Tort Reform by Contract

Abstract:     
This is a scanned copy of the 1993 book, Tort Reform by Contract, published by the American Enterprise Institute and now out of print. In this book I argue that consumers would be better off if they were allowed to contract with providers in cases of medical malpractice and product liability. In these cases the consumer has a prior relationship with the potential injurer and therefore must pay in the form of higher prices to compensate for any expected liability payment. Consumers do not want insurance for nonpecuniary damages ("pain and suffering") and so would likely prefer not to pay upfront for the expected value of these damages. This is especially true since in many cases these damages are associated with risk-reducing products (such as pharmaceuticals and medical care) and the effect of forcing consumers to purchase insurance through the tort system may be to actually reduce the consumption of these goods and services and so in increase risk.

Keywords: Tort Reform, Nonpecuniary Damages, Pain and Suffering, Contract, Product Liability, Malpractice

JEL Classification: K10, K12, K13

Accepted Paper Series