Tort Reform

by F.

Is the US tort system broken? I don’t know, but these words from Jeff Miron sound more reasonable than almost anything I’ve heard on the topic:

We have to be careful what we wish for; the tort liability is plausibly better than the alternatives, despite its own imperfections.

To see this, note first that everyone benefits when companies consider the potential risks and liability from any products they produce. Without question, an overly zealous liability system might result in too little innovation and too few new products; but an insufficiently zealous one could produce the opposite effect. To know we are on the wrong side of the tradeoff requires more than examples of products that “should have been introduced” but were not; it requires a systematic accounting for all such cases and for the cases where companies thought better of developing and selling products that would have carried excessive risks relative to their value. I am aware of no such accounting, nor it is obvious how one could produce it.

In addition, it is a mistake to compare the current, imperfect tort liability system to a hypothetical but “perfect” tort liability system; that is not the choice we face. Perhaps there are reforms of the current system that make sense, but there will always be abuses. Lawyers are simply too clever at circumventing rules that attempt to limit their payoffs.

Worse yet, the alternative to a tort liability system, with all its warts, might be a government regulatory agency that decides what products can be researched and sold. That is roughly what occurs for medicines under the Food and Drug Administration, and the result is not encouraging. In particular, the FDA seems to err on the side of caution and introduces enormous delay and cost in the production of new drugs. The actual choice society faces, therefore, is likely between an imperfect tort liability system and an imperfect regulatory system. At a minimum, the choice is not obvious.

My own hunch is that the tort liability system is the lesser of the evils.

More.

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