Liability Externalities and Mandatory Choices: Should Doctors Pay Less?

27 Pages Posted: 24 Nov 2006

See all articles by Robert D. Cooter

Robert D. Cooter

University of California, Berkeley - School of Law

Ariel Porat

Tel Aviv University; University of Chicago - Law School


According to legal principles, a driver who negligently breaks a pedestrian's leg should pay the same damages as a doctor who negligently breaks a patient's leg. According to economic principles, however, the driver should pay more than the doctor. Non-negligent drivers impose risk on others without being liable for it. When liability externalities are mainly negative as with driving, liability should increase beyond full compensation to discourage the activity. Unlike pedestrians, patients contract with doctors for treatment and willingly submit to the risk of harm. Imperfections in medical markets cause some kinds of doctors to convey more positive than negative externalities on their patients. Increasing liability for these doctors would discourage an activity that needs encouragement. The argument for decreasing doctors' liability is especially strong when doctors must choose among risky procedures, such as cesarean or vaginal delivery of a baby, which we call a "mandatory choice". Given equal benefits, the doctor ought to choose the least risky alternative. If the doctor negligently chooses a more risky alternative and harm materializes, courts award damages equal to the harm suffered by the patient. Even without the doctor's faulty choice, however, the patient would have been exposed to the least risky alternative. Economic efficiency requires reducing the doctor's liability below the victim's actual harm, which current legal rules usually prohibit. We propose that legislatures give courts the choice of lowering tort damages for doctors in well defined circumstances, and for their mandatory choices in particular, and we suggest some principles for doing so.

Keywords: positive externalities, negative externalities, medical malpractice, doctors' liability, road accidents, activity level, mandatory choices, disgorgement damages for accidents, damages

Suggested Citation

Cooter, Robert D. and Porat, Ariel, Liability Externalities and Mandatory Choices: Should Doctors Pay Less?. Journal of Tort Law, Vol. 1, 2006, U of Chicago Law & Economics, Olin Working Paper No. 313, Available at SSRN:

Robert D. Cooter

University of California, Berkeley - School of Law ( email )

Berkeley, CA 94720-7200
United States
510-642-0503 (Phone)
510-642-3767 (Fax)

Ariel Porat (Contact Author)

Tel Aviv University ( email )

Ramat Aviv
Tel Aviv, 69978
972-3-6408283 (Phone)
972-3-6407260 (Fax)


University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States


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