Policy Option: Tort Law versus Social Insurance as Solutions to Certain Medical Problems

By Samuels, Warren J. | Journal of Economic Issues, March 2004 | Go to article overview

Policy Option: Tort Law versus Social Insurance as Solutions to Certain Medical Problems


Samuels, Warren J., Journal of Economic Issues


It seems to be the case that some percentage of people will be unequivocally adversely affected by medical and other products. Some people have suffered from various flu vaccines, notably the one whose use was promoted by President Gerald Ford. Some postal workers claim, in a lawsuit against the manufacturer of Cipro (Bayer Inc., a U.S. subsidiary of a German firm, Bayer AG) and various hospitals, that they were harmed by the drug of choice they were advised to take during the anthrax scare in late 2001. (1) Almost any food product will have adverse impacts--some minor, some serious, some fatal--on a small percentage of the population. Allergy to peanuts is a well-known example.

The basic problem, aside from the specific etiology of the particular adverse consequences, is one of ignorance.

The ignorance is of three types. One type occurs when the connection between the sickening agent and the harmful effect is unknown to all parties. The second type occurs with regard to just who in the population is individually susceptible to the drug or food. The third type occurs when information of potential damage is withheld from potential consumers. These may be designated as total ignorance, individual ignorance, and contrived asymmetrical ignorance.

The cases of total ignorance and individual ignorance cannot be avoided short of a system in which all people are ex ante tested for all agents. The case of contrived asymmetrical ignorance involves both the manipulation of the market, i.e., the use of consumers as guinea pigs, and the manipulation of the legal system. A variant of the third type involves pseudo-ignorance as a result of being deliberately misled through the provision of false and/or misleading information (as in the case of cigarettes and other tobacco products).

Under the present situation, those adversely affected by medical or other products must seek recourse in the courts under the law of torts or, in certain cases, through legislation.

A tort is a legal wrong, as opposed to a criminal wrong (a violation of the penal code). It is a private wrong, (2) a violation of an action specifically declared to be wrong or of a duty imposed by general law upon interacting parties (Black's Law Dictionary, rev. 4th ed.).

Responsibility for redress of grievance in the case of a tort is the task of the putative aggrieved victim--through bringing suit seeking compensation for damages. In the case of a putative crime, redress is the task of the criminal justice system (though civil suit for wrong death, for example, can be brought).

The third type of ignorance--contrived to one degree or another--can in principle be subject to criminal action under the law of fraud, negligence, implied warranty, criminal malpractice, common law or statutory requirement to provide a safe product, and so on.

I am concerned here with the first and second types of ignorance, particularly the second.

The first type of ignorance--that of total ignorance--involves the production and marketing of a product that is not known to have adverse effects. The crux of the matter resides in the word "known" and involves the fundamental dilemma of consumer protection. The dilemma is this: Should a new product be sold only if it is proven safe (or, in some cases, effective and safe), or should the sale of a product be disallowed only if and when it is proven unsafe (or ineffective and/or unsafe)? In the former case, the product is assumed unsafe until proven safe; in the latter case, the product is assumed safe until proven unsafe. The risk tradeoff is between consuming a good that may prove to be unsafe and being unable to consume a good that eventually is proven to be sale. Ex ante, one's preference may be difficult to identify, a function, in part, of risk aversion; ex post, one's preference may be a function of one's experience or the known experience of others. …

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Policy Option: Tort Law versus Social Insurance as Solutions to Certain Medical Problems
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