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Textbook Notes- Chapter 9 Topics in the Economics of Tort Liability

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Robert Barber

Chapter 9 J Topics in the Economics of Tort Liability Goal of Tort: minimize sum of cost of harm form accidents, costs of avoiding accidents, and costs of admin. Core Assumptions: 1. Rationality J for tort liability to have the effect on injurers, those injurers must be rational - 9}oKZ9K}Z}oLZ]KZ} L }o}}]o]LZ~ZZ]oo LZL[7K}Z}o22Z}]o]} ]LZ]Z}L]oo catastrophic outcomes - Common Cause of the 2 problems (=misperceived probabilities): frequency and vividness with which people are reminded of these risks (e.g. infrequentdull reminders of risk = underestimation) - With inaccuracy in making assumptions, }o L[Kl}] o o]}LZ}L benefits and costs that economic theory assumes they make - Issue between unilateral vs. bilateral precaution - LAPSES (clumsinessinattentionmisjudgmentmisperceptionweakness of will that cause accident) cause unintended negligence, which causes accident (e.g. motorists and speed limits = momentary lapses) *figure 9.1 J probability of lapse causing negligent precaution graph o Moral luck ]ZZ }o]]o]9^Z ]LooL}}Zo}EZZ]2Z]K }Z o]]o]_ role of moral luck would be reduced if rule of liability for accidents caused by negligence was replaced with one caused by INTENTIONAL negligence (DOWNFALL: required plaintiff to prove a lot more) 2. Regulation J liability vs. (safety) regulation - Regulation = ex ante enforcement by administrators (e.g. fines) - Liability = ex post enforcement by victims (courts) - Difference between administrators and courts: o Admin = technical knowledge about specialized industries (admin can set standards better than courts J e.g. safety regulations) o Courts = trials can provide better info about harm caused by accident to judgesjuries than administrators can predict o Courts = fewer political motives Regulators may set standards too low to avoid liability for politically powerful businesses (court imposed standard of care > safety regulations) o Admin = set standards too high in order to reduce competition - Safety regulations rich source of bribes for corrupt officials - Countries with admin MORE politicalcorrupt than judges, liability (adv.) > regulation - @}o]]o]-]LE[ZoZ)]LE - liability)
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