Tort Negligence, Cost-Benefit Analysis, and Tradeoffs: A Closer Look at the Controversy

What is the proper role of cost-benefit analysis in understanding the tort concept of negligence or reasonable care? A straightforward question, you might think. But it is a question that manages to elicit groans of exasperation from those on both sides of the controversy. For most utilitarians and adherents to law and economics, the answer is obvious: to say that people should not be negligent is to say that they should minimize the sum of the costs of accidents and the costs of preventing accidents. Under the economic formulation of the famous Learned Hand test, they should take a precaution if but only if the marginal costs (or burden, B) of that precaution are less than its marginal benefits (in the form of reduced risks of injury, measured by multiplying the probability (P) of the injury times the magnitude (L) of the injury if it occurs). If B\u3ePxL, it would be absurd to require the greater expenditure, B. For many advocates of a fairness, corrective justice, rights-based, or contractualist perspective, the opposite answer is equally obvious. Permitting a person to impose risks of harm on others merely because he would thereby obtain a benefit (or would otherwise incur a burden) greater than the discounted value of the harm he might inflict, amounts to authorizing him to dump the costs of his risky activities on innocent victims. To permit this type of sacrifice of individuals on the altar of aggregate social welfare is morally abhorrent. Both sets of criticism have important elements of truth. Neither an unqualified cost-benefit analysis nor an unqualified rights-based rejection of tradeoffs is defensible - either as a description of tort doctrine and practice or as a normative prescription. However, a qualified (sensitive) consequentialist approach can accommodate legitimate criticisms of cost-benefit analysis: the consequentialist can launder preferences, and can consider the distribution of risk both in the social welfare calculus and in determining whether to compensate. At the same time, a qualified (tough-minded) deontological approach can accommodate the legitimate need to recognize tradeoffs: the deontologist can permit intrapersonal but not interpersonal aggregation of risks and benefits, can apply the concept of threshold deontology to risky activity, and can consider individual rather than population risk. I conclude that the formulation of the Learned Hand test found in the Restatement Third of Torts is broad enough to encompass each of these qualified approaches

Tort Negligence, Cost-Benefit Analysis, and Tradeoffs: A Closer Look at the Controversy

What is the proper role of cost-benefit analysis in understanding the tort concept of negligence or reasonable care? A straightforward question, you might think. But it is a question that manages to elicit groans of exasperation from those on both sides of the controversy. For most utilitarians and adherents to law and economics, the answer is obvious: to say that people should not be negligent is to say that they should minimize the sum of the costs of accidents and the costs of preventing accidents. Under the economic formulation of the famous Learned Hand test, they should take a precaution if but only if the marginal costs (or burden, B) of that precaution are less than its marginal benefits (in the form of reduced risks of injury, measured by multiplying the probability (P) of the injury times the magnitude (L) of the injury if it occurs). If B\u3ePxL, it would be absurd to require the greater expenditure, B. For many advocates of a fairness, corrective justice, rights-based, or contractualist perspective, the opposite answer is equally obvious. Permitting a person to impose risks of harm on others merely because he would thereby obtain a benefit (or would otherwise incur a burden) greater than the discounted value of the harm he might inflict, amounts to authorizing him to dump the costs of his risky activities on innocent victims. To permit this type of sacrifice of individuals on the altar of aggregate social welfare is morally abhorrent. Both sets of criticism have important elements of truth. Neither an unqualified cost-benefit analysis nor an unqualified rights-based rejection of tradeoffs is defensible - either as a description of tort doctrine and practice or as a normative prescription. However, a qualified (sensitive) consequentialist approach can accommodate legitimate criticisms of cost-benefit analysis: the consequentialist can launder preferences, and can consider the distribution of risk both in the social welfare calculus and in determining whether to compensate. At the same time, a qualified (tough-minded) deontological approach can accommodate the legitimate need to recognize tradeoffs: the deontologist can permit intrapersonal but not interpersonal aggregation of risks and benefits, can apply the concept of threshold deontology to risky activity, and can consider individual rather than population risk. I conclude that the formulation of the Learned Hand test found in the Restatement Third of Torts is broad enough to encompass each of these qualified approaches

Laissez-faire versus Pareto

AbstractConsider two principles for social evaluation. The first, “laissez-faire”, says that mean-preserving redistribution away from laissez-faire incomes should be regarded as a social worsening. This principle captures a key aspect of libertarian political philosophy. The second, weak Pareto, states that an increase in the disposable income of each individual should be regarded as a social improvement. We show that the combination of the two principles implies that total disposable income ought to be maximized. Strikingly, the relationship between disposable incomes and laissez-faire incomes must therefore be ignored, leaving little room for libertarian values

Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

This paper concerns Saez and Stantcheva's (2016) generalized social marginal welfare weights (GSMWW), which aggregate losses and gains due to tax policies, while incorporating non-utilitarian ethical considerations. The approach evaluates local tax changes without a global social objective. I argue that local tax policy comparisons implicitly entail global comparisons. Moreover, whenever welfare weights do not have a utilitarian structure, these implied global comparisons are inconsistent. One motivation for GSMWW is that it preserves the Pareto principle. I argue that the approach's problems should spark a reconsideration of Pareto if one wants to represent broader values in formal policy analysis

Multidimensional Concepts and Disparate Scale Types

Multidimensional concepts are everywhere, and they are important. Examples include moral value, welfare, scientific confirmation, democracy, and biodiversity. How, if at all, can we aggregate the underlying dimensions of a multidimensional concept F to yield verdicts about which things are Fer than which overall? Social choice theory can be used to model and investigate this aggregation problem. Here, we focus on a particularly thorny problem made salient by this social choice-theoretic framework: the underlying dimensions of a given concept might be measurable on different types of scales—e.g., some ordinal and some cardinal. An underappreciated impossibility theorem due to Anna Khmelnitskaya shows that seemingly plausible constraints on aggregation across scale types are inconsistent. This impossibility threatens to render the notion of overall Fness incoherent. We attempt to defuse this threat, arguing that the impossibility depends on an overly restrictive conception of measurement and of how measurement constrains aggregation. Adopting a more flexible—and, we think, more perspicuous—conception of measurement opens an array of possibilities for aggregation across disparate scale types