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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.

Suggested Citation

  • Steven Shavell, 1983. "Liability for Harm Versus Regulation of Safety," NBER Working Papers 1218, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1218
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    Cited by:

    1. Carolyn Chisadza & Manoel Bittencourt, 2014. "Is Democracy Eluding Sub-Saharan Africa?," Working Papers 201403, University of Pretoria, Department of Economics.
    2. Dharmapala, Dhammika & Hoffmann, Sandra A. & Schwartz, Warren, 2001. "A Neglected Interdependency in Liability Theory," Discussion Papers 10626, Resources for the Future.
    3. Ephraim Clark & Gérard Mondello, 2000. "Resource Management and the Mayor's Guarantee in French Water Allocation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 103-113, February.
    4. 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.
    5. Guiseppe Dari Mattiaci & F. Parisi, 2003. "The Economics of Tort Law: A Précis," Working Papers 03-13, Utrecht School of Economics.
    6. Dhammika Dharmapala & Sandra A. Hoffmann, 2005. "Bilateral Accidents with Intrinsically Interdependent Costs of Precaution," The Journal of Legal Studies, University of Chicago Press, vol. 34(1), pages 239-272, January.
    7. 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.
    8. Marcel Boyer & Donatella Porrini, 2004. "Modelling the choice between regulation and liability in terms of social welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(3), pages 590-612, August.
    9. G.G.A. de Geest & G. Dari Mattiacci, 2005. "Soft Regulators, tough judges," Working Papers 05-06, Utrecht School of Economics.
    10. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Taylor & Francis Journals, vol. 3(2), pages 325-352, November.
    11. David Meintrup & Chang Woon Nam, 2009. "Shadow Market Area for Air Pollutants," Environment and Planning B, , vol. 36(4), pages 664-681, August.
    12. Steven Shavell, 1983. "A Model of the Socially Optimal Use of Liability and Regulation," NBER Working Papers 1220, National Bureau of Economic Research, Inc.
    13. Pearson, Heath, 2001. "Jürgen G. Backhaus, editor, The Elgar Companion to Law and Economics (Cheltenham, UK: Edward Elgar, 1999) pp. xii, 548, $200.00. ISBN 1 8589 8516 1," Journal of the History of Economic Thought, Cambridge University Press, vol. 23(3), pages 388-389, September.
    14. Eirik Amundsen, 1992. "Optimal failure rates and penalty-bonus policies in the offshore petroleum sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(5), pages 469-489, September.
    15. Steven Shavell, 2003. "Economic Analysis of the General Structure of the Law," NBER Working Papers 9699, National Bureau of Economic Research, Inc.
    16. Marcel Boyer & Donatella Porrini, 2002. "The Choice of Instruments for Environmental Policy: Liability or Regulation?," CIRANO Working Papers 2002s-17, CIRANO.
    17. Eef Delhaye, 2004. "Traffic safety: speed limits, strict liability and a km tax," Energy, Transport and Environment Working Papers Series ete0407, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    18. Bernard Sinclair-Desgagné & Carel Vachon, 1999. "Dealing with Major Technological Risks," CIRANO Working Papers 99s-29, CIRANO.

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