The Impact of Uncertainty on the Incentive of the Injurer in Fault-based Liability with an Economic Approach

The notion of uncertainty in the real world has raised doubts about the conventional outcomes of economic analysis. While economic analysis suggests that injurers apply an optimal level of care based on cost-benefit logic, empirical observations indicate that injurers often deviate from this rational behavior and exhibit varying levels of care. This raises the fundamental question of how uncertainty affects the motivation of the injurer in determining the optimal level of care.
Research studies have demonstrated that individuals adjust their level of care, either reducing or increasing it, in response to the degree of uncertainty associated with the application of liability rules that aim to minimize their costs. Consequently, negligence criteria in liability systems, such as the "Reasonable Human" standard, fail to accurately capture human decision-making.
This article aims to prove that real humans do not always act solely based on cost-benefit analysis, which forms the foundation of most legal analyses when making decisions. Instead, when faced with a high probability of an accident, individuals may exhibit care levels that deviate from the optimum.
The primary question addressed in this article is whether the cost-benefit logic model, under conditions of uncertainty, can provide a criterion for determining fault that truly reflects the decision-making process of real individuals regarding the applicable level of caution.
The hypothesis or claim of this article is that the injurer's decision based on the "reasonable person" criterion is not immune to the effects of uncertainty on the injurer's motivations and the quality of the resulting loss. Consequently, the exclusive reliance on the "reasonable human" standard for establishing negligence, in the presence of uncertainty, introduces a departure from the model of rational behavior. Hence, economic models of civil responsibility are not fully compatible with this standard, as they fail to accurately depict human decision-making and yield objective results that align closely with reality.
Research Method:
This article utilizes an economic approach to explore the impact of uncertainty on the injurer's incentive to exercise care, aiming to critique the expected outcomes based on economic consequences.
Findings:
Considering the influence of uncertainty on the quality of the injurer's motivations, which results in deviations from rational behavior, it becomes apparent that the theory of "reasonable person's behavior" as an interpretation of the negligence verification criterion fails to provide an accurate representation of human decisions.
The application of this criterion in the real world, seemingly influenced by the "theory of rational behavior" as an economic assumption, inevitably occurs under conditions of uncertainty. In other words, every decision, by its very nature, incorporates the presence of uncertainty and requires its effects to be taken into account.
The decision regarding the level of care that a reasonable person should exercise is made under the assumption that each level of caution corresponds to a distinct probability of liability, signifying a degree of uncertainty.
If an injurer faces a high probability of liability under the assumption of optimal care, there is an incentive to exercise more care than the optimum, and vice versa. Therefore, the decision of the reasonable injurer, based on the "reasonable person" criterion, is not exempt from the effects of uncertainty on the injurer's motivations.
Consequently, the exclusive reliance on the "reasonable human" standard for determining negligence, in the presence of uncertainty, leads to a departure from the model of rational behavior. This highlights the incompatibility of economic models of civil responsibility with the aforementioned standard, which fails to accurately portray human decisions and yield objective results that closely align with reality.
For instance, it is an undeniable proposition that a reasonable person, when making decisions about the level of care, considers a level of care based on cost-benefit logic. However, a real human, not merely an economic entity, may deviate from this proposition when faced with a high probability of liability despite taking optimal care. In such cases, the real human would be motivated to exhibit care levels beyond the optimum, even if it entails bearing expenses without economic justification. It becomes evident that reducing the degree of uncertainty and eliminating any ambiguity in establishing responsibility rules could be a potential solution.
In conclusion, this article argues that uncertainty significantly impacts the incentive of the injurer in fault-based liability with an economic approach. The reliance on the "reasonable human" standard, which is influenced by the assumptions of rational behavior in economic models, fails to account for the effects of uncertainty on human decision-making. As a result, economic models of civil responsibility do not fully align with this standard and cannot accurately capture human behavior. By acknowledging the inherent presence of uncertainty and its influence on decision-making, a more realistic and objective understanding of human motivations in determining the optimal level of care can be achieved.