The Uneasy Case for Product Liability
Polinsky, A. Mitchell, Shavell, Steven, Harvard Law Review
TABLE OF CONTENTS I. INTRODUCTION 1438 II. THE SAFETY BENEFIT OF PRODUCT LIABILITY 1443 A. Incentives To Reduce Product Risk Generated by Market 1443 Forces B. Regulation of Product Risk 1450 C. Risk Reduction Accomplished by Product Liability 1453 III. THE PRICE-SIGNALING BENEFIT OF PRODUCT LIABILITY 1459 A. Price-Signaling and Consumer Information 1459 B. Price-Signaling and First-Party Insurance 1461 IV. THE COMPENSATION BENEFIT OF PRODUCT LIABILITY 1462 A. Compensation Accomplished by Insurance 1462 B. Compensation Accomplished by Product Liability 1463 C. The Social Desirability of the Compensation Accomplished by Product Liability 1465 V. THE COSTS OF PRODUCT LIABILITY 1469 A. Legal Expenses 1469 B. Price Distortions 1470 VI. IS PRODUCT LIABILITY SOCIALLY WORTHWHILE GIVEN ITS BENEFITS AND COSTS? 1472 A. Product Liability for Widely Sold Products 1472 B. Product Liability for Products That Are Not Widely 1476 Sold VII. THE PREVAILING SOCIAL ENDORSEMENT OF PRODUCT LIABILITY 1476 A. Judicial Opinions 1476 B. Academic Writing 1483 C. Public Commentary 1487 VIII. THE CONTRAST BETWEEN PRODUCT LIABILITY AND LIABILITY TO STRANGERS 1490 IX. CONCLUSION 1491
The liability of manufacturers of products for harms caused to their customers--product liability (1)--has great prominence in the United States. Tens of thousands of product liability cases are filed annually in state and federal courts, including some as class or other mass tort actions that can involve thousands or even millions of individuals as plaintiffs. (2) The legal bases for product liability suits are expansive, comprising liability for manufacturing defect, design defect, and failure to warn. (3) Product liability cases receive significant attention from the media, especially when they concern widely sold products that harm many consumers. (4) Moreover, product liability is of growing importance outside of the United States, particularly in the European Union and in Asia. (5)
Perhaps surprisingly, no one to our knowledge has attempted to examine the question whether, or in what circumstances, product liability is socially desirable, considering its major benefits and costs. (6) We undertake this task here and come to the judgment that the case for product liability is problematic for a wide range of products. The essence of our argument is that the three beneficial effects of product liability--inducing firms to improve product safety, causing prices of products to reflect their risks, and providing compensation to injured consumers--are, for many products, likely to be outweighed by the litigation and related costs of product liability. (7)
We discuss the influence of product liability on product safety in Part II of the Article. To assess this effect, it is necessary to consider whether firms would have an incentive to make safe products even in the absence of product liability. One reason that firms might have such an incentive concerns market forces, namely, that their sales may fall if their products harm consumers or are viewed as unduly risky, or that their sales may rise if their products are seen as particularly …
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Publication information: Article title: The Uneasy Case for Product Liability. Contributors: Polinsky, A. Mitchell - Author, Shavell, Steven - Author. Journal title: Harvard Law Review. Volume: 123. Issue: 6 Publication date: April 2010. Page number: 1437+. © 2007 Harvard Law Review Association. COPYRIGHT 2010 Gale Group.