Chapter

Liability and Social Insurance

W. Kip Viscusi

in Rational Risk Policy

Published in print March 1998 | ISBN: 9780198293637
Published online November 2003 | e-ISBN: 9780191596995 | DOI: http://dx.doi.org/10.1093/0198293631.003.0007
 Liability and Social Insurance

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The estimates of the value of life provide a basis for assessing the appropriate level of safety but not for providing compensation to victims. The proper use of value‐of‐life estimates is illustrated using the Ford Pinto as a case study. Tort liability for risks imposes substantial costs, particularly for mass toxic torts. Calculations of the social costs of cigarette smoking indicate that smokers on balance pay their own way but do generate substantial health cost externalities. Workers’ compensation plays an effective role as social insurance both in providing compensation to victims as well as creating substantial incentives for safety.

Keywords: compensation; Ford Pinto; incentives; liability; safety; smoking; social costs; social insurance; value of life

Chapter.  6771 words.  Illustrated.

Subjects: Microeconomics

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