Analysis of Tort Damages: A Survey

Abstract

Tort liability rules cannot be efficient unless damage rules are efficient. Designing optimal damage awards is remarkably difficult, however. Contrary to conventional wisdom, optimal damage awards do not necessarily fully compensate victims for their losses. Moreover, the issue of what is full compensation is more complex than it might at first appear. This article surveys the literature on tort damages, including damages for serious physical injury and death. Section II discusses the efficiency criteria. Section III presents the basic analysis of tort damages for injuries to replaceable commodities, focusing on the relationship between liability rules and optimal damage rules. Section IV discusses damages for physical injury and death, examining, among other issues, the deterrence and insurance values of life. Section V examines special topics, such as optimal liability when corporations are defendants, whether recovery should depend on defendants' wealth, economic and nonpecuniary losses, and the calculation of damages. An exhaustive bibliography is attached at the end.

JEL Classification: K13