Injuries and Institutions: Tort Reform, Tort Theory, and Beyond

Abstract

Tort reform has been a subject of active debate and scholarship for at least fifty years. The torts system is very expensive and capable of causing severe distortions in societal behavior. But, when one considers the scale and complexity of the injuries in question and the character of the alternative modes of societal responses to these injuries,these expenses and distortions, taken by themselves, tell us surprisingly little about which if any tort reforms would be socially valuable. In a setting where all institutions are and will be very far from ideal, reforms cannot be promoted by parading the horribles of the existing system while proposing substitutes based on "black box" institutions vaguely assumed to operate in an ideal fashion. Sensible proposals for reform require an understanding of the real workings of such institutional alternatives as the torts system, criminal liability, administrative regulation, and the market. The relative merits of theseinstitutional alternatives vary across injury settings, providing for a mix of social responses geared to the realities of individual injury settings.

This Article builds a framework for an institutional analysis of tort reform by focusing on the actions of the actors who play important roles in all the institutional alternatives. It examines the determinants of deterrability, insurability, the tendency to bring and prosecute cases in the courts, and the tendency for (and efficacy of) political action, by tracing the behavior of these actors. This institutional analysis puts important tort reforms and even traditional aspects of tort theory in a very different perspective. Reforms such as scheduled damages and tort fines will now appear as institutional shifts substituting legislatures and administrative agencies for juries and judges. In some important injury settings, such as products liability, this substitution can have unattractive features. Viewed in this broader institutional context, popular tort reforms which reduce or eliminate joint and several liability, punitive damages, and pain and suffering damages show significant hidden costs. Institutional analysis also reveals that, ironically, calls for tort reform are often strongest (and reform occurs) in those areas where the existing system is most beneficial to society. In addition, it casts new light on traditional issues of tort theory such as the relative merits of negligence and strict liability.

Keywords: comparative institutional analysis, tort reform, torts system, criminal liability, administrative regulation, market, injury, institutional alternatives deterrence, insurance, tort theory, legislatures, administrative agencies, juries, judges, products liability, joint and several liability, puniti

JEL Classification: K13