The goal of the Principles of European Tort Law is to serve as a basis for the enhancement and harmonisation of tort law in Europe. This paper takes a critical look at these Principles from a Law and Economics perspective. The first part of the paper questions the traditional arguments in favour of harmonisation, such as the need to achieve a ‘level playing field’ for industry and the reduction of legal uncertainty which may hinder cross-border trade. There are several economic arguments in favour of diverging tort laws: the possibility to satisfy heterogeneous preferences and the learning processes generated by competition between legal orders. Economic arguments in favour of harmonisation are weak. There is no need for central rules to internalise externalities; a race to the bottom is unlikely and the amount of transaction cost savings may be low. The second part of the paper examines whether the Principles may contribute to ‘better’ tort law. Large parts of the Principles, such as the fault standard and some of the rules on causation, are in conformity with economic insights. According to Article 10:101, damages serve the goal of compensation but also the aim of preventing harm. However, it is shown that several provisions of the Principles are not in conformity with the goal of prevention. The analysis focuses on the limitation of damages to normal losses, the different levels of protection in function of the nature of the safeguarded interests, the narrow strict liability rule for harm caused by abnormally dangerous activities and rules for assessing damages. The concluding remarks provide an overall assessment of the Principles for the future development of tort law in Europe.