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Does Tort Law Deter Individuals? A Behavioral Science Study

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Abstract

For nearly four decades, economic analysis has dominated academic discussion of tort law. Courts also have paid increasing attention to the potential deterrent effects of their tort decisions. But at the center of each economic model and projection of cost and benefit lies a widely accepted but grossly undertested assumption that tort liability in fact deters tortious conduct. This article reports the results of a behavioral science study that tests this assumption as it applies to individual conduct. Surveying over 700 first‐year law students, the study presented a series of vignettes, asking subjects to rate the likelihood that they would engage in a variety of potentially tortious behaviors under different legal conditions. Students were randomly assigned one of four surveys, which differed only in the legal rules applicable to the vignettes. In summary, the study found that although the threat of potential criminal sanctions had a large and statistically significant effect on subjects' stated willingness to engage in risky behavior, the threat of potential tort liability did not. These findings call into question widely accepted notions about the very foundations of tort law.

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... Does damages liability promote socially desirable behavior? Reviews of tort law's effects reach mixed conclusions, with one finding tort law " somewhat successful " in deterring (Schwartz 1994:443), but a recent experiment finding subjects' willingness to engage in risky behavior unaffected by the threat of potential tort liability (Cardi et al. 2012 ). Empirical studies assess deterrence by comparing liability with nonliability, such as comparing alcohol-related motor vehicle fatalities across states that do or do not impose liability on commercial servers of alcoholic beverages (Sloan et al. 2000). ...
... Gary Schwartz's thorough review of the tort deterrence literature concluded that " between the economists' strong claim that tort law systematically deters and the critics' response that tort law rarely if ever deters lies an intermediate position: tort law, while not as effective as economic models suggest, may still be somewhat successful in achieving its stated deterrence goals " (Schwartz 1994:443). A recent summary of the literature concluded that " [t]o date, no study has found that tort law serves as a comprehensive deterrent, " some studies " have found limited evidence that tort acts as a weak deterrent with respect to certain behaviors, " and that other studies " have found no evidence of deterrence or even, in a few cases, a negative association—that certain tort rules are associated with an increase in related injuries " (Cardi, Penfield et al. 2012). Ours is the first incentivized test of deterrence using ...
... This resonates with other public good experimental findings that contributions increase as the cost to the punisher of inflicting punishment decreases (Egas & Riedl 2008; Nikiforakis & Normann 2008). The dynamic quality of the public good experimental paradigm may help explain its deterrence-promoting result, at sufficient damages levels, compared to an experimental finding that the threat of tort liability does not deter (Cardi, Penfield et al. 2012). Cardi et al.'s respondents were asked in a cross-sectional survey whether tort liability in several scenarios would deter them and no significant deterrent effect was found. ...
Article
To explore damage rules’ deterrent effect, we use a public good experiment to tailor allowable punishment to rules used in actual civil litigation. The experimental treatments are analogous to: (1) damages limited to harm to an individual litigant, (2) damages limited to harm to a group available in aggregate litigation, such as class actions, and (3) treble damages. We compare our treatments with a standard voluntary contribution mechanism, where antisocial behavior goes unchecked. For (1) and (2) we also manipulate the probability of a player being entitled to claim damages. The treatments with damages limited to harm to an individual do not prevent the deterioration in cooperation over time commonly found in public good experiments without punishment, yet deterioration is slower. In the class action damages treatment, cooperation is stable over time if the probability of having to pay damages is sufficiently high. The same holds for the treble damages treatment. In all treatments, a money maximising agent would be expected to completely freeride and make no contribution to the public good. Our results can thus not be explained by an incentive effect. Rather we find that social preferences interact with the severity of sanctions, even if imposing the sanction is not altruistic, but instead financially benefits the sanctioning authority. The results persist in a variation of (1) and (2) in which the player imposing damages has the option to not retain them for herself but to have them forfeited with no benefit to her. We can therefore rule out that the beneficial effect of sanctions hinges on the participants knowing that the player imposing sanctions cannot intend to enrich herself.
... damages liability promote socially desirable behavior? Reviews of tort law's effects reach mixed conclusions, with one finding tort law " somewhat successful " in deterring (Schwartz 1994: 443), but a recent experiment finding subjects' willingness to engage in risky behavior unaffected by the threat of potential tort liability (Cardi, Penfield et al. 2012). Empirical studies assess deterrence by comparing liability with non-liability, such as comparing alcohol-related motor vehicle fatalities across states that do or do not impose liability on commercial servers of alcoholic beverages (Sloan, Stout et al. 2000). Other studies compare the degree of available damages by assessing whether t ...
... comprehensive deterrent, " some studies " have found limited evidence that tort acts as a weak deterrent with respect to certain behaviors " and that other studies, " have found no evidence of deterrence or even, in a few cases, a negative association—that certain tort rules are associated with an increase in related injuries " (Cardi, Penfield et al. 2012). Ours is the first incentivized test of deterrence using damages rules analogous to those in tort and class actions, under completely controlled, decontextualized conditions. ...
... The dynamic quality of the public good experimental paradigm may help explain its deterrencepromoting result, at sufficient punishment levels, compared to an experimental finding that the threat of tort liability does not deter (Cardi, Penfield et al. 2012). Cardi et al.'s respondents were asked in a cross-sectional survey whether tort liability in several scenarios would deter them and no significant deterrent effect was found. That result is consistent with a single-period outcome of no deterrent effect. But a cross-sectional design cannot subject the respondents to the experience of ha ...
Article
To explore damage rules’ deterrent effect, we use a public good experiment to tailor allowable punishment to rules used in actual civil litigation. The experimental treatments are analogous to: (1) damages limited to harm to an individual litigant, (2) damages limited to harm to a group available in aggregate litigation, such as class actions, and (3) damages allowed beyond actual harm to victims, such as punitive damages. The treatment with damages limited to harm to an individual does not prevent the deterioration in cooperation over time commonly found in public good experiments without punishment or with too low punishment. In the class action damages treatment, cooperation is stable over time. In the damages-beyond-harm treatment, cooperation approaches the optimal level, but concerns of socially unjust punishment arise. In all treatments, a money maximising agent would be expected to completely freeride and make no contribution to the public good. Our results can thus not be explained by an incentive effect. Rather we find that social preferences interact with the severity of sanctions, even if imposing the sanction is not altruistic, but instead financially benefits the sanctioning authority. The results persist in a variation of the three treatments in which the player imposing damages has the option to not retain them for herself but to have them forfeited with no benefit to her. We can therefore rule out that the beneficial effect of sanctions hinges on the participants knowing that the player imposing sanctions cannot intend to enrich herself. The methodology we develop could be used to assess the social welfare benefit of many damages rules, such as treble damages in antitrust cases and caps on damages common in medical malpractice cases and punitive damages cases.
... The experiment instructions to participants (English translation), the dataset, analysis scripts, and additional documents used in this 2 Other contributions have experimentally tested the deterrent effect of tort liability (e.g. Cardi, Penfield, and Yoon 2012;Eisenberg and Engel 2014). See also DeJong , Forsythe, and Uecker (1985) and Schwartz (1999, 2000) on auditors' liability, and Landeo, Nikitin, and Babcock (2007) on split-award statutes in a litigation context. ...
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Tort models assume symmetry in the behavior of injurers and victims when faced by a threat of liability and a risk of harm without compensation, respectively. This assumption has never been empirically validated. Using a novel experimental design, we study the behavior of injurers and victims when facing symmetric accident risks. Experimental results provide qualified support for the symmetric behavior hypothesis.
... They are also not uncommon in the empirical legal literature (see e.g. Cardi et al., 2012;Martin, 2016;Klepper & Nagin, 1989;Thurman, 1989) and recent research on the willingness to pay compensation found consistent results across vignettes and laboratory experiments (Desmet & Leunissen, 2014). ...
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... It contradicts not only the study's hypothesis, but also the decades-old contrary assumptions of judges, policymakers, and academics. 199 Reluctant to reach this conclusion the researchers went on to advance various explanations relating to factors such as the study's design, but did not find any satisfactory. They still preferred to say that the results of the study 'do not warrant an ultimate and sweeping conclusion that tort law does not deter' and called for more research. ...
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... Tort liability had little effect. For many scenarios, the proclivity to engage in illegal activity was not significantly different from the condition where no legal rule was mentioned (Cardi et al. 2012). The third study used the methodology developed in experimental economics, that is, a lab experiment. ...
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This paper presents a theoretical and empirical analysis of the effects of no-fault automobile insurance on fatal accident rates. As a mechanism for compensating the victims of automobile accidents, no-fault insurance has several important advantages over the tort system. However, by restricting access to tort, no-fault may weaken incentives for careful driving and lead to higher accident rates. We conduct an empirical analysis of automobile accident fatality rates in all U.S. states over the period 1968-94, controlling for the potential endogeneity of no-fault laws. The results support the hypothesis that no-fault is significantly associated with higher fatal accident rates than tort. Copyright 2001 by the University of Chicago.
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