Working Paper: NBER ID: w19879
Authors: Steven Shavell
Abstract: This article develops two points. First, insurance against the risk of legal change is largely unavailable, primarily because of the correlated nature of the losses that legal change generates. Second, given the absence of insurance against legal change, it is generally desirable for legal change to be attenuated. Specifically, in a model of uncertainty about two different types of legal change--in regulatory standards, and in payments for harm caused--it is demonstrated that the optimal new regulatory standard is less than the conventionally efficient standard, and that the optimal new payment for harm is less than the harm.
Keywords: No keywords provided
JEL Codes: H8; K10; K20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| absence of insurance against legal change (G52) | desirability of attenuated legal change (K41) |
| optimal regulatory standard (L51) | conventionally efficient standard (D61) |
| strict liability framework (K13) | magnitude of damages (K13) |
| correlated nature of losses from legal change (K13) | unavailability of insurance (G52) |