< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: Balboa and Tort Reform

Thursday, October 13, 2005

Balboa and Tort Reform

Professor Paul Rubin is at it again, out to save the world through Tort Reform. Paul is perhaps best known for his book Tort Reform by Contract, where he argues for a contractual solution to the social cost of accidental injuries. I grew up calling this the Epstein theory, but Rubin and Epstein are more or less interchangeable on this point: let parties limit their exposure to personal injury risk by consensual contract between them. Power to the people ya’ll.

However self-empowering the Rubin/Epstein theory may appear, it does have some serious holes. Prof. Alex Stein, for starters, shows the most glaring problem with the theory as applied in the context of medical malpractice: big information problem. Doctors and patients don’t bargain from nearly equivalent informational thresholds. Therefore the transaction costs on patients to overcome this barrier to bargain are enormous, indeed, if you consider it for a moment, most likely always prohibitive (maybe not for elective plastic surgery, but that’s probably about it). Moreover, the information problem is never removed, it can only be surmounted. So the Rubin/Epstein argument really only works in those areas, like business transactions for example, where parties to the contract are operating under nearly equivalent informational contexts. Guess what? Those areas ARE ALREADY COVERED BY CONTRACT law, its called commercial law, article 9 and art. 2 of the UCC, etc. In other words, been there, done that.

I’d like to say that this critique has compelled Rubin & Epstein to alter their argument a little, go back to the drawing board perhaps, and make a better go at it. You see, I actually like the theory and find it full of promise. But instead of dealing straightforwardly with this criticism, like the good academics they are, Rubin it appears has decided to just ignore the whole bunch. In fact, he’s moved on to bigger and better things.

His latest argument is: Tort Reform Saves Lives, a pithy little piece originally published in WSJ now available at AEI. This piece is based on his work: Tort Reform and Accidental Deaths, a longer more detailed study of the effect of Tort Reform on accidents (pdf here).

You can probably already guess where he goes with this. He is so bold as to suggest he’s proved that where tort reform is enacted, lives are saved, accidents are lowered, and people live longer. Indeed, after you read the WSJ article, you may wonder why we aren’t bottling tort reform and selling it on every shelf in every drug store in America? I mean its time in a bottle, the fountain of youth! Had Jesus only had tort reform, we’d all be saved!

I’m going to comment, in a much more serious voice I hope, on these two works early next week (I’m still digesting them). But for now, I’d like to draw your attention to Rubin’s conclusion in the longer paper. In the third sentence of the conclusion, Rubin says: It is an extremely expensive system, and can be justified only if it provides substantial deterrence.

Does that sound right? Is the law of torts, that is the collection of legal theories designed to hold people accountable for the injuries they cause, just about providing deterrence? Is there absolutely no other justification, perhaps a moral one, which can be used to justify at least some of the expense? I mean, didn’t our Mama teach us when we break something we gotta go and pay for it? Why did she do that?