The John M. Olin Center
Paper Abstract
535. Steven Shavell, Economics and Liability for Accidents, 12/2005; subsequently published in New Palgrave Dictionary of Economics, 2nd edition, 2008.
Abstract: Legal liability for accidents determines the circumstances under which injurers must compensate injurers for harm. The effects of liability on incentives to reduce risk, on risk-bearing and insurance (both direct coverage for victims and liability coverage for injurers), and on administrative expenses are considered. Liability is also compared to other methods of controlling harmful activities, notably, to corrective taxation and regulation.