Efficient Tort Damages for Serious Permanent Physical Injury

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The issue of optimal damages for death and serious permanent injury is one of the most important questions facing society today. Although it is generally agreed that current award levels are not optimal, no consensus has been reached on what the awards should be. This lack of consensus has resulted in diametrically opposed trends. At the same time that legislatures are trying to reduce damage awards for death and permanent injury by using caps, courts are increasing allowable recovery for death and serious permanent injury. Despite the ofttimes fervor of the debate, little rigorous scholarship has been done on what constitutes optimal damage rules and damage awards. Professor Arlen seeks to address this issue through her research. Her project focuses on efficient damages from serious permanent physical injuries resulting from single activity accidents, in particular automobile accidents. The work aims to determine what damage awards induce efficient risk-taking and risk-spreading behavior under two conditions: where all injured individuals suffer identical losses or where parties do not necessarily suffer the same losses. The case of the automobile accident is both practically and theoretically important. Automobile accidents are a primary cause of accidental serious permanent injury in contemporary life. Further, such a single accident activity allows determining utility maximizing damage rules in situations (1) where individuals run risks of both injuring and being injured and (2) face the possibility of both paying and receiving damage awards.