain: you could sue not only the manufacturer, but also the wholesaler and retailer. But there still had to be defect somewhere in design, manufacture or labelling for anyone in the distributive chain to be liable. That was indeed a "deep pockets" policy decision (i.e., your #3), but it has been abandoned in at least some jurisdictions and contexts (e.g., a retailer who merely sells sealed containers with no ability to inspect the product now cannot be held liable for a manufacturing defect, at least in some jurisdictions).

"Strict liability," meanwhile, was generally only used for the tort of trespass: If your cow wandered onto your neighbor's land and did damage, then you were responsible, even if you were not negligent. "Negligence" as a tort didn't even really exist before the Industrial Revolution.

The only other common example of strict liability I can think of is for dog bites -- and even that isn't true in all jurisdictions (some use a negligence standard).

Your economic analysis is spot on -- the low-cost avoider should have the burden of avoidance. But that analysis is basically subsumed by the precedent question of whether the manufacturer was somehow negligent. It's really the same question, just asked in a different way.

Cheers...