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Defining Efficient Care: The Role of Income Distribution

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  • Miceli, Thomas J
  • Segerson, Kathleen

Abstract

This article examines whether the wealth levels of injurers and victims in accident cases are relevant for the determination of efficient tort rules. When the standard of efficiency is wealth maximization, it is well known that the answer is no. In this article, we consider whether this is also true when utility is not linear in wealth. We show that when actuarially fair insurance is available and income can be redistributed by mechanisms other than tort liability, efficient care levels and damage awards are independent of wealth in this case as well. When independent redistribution mechanisms do not exist, however, then whether wealth matters depends on the assumed distribution of accident costs in the definition of efficient care. These conclusions have important implications regarding the admissibility of evidence regarding a defendant's wealth in tort cases. Copyright 1995 by the University of Chicago.

Suggested Citation

  • Miceli, Thomas J & Segerson, Kathleen, 1995. "Defining Efficient Care: The Role of Income Distribution," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 189-208, January.
    • Handle: RePEc:ucp:jlstud:v:24:y:1995:i:1:p:189-208
    DOI: 10.1086/467957
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    Cited by:

    1. Dari-Mattiacci, Giuseppe & Langlais, Eric, 2012. "Social Wealth and Optimal Care," International Review of Law and Economics, Elsevier, vol. 32(2), pages 271-284.
    2. Usher, Dan, 2001. "Personal goods, efficiency and the law," European Journal of Political Economy, Elsevier, vol. 17(4), pages 673-703, November.
    3. Ganuza Juan-Jose & Gomez Fernando, 2006. "Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 1(3), pages 365-397, January.
    4. James BARRETT & Kathleen SEGERSON, "undated". "Prevention And Treatment In Food Safety: An Analysis Of Conceptual Issues," Department of Resource Economics Regional Research Project 9521, University of Massachusetts.
    5. Hackney, James Jr., 2003. "Law and neoclassical economics theory: a critical history of the distribution/efficiency debate," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 361-390, September.
    6. Barrett, James & Segerson, Kathleen, 1997. "Prevention and Treatment in Environmental Policy Design," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 196-213, June.
    7. Nell, Martin & Richter, Andreas, 2001. "The design of liability rules for highly risky activities: Is strict liability the better solution?," Working Papers on Risk and Insurance 1, University of Hamburg, Institute for Risk and Insurance.
    8. Marie‐Cécile Fagart & Claude Fluet, 2009. "Liability insurance under the negligence rule," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 486-508, September.
    9. Giorgio Rampa & Margherita Saraceno, 2023. "Conjectures and underpricing in repeated mass disputes with heterogeneous plaintiffs," Journal of Economics, Springer, vol. 139(1), pages 1-32, June.
    10. Langlais, Eric, 2010. "Safety and the Allocation of Costs in Large Accidents," MPRA Paper 25710, University Library of Munich, Germany.
    11. Segerson, Kathleen, 1998. "Mandatory vs. Voluntary Approaches to Food Safety," Research Reports 25188, University of Connecticut, Food Marketing Policy Center.
    12. Roe, Brian E., 1999. "Preventable Food Borne Illness With Dose-Response Damages: Optimal Sharing Of Prevention Between Consumers And Processors And The Effect Of Product Liability," 1999 Annual meeting, August 8-11, Nashville, TN 21668, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Alice Guerra & Tobias M. Hlobil, 2018. "Tailoring Negligence Standards to Accident Records," The Journal of Legal Studies, University of Chicago Press, vol. 47(2), pages 325-348.
    14. Nell, Martin & Richter, Andreas, 2003. "The design of liability rules for highly risky activities--Is strict liability superior when risk allocation matters?," International Review of Law and Economics, Elsevier, vol. 23(1), pages 31-47, March.
    15. De Geest, Gerrit, 2013. "N problems require N instruments," International Review of Law and Economics, Elsevier, vol. 35(C), pages 42-57.
    16. Kathleen Segerson, 1999. "Mandatory versus voluntary approaches to food safety," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 53-70.
    17. Tim Friehe, 2007. "A note on judgment proofness and risk aversion," European Journal of Law and Economics, Springer, vol. 24(2), pages 109-118, October.
    18. Zivin, Joshua Graff & Just, Richard E. & Zilberman, David, 2005. "Risk Aversion, Liability Rules, and Safety," International Review of Law and Economics, Elsevier, vol. 25(4), pages 604-623, December.
    19. Lee Kangoh, 2016. "Risk Aversion, the Hand Rule, and Comparison between Strict Liability and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 12(2), pages 261-274, July.
    20. Juan José Ganuza & Fernando Gómez, 2003. "Optimal negligence rule under limited liability," Economics Working Papers 759, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2004.
    21. Juan José Ganuza & Fernando Gómez, 2008. "Realistic Standards: Optimal Negligence with Limited Liability," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 577-594, June.
    22. L. A. Franzoni, 2016. "Optimal liability design under risk and ambiguity," Working Papers wp1048, Dipartimento Scienze Economiche, Universita' di Bologna.
    23. Marc D. Davidson, 2012. "Intergenerational Justice: How Reasonable Man Discounts Climate Damage," Sustainability, MDPI, vol. 4(1), pages 1-17, January.

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