It will be no news to the readers of this symposium that the cost of traffic accidents in the United States, even on a crass material level, is staggering. Yet it may help to put the matter in perspective to note that this cost, estimates of which range from a minimum of $8 billion to over $i2 billion a year, is of roughly the same magnitude as the entire annual cost of providing the roadways on which these accidents occur. 1 While much effort has been devoted to ascertaining how the cost of the highway should be apportioned among various classes of traffic, little attention has been given by economists to the question of how the cost of accidents should be borne, even in the face of the open scandal that less than half of the amounts paid as premiums and uninsured judgments ever reaches the injured, the remainder being frittered away in commissions, administrative expense, and legal fees. I LAw VExsus EcoNoMics A. Fault Versus Externality To the jurist, the question poses itself as one of under what circumstances, and to what extent, losses suffered in the first instance by one party should be shifted to another and possibly eventually passed on to a class of loss-bearers. In this process it is axiomatic that, aside from criminal penalities, amounts payable by those to whom liability attaches, less whatever costs of transfer or adjudication are involved in the process, should equal the amounts receivable as compensation. In traditional tort law, the main occasion for such shifting is the fault or culpable negligence of one of the parties, looked at ex post, with the aid of such doctrines as that of "contributory negligence" and "last clear chance." '2 Even if the jurist goes so far as to admit that liability should attach to some degree and in some cases even when no error or misconduct can be imputed to the responsible party, the liability is to be measured by the compensation payable, and if payment of compensation is not feasible, no civil liability will attach. Thus *B.A. '935, Yale University; M.A. 1937, Ph.D. i947, Columbia University. Professor of Economics, Columbia University. Center for Advanced Study in the Behavioral Sciences, 1967-68. 'See, e.g., NATIONAL SAFETY CouNcn., AccrDENT FACTS (I968 ed.); THE EcoNoMisr, July 13, 1968, p. xxi. 'See generally W. PROSSER, HANDBOOK ON THE LAw OF TORTS 426-43 (3d ed. 1964); 2 F. HAIRR & F. JAmEs, THE LAw OF TORTS 1I93-X263 (I956); C. Moiuus, MoRRIus oN TORTS 211-26 (1953).
