This article investigates the implications of uncertainty aversion on optimal liability law. Of special interest is the case in which the causal link between conduct and harm is not known with certainty, as is frequently the case with toxic torts. Under negligence, uncertainty aversion calls for a higher standard of care if, and only if, the safest prevention measures are also the most reliable ones (ie, they reduce the uncertainty perceived by the victim). Strict liability dominates negligence when the injurer has lower degrees of uncertainty aversion than the victim and can formulate more precise estimates of the probability of harm. When harm is dispersed on a very large number of victims, however, negligence dominates independently of their degree of uncertainty aversion.
Luigi Alberto Franzoni, ‘Liability Law under Scientific Uncertainty’, American Law and Economics Review. DOI: https://doi.org/10.1093/aler/ahx016. Published: 28 July 2017.