Ex post liability, Ex ante regulation, Cognitive biases, Tobacco industry, Hindsight biases
Cognitive Psychology | Torts
Potentially dangerous products, such as cigarettes, can be regulated through ex post liability or ex ante regulation. Both systems should reach the same result. In practice, however, cognitive biases that influence the liability system can produce incentives to take an excess of precautions. In particular, because people tend to see past events as more predictable than they really were, judges and juries will tend to find defendants who took reasonable care negligent or even reckless. As a consequence of these biases, a liability system can be more expensive than a regulatory system, both to potential defendants and to society. Cognitive biases in the liability system can therefore explain why the tobacco industry has been willing to enter into a settlement that mimics a regulatory system.
Rachlinski, Jeffrey J., "Regulating in Foresight Versus Judging Liability in Hindsight: The Case of Tobacco" (1999). Cornell Law Faculty Publications. Paper 809.
Published in: Georgia Law Review, vol. 33, no. 3 (Spring 1999).