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References
See the discussion of the facts in J.M. Feinman, Law 101 (2000) and at http://www.cooterulen. com.
See generally M.A. Eisenberg, The Nature of the Common Law (1988). For a modern account of why common law does and should avoid general theories, see Cass R. Sunstein, Incompletely Theorized Arguments, [1995] 108 Harvard Law Review (Harv. L. Rev.), 1733.
Columbia University Research Council in the Social Sciences, Report by the Committee to Study Compensation for Automobile Accidents (1932).
R. Keeton/ J. O’Connell, Basic Protection for the Traffic Victim (1965).
There are, of course, theoretical and practical contacts between tort liability and insurance. For example, theoretically there is a concern that having first-party insurance might cause victims to be less likely to bring an action against those who injured them, and third-party insurance might make injurers less careful on the theory that their insurer will compensate victims regardless of what happens. Naturally, there are counter-arguments to these theoretical points. And in terms of practical interactions insurers, victims, and injurers are deeply involved with one another. See, for example, H. Laurence Ross, Settled Out of Court: The Social Process of Insurance Claims Adjustments (1970).
Black’s Law Dictionary (8th edn. 2004).
There is, to my knowledge, no hard evidence on whether jurors behave in this fashion. There are two points worth noting with regard to these matters. First, in addition to their understanding about insurance, jurors may also have understandings about other aspects of litigation that cut the other way. For example, jurors may know that the successful plaintiff must compensate his or her attorney from whatever amounts that the jury awards him or her. If, for instance, a plaintiff must pay his or her attorney one-third of his damages award, then he or she will be left with two-thirds of the award from which to compensate his or her injuries. As a result, if jurors believe that two-thirds of the amount awarded will not adequately cover the compensatory amounts, they may increase the amount awarded so that, after paying their attorneys, plaintiffs have enough left over for full compensation. Second, there is some recent evidence that it is extremely difficult for fact finders to ignore things to which they have been exposed. In a fascinating recent working paper three scholars sought to investigate whether judges could truly ignore inadmissible information that they had been shown in mock trials. The authors devised scenarios in which, for example, a plaintiff seeking contract damages told his attorney, on a tape recording heard by the judge, that a crucial element of his case was factually untrue. The authors presented this and other scenarios to many judges — about half of whom learned the inadmissible information, while the other half did not — and then compared the rates at which the judges would have found in favor of the plaintiff or defendant. In most instances they found that the judges who heard the inadmissible information were far more likely to find in favor of the party in whose favor the inadmissible evidence ran. See A.J. Wistrich/ Ch. Guthrie/ J. Rachlinski, Can Judges Ignore Inadmissible Information? The Fiction of Forced Forgetting (Presented at the 14th Annual Meeting of the American Law and Economics Association, Chicago, IL, May, 2004).
For broad overviews, see R.D. Cooter/ T.S. Ulen, Law and Economics (4th edn. 2003) and R.A. Posner, The Economic Analysis of Law (6th edn. 2003).
See T.S. Ulen, A Nobel Prize in Legal Science: Theory, Empirical Work, and the Scientific Method in the Study of Law, [2003] University of Illinois Law Review (U. Ill. L. Rev.), 1037; T.S. Ulen, The Unexpected Guest: Law and Economics, Law and Other Cognate Disciplines, and the Future of Legal Scholarship, [2004] 79 Chicago-Kent Law Review (Chi.-Kent L. Rev.), 403; and N. Garoupa/T.S. Ulen, The Market for Legal Innovation: Law and Economics in the US and Europe (Illinois Program in Law and Economics Working Paper, November, 2004).
I have, of course, left out much of the nuance of the theory. One important oversight is the analysis of how different liability standards might affect the activity levels of potential injurers. For a summary, see W. Landes/ R.A. Posner, The Economic Structure of Tort Law (1987), 64–71. The original statement of the activity level argument was S. Shavell, Negligence versus Strict Liability, [1980] 9 J. Legal Stud., 1.
For a review of this literature see R.B. Korobkin/ T.S. Ulen, Law and Behavioral Science: Removing the Rationality Assumption from Law and Economics, [2000] 88 California Law Review (Cal. L. Rev.), 1051.
See Ch. Jolls, Behavioral Economics Analysis of Redistributive Legal Rules, [1998] 51 Vanderbilt Law Review (Vand. L. Rev.), 1653, 1659 and no. 22 (claiming nearly 200 studies support this descriptive claim).
See sources cited in N.D. Weinstein, Unrealistic Optimism About Future Life Events, [1980] 39 Journal of Personality and Social Psychology (J. Pers. & Soc. Psych.), 806, 806.
G. Keillor, Leaving Home xvii (1987) (“That’s the news from Lake Wobegon, where all the women are strong, the men are good-looking, and all the children are above average….”).
N. D. Weinstein, [1980] 39 J. Pers. & Soc. Psych., at 809.
Ibid. at 810 (table 1).
Ibid.
L. A. Baker/ R.E. Emery, When Every Relationship Is Above Average: Perceptions and Expectations of Divorce at the Time of Marriage, [1993] 17 Law and Human Behaviour (Law & Hum. Behav.), 439 (finding that recently married couples are aware that 50 percent of marriages end in divorce but almost unanimously believe that theirs will succeed).
A. Gawande, Why Doctors Make Mistakes, The New Yorker (1 February 1999), 40–52 (arguing that most medical mistakes — even those by very good physicians — are simply oversights and that exposure to malpractice liability does not have an additional precaution effect on physicians).
One plausible — but as yet unproven — hypothesis is that older people are less overconfident than younger people. See R.A. Posner, Aging and Old Age (1995), 104. Available data does suggest however, that the bias is not limited to the young, who disproportionately serve as subjects in psychology experiments. See, e.g., A. Guppy, Subjective Probability of Accident and Apprehension in Relation to Self-Other bias, Age, and Reported Behavior, [1993] 25 Accident Analysis & Prevention, 375, 377–78 and tbl. 1 (19; N.D. Weinstein, Unrealistic Optimism About Susceptibility to Health Problems: Conclusions from a Community-Wide Sample, [1987] 10 Journal of Behavioral Medicine (J. Behav. Med.), 481, 487–89.)
See N.D. Weinstein (supra fn. 45), at 814. Weinstein concluded that, when subjects perceived an event to be controllable, they tended to compare themselves with the stereotypical victim of the negative event, leading to overconfident predictions. In contrast, when events were perceived as uncontrollable, subjects did not perceive a stereotype of a victim with whom to compare themselves. Ibid.
Charles Lord et al., Biased Assimilation and Attitude Polarization: The Effects of Prior Theories on Subsequently Considered Evidence, [1979] 37 J. Pers. & Soc. Psych., 2098, 2102.
G. Loewenstein et al., Self-Serving Assessments of Fairness and Pretrial Bargaining, [1993] 22 Journal of Legal Studies (J. Legal Stud.), 135.
L. Babcock et al., Biased Judgments of Fairness in Bargaining, [1995] 85 American Economic Review (Am. Econ. Rev.), 1337; see also L. Babcock, et al., Choosing the Wrong Pond: Social Comparisons in Negotiations that Reflect a Self-Serving Bias, [1996] 111 Quaterly Journal of Economics (Q. J. Econ.), 1.
See G. Priest/ B. Klein, The Selection of Disputes for Litigation, [1984] 13 J. Legal Stud., 1, 12, and R.D. Cooter/T.S. Ulen (supra fn. 34), at 338–343 and 349–352. For an excellent review of the literature, see R.D. Cooter/D. Rubinfeld, Economic Analysis of Legal Disputes and Their Resolution, [1989] 3 Journal of Economic Literature (J. Econ. Lit.), 1067.
G. Priest/ B. Klein, [1984] 13 J. Legal Stud., at 10–11 and Fig. 3; L. Babcock et al., [1995] 85 Am. Econ. Rev., at 1337.
See generally R.A. Coase, The Problem of Social Cost, [1960] 3 Journal of Law and Economics (J. L. & Econ.), 1.
For a review of well over 100 studies of the hindsight bias, see J. Christensen-Szalanski/ C. Willham, The Hindsight Bias: A Meta-Analysis, [1991] 48 Journal of Organizational Behavior & Human Decision Processes, 147.
B. Fischhoff, Hindsight is Not Equal to Foresight: The Effect of Outcome Knowledge on Judgment Under Uncertainty, [1975] 1 Journal of Experimental Psychology: Human Perception & Performance, 288, 289–90.
Ibid. at 289.
Ibid. at 290. The experiment is discussed in J.J. Rachlinski, A Positive Psychological Theory of Judging in Hindsight, [1998] 65 U. Chi. L. Rev., 571, 576.
K. A. Kamin/ J.J. Rachlinski, Ex Post ≠ Ex Ante: Determining Liability in Hindsight, [1995] 19 Law & Hum. Behav., 89; see also S.J. Labine/G. Labine, Determinations of Negligence and the Hindsight Bias, [1996] 20 Law & Hum. Behav., 501 (finding that a large minority of subjects playing the role of jurors would find a psychiatrist negligent for failing to prevent a patient’s violence even when the psychiatrist followed a widely approved standard of behavior and the violent act was unpredictable).
Petition of Kinsman Transit Co., 338 F.2d 708 (2d Cir. 1964); cert. denied, 85 S.Ct. 1026 (1965).
The formula was made famous in Judge Hand’s opinion in U.S. v. Carroll Towing, 159 F.2d 169 (2d Cir. 1947).
K. A Kamin/ J.J. Rachlinski, [1995] 19 Law & Hum. Behav., at 96.
J.J. Rachlinski, [1995] 19 Law & Hum. Behav. Ibid. at 98.
See J.J. Rachlinski, [1998] 65 U. Chi. L. Rev., at 603 (concluding that any procedure that might mitigate against the hindsight bias is “so intrusive [that it] may not be suitable for the courtroom”).
Ibid. at 606; and Ch. Jolls, [1998] 51 Vand. L. Rev., at 1532.
Cf. J.J. Rachlinski, [1998] 65 U. Chi. L. Rev., at 574 (suggesting the business judgment rule can be viewed as a rule of “no liability,” which might have fewer consequences than the alternative of negligence judged in hindsight).
See, e.g., Aronson v. Lewis, 473 A2d 805 (Del. 1984) (stating the “gross negligence” standard). Of course, there are other ways of justifying that rule. For instance, a standard argument is that shareholders would want managers to have wide discretion to run the company without having to face repeated challenges to their decisions on a close standard like “preponderance of the evidence.”
Ch. Jolls, [1998] 51 Vand. L. Rev., at 1527–29.
Ibid. at 1527–28.
S. Shavell, Strict Liability versus Negligence, [1980] 9 J. Legal Stud. 1.
For a useful overview of these and related problems, see S. Breyer, Regulation and Its Reform (1982), and D.A. Farber/Ph. Frickey, Law and Public Choice: A Critical Introduction (1991).
R. D. Cooter/ T.S. Ulen (supra fn. 34), at 82 (“When transaction costs are zero, an efficient use of resources results from private bargaining regardless of the legal assignment of … rights.”).
There have, of course, been notable exceptions to this sweeping claim. For an account of some of them, see generally T.S. Ulen, [2003] U. Ill. L. Rev., 1037 and T.S. Ulen, [2004] 79 Chi.-Kent L. Rev., 403.
For the empirical evidence of an increase in empirical research in law, see R.C. Ellickson, Trends in Legal Scholarship: A Statistical Study, [2000] 29 J. Legal Stud., 517.
Reality in the Economic Analysis of Tort Law: Does Tort Law Really Deter?, [1994] 42 UCLA Law Review, 377, 443.
Ibid. at 393.
D. N. Dewees/ D. Duff/ M. Trebilcock, Exploring the Domain of Accident Law: Taking the Facts Seriously (1995), at 412.
See P. Weiler (supra fn. 25), no. 25.
See M. Galanter, The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State Courts (2004), and G. Hadfield, Where Have All the Trials Gone? Settlements, Non-Trial Adjudications, and Statistical Artifacts in the Changing Disposition of Federal Civil Cases (University of Southern California Law and Economics Working Paper No. 04–17, 2004).
See M. Rustad, Demystifying Punitive Damages in Product Liability Cases: A Survey of a Quarter Century of Verdicts (1991).
W. Kip Viscusi, The Blockbuster Punitive Damages Awards, (Harvard Law and Economics Discussion Paper No. 47, April, 2004), available at www.ssrn.com. The first such awarded occurred in 1985, and the study found 64 such awards through the end of 2003.
Ibid. at 425.
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Ulen, T.S. (2005). The View from Abroad: Tort Law and Liability Insurance in the United States. In: Wagner, G. (eds) Tort Law and Liability Insurance. Tort and Insurance Law, vol 16. Springer, Vienna. https://doi.org/10.1007/3-211-30631-5_9
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