Both tort law and statutory law have regulatory effects. This paper will address the question of how tort law and regulation by statute should fit together. While some critics contend that the size of jury awards implies that the tort system should be entirely abandoned as a way of regulating product quality, that is an unrealistic proposal. Nevertheless, one can distinguish the relative efficiency of tort law and statutory law in alternative settings. Different situations may require reliance on one system over the other, as the following examples suggest.6

Statutory law works best in the following circumstances:

1. If the harm is very diffuse, with many people harmed in a small way. No one has much of an incentive to sue individually, and even though class action suits are an option, they are not always effective.

2. If damages are imposed on large numbers of people. In these cases, the tort system, which operates on an ex post and case-by-case basis, may be less effective than an ex ante regulatory system. The latter approach facilitates economies of scale and conserves on information in cases of individualized but similar harms. Such problems are most effectively controlled through a standard-setting process at the government level.

3. When the damages cannot be tied to a single, identifiable source. For example, if polluting smokestacks are causing many people to suffer, there is nothing to be gained by reducing the problem to a set of disputes between particular individuals and particular smokestacks. Pollution damages are a statistical problem, and it is a waste of resources to try to control damages through a set of individualized decisions in the tort system.

4. If the companies causing the injuries are too poor to pay for the harm they cause.

In contrast, the tort system is more effective for regulating very low probability events because it may be administratively cheaper. Developing, enacting, and enforcing regulations is a time-consuming and expensive process, and one does not want to burden the system by over-regulation.

In theory, the relative importance of these factors should help one choose between regulating through the incentives provided by the tort system or through an ex ante statutory system. However, in practice, in areas like toxic torts, product liability, and medical malpractice, the line between the two systems has blurred. The courts have innovated by making themselves into little regulatory agencies and setting up institutions to administer their judgments. This is a trend that has little to recommend it.

Front Matter (R1-R8)

Overview and Perpectives (1-20)

THE DYNAMICS OF INNOVATION AND PRODUCT LIABILITY (21-22)

Technology Issues and Product Liability (23-29)

Making Product Liability Work for You: A Path Out of the Product Liability Jungle (30-36)

The Role of the Justice System in the Product Liability Debate (37-44)

IMPACT ON ENGINEERING PRACTICE, INNOVATION, AND CORPORATE STRATEGIES (45-46)

The Chemical Industry: Risk Management in Today's Product Liability Environment (47-53)

Medical Devices, Component Materials, and Product Liability (54-61)

General Aviation Engineering in a Product Liability Environment (62-67)

Indirect Effects of Product Liability on Automotive Engineering Practice (68-76)

The Effects of Product Liability on Automotive Engineering Practice (77-81)

Approaches to Product Liability Risk in the U.S. Automotive Industry (82-112)

Innovation, Engineering Practice, and Product Liability in Commercial Aviation (113-119)

Regulation, Litigation, and Innovation in the Pharmaceutical Industry: An Equation for Safety (120-128)

THE SOCIAL, LEGAL, AND REGULATORY ENVIRONMENT (129-130)

Insurance: The Liability Messenger (131-137)

Junk Science in the Courtroom: The Impact on Innovation (138-150)

Product Safety Regulation and the Law of Torts (151-158)

The Inconvienient Public: Behavioral Research Approaches to Reducing Product Liability Risks (159-189)

Contributors (190-196)

Index (197-205)