The plaintiffs' daughter was four years old when they brought her in to the local medical clinic. Clinic staff gave the girl a sedative to keep her calm while they examined her, but they miscalculated the dose, and she later died.' Tort liability, or the specter of it, is supposed to discourage these kinds of preventable tragedies. The clinic's owner, fearing a potential crippling award to bereaved families, should have trained his staff more carefully. As it happens, the owner instead had carefully scooped all the assets out of the firm. When the girl's parents won a $34.6 million award against him, the limited-liability protection the firm provided ensured that he paid none of it.
The problem of judgment-proof defendants is a familiar one to tort scholars, who have often grappled with its intricacies,4 but the lesson I want to take from this sad episode (and many others like it) extends beyond the details of tort doctrine. Consider that there were a number of other ways the state of Texas could have tried to ensure that clinical staff understood how to dose for small children. For example, it could have imposed greater training, certification, and continuing- education requirements on the relevant care providers. Which was the better choice: tort reform or regulatory action? Users of e-cigarettes, many manufactured under low standards in China, are likely to face similar problems of judgment-proof defendants should the devices prove less safe than some now think. Should government demand that manufacturers and retailers carry liability insurance sufficient to cover any tort award? Should we simply impose a tax on the devices in an amount equal to what we project the average per-device tort award would be-a tax that, since it is collected up-front, will be paid before manufacturer firms can declare bankruptcy? Or try something else, like the conspicuous and disturbing labels Australia requires on tobacco products sold down under?6 Which of these would most efficiently minimize the harms to the American public?
Governing in the twenty-first century, in short, is a problem of incentive design. Regulators often know what they want, but not how best to achieve it. There is general consensus, for example, that society would like to avoid banking-sector meltdowns and promote life-saving drugs; to minimize the risk of catastrophic climate change and encourage contributions to charity; to fight obesity and encourage investment in infrastructure. It might surprise some readers to learn that for many scholars there is also a good degree of consensus on the best general approach to all these problems. That approach, in a word, is price. Many scholars believe government should do its best to make sure that the price market actors face in making their decisions accurately reflects all the society-wide costs and benefits of those decisions. That accomplished, government should then step back and let the market work.
In Praise of Ex Ante Regulation,
68 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol68/iss6/5