The Rights of Statistical People

In this Comment, I argue that the use of cost-benefit analysis to evaluate life-saving regulatory programs has, in a society that eschews reliance on cost-benefit analysis in other life-saving situations, been justified by the creation of a new kind of entity-the statistical person. A primary feature of the statistical person, as I will explain, is that she is unidentified; she is no one\u27s sister, or daughter, or mother. Indeed, in one conception, the statistical person is not a person at all, but rather only a collection of risks. By distinguishing statistical lives from the lives of those we know, economic analysts have attempted to sidestep the uncomfortable fact that most of us profess ourselves quite incapable of identifying the monetary equivalent of the lives of our sisters, daughters, mothers, and friends

Dollars and Death

Administrative regulations and tort law both impose controls on activities that cause mortality risks, but they do so in puzzlingly different ways. Under a relatively new and still-controversial procedure, administrative regulations rely on a fixed value of a statistical life representing the hedonic loss from death. Under much older law, tort law in most states excludes hedonic loss from the calculation of damages, and instead focuses on loss of income, which regulatory policy ignores. Regulatory policy also disregards losses to dependents; tort law usually allows dependents to recover for loss of support. Regulatory policy generally treats the loss of the life of a child as equivalent to the loss of the life of an adult; tort law usually treats the loss of the life of a child as less valuable. Regulatory policy implicitly values foreigners as equal to Americans; tort law does not. We argue that both areas of law make serious mistakes in valuing life and that each should learn from the other. Regulatory policy properly focuses on hedonic loss from death, and tort law should adopt this approach. But regulatory policy should imitate tort law's individualized approach to valuing the loss from death, including its inclusion of losses to dependents. If these changes were made, tort awards would be more uniform and predictable, and regulations would be less uniform and more stringent. In addition, average tort damages for wrongful death would be at least twice as high as they are today. With respect to dollar judgments for mortality risks, a pervasive issue is how to combine accuracy with administrability and predictability; both bodies of law could do far better on this score.

Individual Rationality, Hazard Warnings, and the Foundations of Tort Law

If all people were fully rational and cognizant of all the risks they faced, then they would always select an efficient level of safety in all their activities and other choices. Thus people would trade off the potential benefits of the risky behavior against the costs, including the risks to life and limb, and select the activity and product mix that best promoted their welfare. In such a world, there would not only be no need for hazard warnings, but there also would be no need for liability of any kind. Purchasers of hazardous products, for example, would always value the improved safety associated with safer variants of products and would provide the correct price incentives for product manufacturers to sell safer products through their willingness to pay more for products that provide a greater desired level of safety at an appropriate cost... The purpose of this paper is to formulate how one should think about such situations. In some instances, it may be desirable to mandate product safety directly, either through government regulation or by imposing tort liability. In other instances, hazard warnings alone may be sufficient. Nevertheless, how are we to judge such warnings and, even if we have an effective warning, how are we to assess whether a warnings policy alone is adequate or whether additional strictures should be placed on the product safety level? This paper will examine the conditions that should be met for effective warnings and whether the utilization of hazard warnings is undertaken efficiently

The Social Costs of Punitive Damages Against Corporations in Environmental and Safety Torts

Legal scholars and judges have long expressed concerns over the unpredictability and arbitrariness of punitive damages awards. Proposed remedies, such as restricting punitive damages to narrowly defined circumstances, have not yet met with success. This paper addresses the threshold issue of whether, on balance, punitive damages have benefits in excess of their costs. There is no evidence of a significant deterrent effect based on an original empirical analysis of a wide range of risk measures for the states with and without punitive damages. These measures included accident rates, chemical spills, medical malpractice injuries, insurance performance, and other outcomes that should be affected by punitive damages, but which are not. Punitive damages can and do cause substantial economic harm through their random infliction of economic penalties

Monetizing the Benefits of Risk and Environmental Regulation

This article provides a response to the opponents of monetization of risk and environmental benefits, such as the authors of Priceless: On Knowing the Price of Everything and the Value of Nothing . Putting benefit values in dollar terms ensures that there will be full recognition of these benefits in the policy evaluation process, and also places them on terms comparable to program costs. Much of the article is devoted to advocating the use of the value of statistical life to value health risk reductions from government regulations. The article explores sensitive issues such as the heterogeneity of the value of statistical life with respect to income and age. While the use of a "senior discount" was controversial and involved too great of a discount, there is substantial evidence that there are age variations in the value of statistical life. The article also advocates the continued use of stated preference approaches to valuing environmental benefits, which is in contrast to the critiques of stated preference analyses by those who consider environmental resources to be priceless and by those who believe that all non-use values of environmental benefits are zero.

Why There is No Defense of Punitive Damages

This paper is a response to the comments by David Luban and Theodore Eisenberg on my article on punitive damages to be published in the Georgetown Law Journal (1998) and entitled The Social Costs of Punitive Damages against Corporations in Environmental and Safety Tort. Neither of these authors presents any evidence indicating that there is a determent effect of punitive damages. They suggest, however, that there could be retribution objectives or other rationales for punitive damages. In addition, they claim that punitive damages are predictable and that cognitive biases may not tilt juries against corporations. This paper reviews these diverse arguments on behalf of punitive damages and concludes that they are without foundation. Indeed, the evidence on the predictability of punitive damages suggests that there is no evidence in the literature that would enable firms to distinguish the different expected punitive damages costs associated with alternative safety choices. This paper also includes sensitivity tests to ascertain whether classifying Louisiana as a no-punitive damages state alters the assessment of the deterrent effects. It does not

The Blockbuster Punitive Damages Awards

This paper provides an analysis of 64 punitive damages awards of at least $100 million. Based on an inventory of these cases, there is evidence that these blockbuster awards are highly concentrated geographically, as two states account for 27 of the 64 awards.The awards also have been rising substantially over time, with the majority of these blockbuster awards taking place since 1999.An assessment of the current status of the blockbuster punitive damages awards indicates that most of these awards have been appealed, but the reversal of these punitive damages awards is the exception rather than the rule.Many large punitive damages awards are settled without any appeal. The ratio limits outlined in State Farm v. Campbell will affect over 90% of the blockbuster awards and over 90% of the damages associated with these awards if a ratio of 1.0 becomes the upper limit on punitive damages.

Rational Discounting for Regulatory Analysis

This Article examines the economic basis for what is termed rational discounting, which entails full recognition of policy effects over time and exponential discounting at a riskless rate of return. Policies often cannot be ranked unambiguously in terms of their present or future orientation. Both failure to discount and preferential intergenerational discounting generate inconsistencies and economic anomalies. Office of Management and Budget (OMB) discounting guidelines now stipulate more reasonable discount rates than earlier guidelines, but err in permitting open-ended preferential rates for intergenerational effects. This Article presents a methodology for monetizing the value of statistical life for people of different ages and at different points in time. Review of regulatory analyses indicates increased consistency of discounting practices. However, an examination of two policies with intergenerational effects, stratospheric ozone regulation and nuclear waste storage at Yucca Mountain, reveals failures to adopt a rational discounting approach. The influence of behavioral anomalies such as hyperbolic discounting may make full recognition of intertemporal effects in benefit-cost analysis more consequential than the use of preferential discount rates

Constructive Cigarette Regulation

Professor W. Kip Viscusi argues for a move away from the adversarial approach to tobacco regulation, an approach that is currently embodied in class action lawsuits and the proposed broadening of FDA regulatory power over cigarettes. In this Article, he suggests that the FDA should take a constructive role in fostering technological innovations to promote cigarette safety, in much the same way that the government currently fosters safety improvements in motor vehicles and jobs. Professor Viscusi claims that the objective of government policy should be to promote informed consumer risk taking-an approach which recognizes that adult consumers have a right to smoke and to incur the associated risks. He provides survey data demonstrating that although consumers know that smoking is a risky decision, they have little exposure to information regarding the comparative riskiness of various cigarette brands. According to Professor Viscusi, the government should assist in compiling and disseminating information regarding the comparative risks of different smoking options and the effects of certain innovative safety features for cigarettes. Making this information available would enable consumers to make more informed smoking decisions and potentially minimize the health hazards that smoking poses

Pain and Suffering: Damages in Search of a Sounder Rationale

article published in law reviewCompensation for non-pecuniary losses is one of the most controversial components of tort liability. Newspaper headlines routinely feature occasionally extreme awards, such as the $2.9 million award to the women who spilled a hot cup of McDonald's coffee on her lap.1 In contrast, small awards or accident victims who are unsuccessful in their suits receive negligible press coverage. Notwithstanding the salience of outlier award anecdotes, it is also clear that people suffer from accidents in more than financial ways. Lost earnings and medical costs often are not even the most consequential implications of an injury. The loss of one's life, the welfare effects of permanent disability, and the grief experienced by family members as the result of the death of an accident victim are among the many other consequences that distinguish personal injuries from events that simply involve monetary transfers. There are also consequences of accidents other than these itemized damages components, such as legal fees and the personal investment in the litigation process. These expenses make tort liability suits less of a windfall proposition than is frequently assumed. While it is clear that there are effects of accidents that are not monetary in nature, exactly what the court should do about these losses remains a matter of substantial controversy. There are a variety of approaches one could take to pain and suffering damages. The reason for this diversity of viewpoints is that the manner in which one should quantify the pain and suffering damages depends in large part on the rationale for these damages. One possibility is to establish damages that would provide appropriate incentives for the injurer to avoid injuring the plaintiff in such accident contexts. A possibly related objective is to make the plaintiff whole and restore the plaintiff to the same level of welfare as would be experienced if there had been no injury. Alternatively, is the objective of these damages to provide the victim with the same level of insurance that the victim would have chosen had pain and suffering insurance been available? Whereas these three approaches may lead to identical compensation levels for monetary losses, they usually will have quite different implications for pain and suffering for personal injuries. This article will be concerned with these and other possible rationales for pain and suffering damages and their differing implications for how damages awards should be set