Liability for Harm Versus Regulation of Safety

51 Pages Posted: 9 Jun 2004 Last revised: 17 Apr 2008

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: October 1983

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

Shavell, Steven, Liability for Harm Versus Regulation of Safety (October 1983). NBER Working Paper No. w1218. Available at SSRN: https://ssrn.com/abstract=227549

Steven Shavell (Contact Author)

Harvard Law School ( email )

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617-495-3668 (Phone)
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National Bureau of Economic Research (NBER)

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