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BPEA Article

The Consumer Welfare Effects of Liability for Pain and Suffering An Exploratory Analysis



A SURGE IN LIABILITY PAYMENTS since the 1960s and periodic crises in
the liability insurance market have generated much concern about the
products liability system. Indeed, the so-called tort tax, estimated to
be in the hundreds of billions of dollars, has been cited as a serious
impediment to America's competitiveness. Criticisms of the system
have tended to focus on unexpected increases in the size and scope of
liability awards, on the inefficiencies inherent in using the liability
system as an insurance or compensation mechanism, and on the possible
imperfections in the insurance industry itself.



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