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27 August 2006

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AustinContrarian

I just found this blog, and I know this post is ancient measured in blogosphere time.

Still, I must comment.

I think empirical analysis of tort law is long overdue. But from the stuff I've seen, the authors are asking the wrong question, or at least a secondary question. Rather than ask, "Do we really have a mass tort crisis?", we should ask, "Do mass torts really do any good?"

For example, you state, "Over the last several decades, large scale plaintiffs' lawsuits have been a strong deterrent against dangerous or fraudulent conduct." I know that's the popular perception. Is that true? If true, do these lawsuits provide the optimal amount of deterrence, or do they over- or under-deter?

Is there one scrap of evidence that pharmaceuticals are safer because of our products liability laws? Or, a better question, Do the benefits of our products liability laws to drug safety outweigh their costs? The costs include the massive transaction costs -- 60% or more of the settlement value of the claim, when both plaintiff and defense costs are included. There is also a cost for drugs needlessly withheld from the market due to overdeterrence. This is the cost of unnecessary death and disease.

In sum, do we really maximize welfare by pinning the loss on the putative "cheaper cost avoider?"

We need empirical analysis of the auto industry; empirical analysis of the pharmaceutical industry; empirical analysis of the lawnmower industry.

Is the increase in safety worth the cost?

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