Document Type



Law and Economics | Torts


Economists often claim that the tort system leads firms to provide consumers and workers with the socially optimal level of safety. Moreover, in the case of work-related hazards, employers are alleged to have another source of incentives to take precautions. If wages are sensitive to job-related risks, employers should spend money to reduce such risks when, by doing so, they can save more in wage costs than the costs of the precautions taken. Whatever their merits in other settings, in the case of latent injuries such as workplace exposure to asbestos neither tort nor market are likely to provide an optimal level of safety; indeed, they have failed to do so in the examples we discuss. We find that the introduction of a long delay between the exposure to a hazard and the onset of symptoms introduces a variety of empirical complications that overwhelm the assumptions on which the neoclassical model rests. Our conclusion is thus that comparisons between tort and alternative systems of deterrence/compensation should start from an empirical assessment of how the tort system actually works (and doesn't work), rather than beginning with misleading theoretical claims about the system's optimality.