Products Liability and Product Safety: Japan and the U.S.

Abstract

Consumers in wealthy countries like the U.S. and Japan usually know what they want, and how to obtain it. In such markets, the sellers who thrive should tend to be those who offer consumers the level of safety they want -- no matter what the law might be. For the most part, U.S. data confirm this essentially Coasian logic: a shift in the product liability rule from negligence to strict liability seems not to raise product safety. Unfortunately for the empiricist, however, the U.S. combines state-based liability standards with a national product market. This necessarily complicates the empirical task. Although Japan presents its own empirical difficulties, it does couple national law with a national market. In 1995, the Diet adopted strict products liability. Before, courts had adjudicated product disputes in negligence or contract; after 1995, they applied strict liability. As in the U.S., the level of product safety did not rise.

Curiously, Japan did not experience any of the perverse effects sometimes attributed to strict products liability in the U.S. either. This fact suggests that the perverse results may derive not from the liability rule itself, but from the interaction between the rule and several procedural devices peculiar to the U.S.

JEL Classification: K13, K40