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Economic Analysis of Accident Law

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  • Steven Shavell

Abstract

Accident law is the body of legal rules governing the ability of victims of harm to sue and to collect payments from those who injured them. This paper contains the chapters on accident law from a general, forthcoming book, Foundations of Economic Analysis of Law (Harvard University Press, 2003). The analysis is first concerned (chapters 2-4) with the influence of liability rules on incentives to reduce accident risks. Then consideration of accident law is broadened (chapter 5) to reflect the effect of liability rules on compensation of victims and the allocation of risk. In this regard a central issue is the roles of victims' insurance and of liability insurance, and how they alter the incentives inherent in liability rules. Finally, the administrative costs of the liability system, namely, the private and public legal costs of litigation, are examined (chapter 6). These costs are significant and thus bear importantly on whether use of accident law is socially desirable. It is emphasized that social intervention -- either to curtail use of the legal system or to encourage it -- may well be needed because the private incentives to use the system are generally different from the socially desirable incentives to do so.

Suggested Citation

  • Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9694
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    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    2. Biggar, Darryl, 1995. "A model of punitive damages in tort," International Review of Law and Economics, Elsevier, vol. 15(1), pages 1-24, January.
    3. Philip J. Cook & Daniel A. Graham, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 143-156.
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    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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