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Liability for Harm Versus Regulation of Safety

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  • Steven Shavell

Abstract

Liability in tort and the regulation of safety are considered as means of controlling accident risks using the instrumentalist, economic method of analysis.Four general determinants of the relative social desirability of liability and regulation are first identified--differences in knowledge about risky activities as between a social authority and private parties; the possibility that parties would not be able to pay fully for harm done; the chance that they would not face suit for harm done; and administrative costs. On the basis of analysis of these determinants, it is suggested that the choices observed to be made between liability and regulation are, when broadly viewed, socially rational: Notably, activities that create the risk of the typical tort and that are little regulated characteristically display features leading us to say that they ought to be controlled mainly by liability. And activities that are much regulated -- especially ones involving significant hazards to health or to the environment -- ought to be directly constrained in important ways, taking into account their usual features.

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File URL: http://www.nber.org/papers/w1218.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1218.

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Date of creation: Oct 1983
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Publication status: published as Shavell, Steven. "Liability for Harm Versus Regulation of Safety." Journal of Legal Studies, Vol. 13, (June 1984), pp. 357-374.
Handle: RePEc:nbr:nberwo:1218

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Cited by:
  1. Steven Shavell, 2003. "Economic Analysis of the General Structure of the Law," NBER Working Papers 9699, National Bureau of Economic Research, Inc.
  2. Dari-Mattiacci, Giuseppe & De Geest, Gerrit, 2006. "When will judgment proof injurers take too much precaution?," International Review of Law and Economics, Elsevier, vol. 26(3), pages 336-354, September.
  3. G.G.A. de Geest & G. Dari Mattiacci, 2005. "Soft Regulators, though judges," Working Papers 05-06, Utrecht School of Economics.
  4. Ephraim Clark & Gérard Mondello, 2000. "Resource Management and the Mayor's Guarantee in French Water Allocation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 103-113, February.
  5. Marcel Boyer & Donatella Porrini, 2002. "Modeling the Choice Between Regulation and Liability in Terms of Social Welfare," CIRANO Working Papers 2002s-13, CIRANO.
  6. David Meintrup & Chang Woon Nam, 2006. "Shadow Market Area for Air Pollutants," ERSA conference papers ersa06p412, European Regional Science Association.
  7. Bernard Sinclair-Desgagné & Carel Vachon, 1999. "Dealing with Major Technological Risks," CIRANO Working Papers 99s-29, CIRANO.
  8. G. Dari Mattiacci & Francesco Parisi, 2003. "The Economics of Tort Law: A Précis," Working Papers 03-13, Utrecht School of Economics.
  9. Marcel Boyer & Donatella Porrini, 2002. "The Choice of Instruments for Environmental Policy: Liability or Regulation?," CIRANO Working Papers 2002s-17, CIRANO.
  10. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 325-352, November.
  11. Steven Shavell, 1983. "A Model of the Socially Optimal Use of Liability and Regulation," NBER Working Papers 1220, National Bureau of Economic Research, Inc.
  12. Eef Delhaye, 2004. "Traffic safety: speed limits, strict liability and a km tax," Energy, Transport and Environment Working Papers Series ete0407, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  13. Dhammika Dharmapala & Sandra A. Hoffmann, 2002. "Bilateral Accidents with Intrinsically Interdependent Costs of Precaution," Working papers 2002-11, University of Connecticut, Department of Economics.
  14. Carolyn Chisadza & Manoel Bittencourt, 2014. "Is Democracy Eluding Sub-Saharan Africa?," Working Papers 201403, University of Pretoria, Department of Economics.
  15. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
  16. Eirik Amundsen, 1992. "Optimal failure rates and penalty-bonus policies in the offshore petroleum sector," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(5), pages 469-489, September.
  17. Hoffmann, Sandra & Schwartz, Warren & Dharmapala, Dhammika, 2001. "A Neglected Interdependency in Liability Theory," Discussion Papers dp-01-13, Resources For the Future.

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