Computational Complexity and Tort Deterrence

Abstract

Standard economic models of tort deterrence assume that a tortfeasor's precaution set is convex-usually the non-negative real numbers, interpreted as the set of feasible levels of spending on safety. In reality, however, the precaution set is often discrete. A good example is the problem of complex product design (e.g., the Boeing 737 MAX airplane), where the problem is less about how much one spends on safety and more about which combination of safety measures one selects from a large but discrete set of alternatives. I show that in cases where the precaution set is discrete, the problem faced by a tortfeasor under strict liability and negligence is computationally intractable, frustrating their static deterrence e¤ects. I then argue that negligence has a dynamic advantage over strict liability in that negligence can move a tortfeasor's behavior in the direction of socially optimal care over time more rapidly than strict liability. JEL codes: C61, K13.