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![Page 1: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/1.jpg)
Hazards Liability and Tort
Lecture 8
![Page 2: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/2.jpg)
Outline Another economic role for the government is
regulating hazards and risks• Factory producing explosives (location & care in
operation)• Dangerous Dogs• Food hygiene• Driving
How much should we spent on precautions?
![Page 3: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/3.jpg)
Outline Regulating Hazards and Risks• Factory producing explosives (location & care in
operation)• Dangerous Dogs• Food hygiene• Driving
How much should we spent on precautions?Regulating Risk with Liability• Liability for costs => incentives for precautionary
spending. Is this efficient?
![Page 4: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/4.jpg)
Outline Regulating Hazards and Risks• Factory producing explosives (location & care in
operation)• Dangerous Dogs• Food hygiene• Driving
How much should we spent on precautions?Regulating Risk with Liability• Liability for costs=> incentives for precautionary
spending. Is this efficient?Liability versus Ex Ante regulation• Is it more efficient to regulate hazards ex ante? Or,
should we rely on incentives created by liabilities?
![Page 5: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/5.jpg)
A Simple Model
Let us suppose: w is the marginal cost of precaution (cost of inspecting food hygiene)
![Page 6: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/6.jpg)
A Simple Model
Let us suppose: w is the marginal cost of precaution (cost of inspecting food hygiene)x is the amount of precaution (inspection).
![Page 7: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/7.jpg)
A Simple Model
Let us suppose: w is the marginal cost of precaution (cost of inspecting food hygiene)x is the amount of precaution (inspection).p(x) is the probability that an accident occurs.
![Page 8: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/8.jpg)
A Simple Model
Let us suppose: w is the marginal cost of precaution (cost of inspecting food hygiene)x is the amount of precaution (inspection).p(x) is the probability that an accident occurs.A is the cost of an accident.
![Page 9: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/9.jpg)
Total Costs
Total Costs
x = Amount of precaution
p(x)A = Expected Accident costs
![Page 10: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/10.jpg)
Total Costs
Total Costs
x = Amount of precaution
wx = precaution cost
p(x)A = Expected Accident costs
![Page 11: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/11.jpg)
Total Costs
Total Costs
x = Amount of precaution
wx = precaution cost
p(x)A = Expected Accident costs
Total Cost = p(x)A + wx
![Page 12: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/12.jpg)
Total Costs
Total Costs
x = Amount of precaution
wx = precaution cost
p(x)A = Expected Accident costs
Total Cost = p(x)A + wx
Minimum = Efficient amount of precaution
x*
![Page 13: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/13.jpg)
The same issue with slopes
Marginal Costs
x = Amount of precaution
Rate at which Accident costs decrease
![Page 14: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/14.jpg)
The same issue with slopes
Marginal Costs
x = Amount of precaution
Marginal cost of precaution
Rate at which Accident costs decrease
w
![Page 15: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/15.jpg)
The same issue with slopes
Marginal Costs
x = Amount of precaution
Marginal cost of precaution
Rate at which Accident costs decrease
Minimum = Efficient amount of precaution
x*
w
![Page 16: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/16.jpg)
Regulating Risk with Liability
We will examine the following 2 cases:
(1) Strict Liability
=> Injurer always liable for the costs of any accident.
![Page 17: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/17.jpg)
Regulating Risk with Liability
We will examine the following 2 cases:
(1) Strict Liability
=> Injurer always liable for the costs of any accident.
(2) Liability Based on Negligence Rule
=> Injurer is liable for damages only if the court judges that the injurer has been negligent.
![Page 18: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/18.jpg)
1. Precautionary Incentives Under Strict Liability
(Strict Liability => Injurer liable for accident damages regardless of level of precaution taken).
The cost to the injurer =
Precautionary Costs + Accident Costs
![Page 19: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/19.jpg)
1. Precautionary Incentives Under Strict Liability
(Strict Liability => Injurer liable for accident damages regardless of level of precaution taken).
The cost to the injurer =
Precautionary Costs + Accident Costs
As a result, costs imposed on victims are internalized by the injurer (the injurer bears these costs too).
![Page 20: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/20.jpg)
1. Precautionary Incentives Under Strict Liability
(Strict Liability => Injurer liable for accident damages regardless of level of precaution taken).
The cost to the injurer =
Precautionary Costs + Accident Costs
As a result costs imposed on victims are internalized by the injurer (the injurer bears these costs too).
Strict liability achieves the efficient level of precaution.
![Page 21: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/21.jpg)
1. Precautionary Incentives Under Strict Liability
(Strict Liability => Injurer liable for accident damages regardless of level of precaution taken).
The cost to the injurer =
Precautionary Costs + Accident Costs
As a result costs imposed on victims are internalized by the injurer (the injurer bears these costs too).
Strict liability achieves the efficient level of precaution.
However, this is not true if victims can affect the probability and size of the injuries!
![Page 22: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/22.jpg)
2. Liability Under a Negligence Rule
Injurer is liable for damages only if the court judges the injurer has been “negligent”.
![Page 23: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/23.jpg)
2. Liability Under a Negligence Rule
Injurer is liable for damages only if the court judges the injurer has been “negligent”.
Negligence Less precaution is taken than the standard of due care.
![Page 24: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/24.jpg)
2. Liability Under a Negligence Rule
Injurer is liable for damages only if the court judges the injurer has been “negligent”.
Negligence Less precaution is taken than the standard of due care.
Injurer bears all costs only if found negligent.Otherwise the victim bears these costs.
![Page 25: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/25.jpg)
2. Liability Under a Negligence Rule
SDC = “Standard of Due Care”
The incentives now depend on the SDC applied by the court.
SDC too low => Marginal cost for injurer too low. Too little precaution.
The injurer bears none of the accident costs if it has already provided SDC.
![Page 26: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/26.jpg)
If the SDC is too low:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Total Costs
Minimum = Efficient amount of precaution
x*
![Page 27: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/27.jpg)
If the SDC is too low:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 28: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/28.jpg)
If the SDC is too low costs are as before for low levels of precaution:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 29: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/29.jpg)
If the SDC is low costs jump down at SDC:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 30: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/30.jpg)
If the SDC is too low don’t pay accident costs if satisfy SDC:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Total Costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 31: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/31.jpg)
On the other hand…
If the SDC is too high
May get optimal precaution if the SDC is set just right.
However,
May get excessive investment in precaution and an inefficient outcome if it is unclear what the SDC is.
“Hand Rule” formulated in US Gov. versus Carroll Towing Company applies a cost-benefit test on precaution to determine the SDC.
![Page 32: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/32.jpg)
If the SDC is high:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Total Costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 33: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/33.jpg)
If the SDC is high can get excessive caution:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Total Costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 34: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/34.jpg)
If the SDC is high or can get efficient caution:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs
Total Costs
Minimum = Efficient amount of precaution
x*
SDC
![Page 35: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/35.jpg)
Judge Learned Hand
“Since there are occasions when every vessel will break from her moorings, and since, she becomes a menace to those about her; the owner’s duty, as in other similar situations , to provide against resulting injuries is a function of three variables:
(1) The probability that she will break away;(2) The gravity of the resulting injury, if she does;(3) The burden of adequate precautions.Possibly it serves to bring this notion into relief to
state in algebraic terms: if the probability be called P; the injury L; the burden B; liability depends upon whether …B<PL.”(1947)
![Page 36: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/36.jpg)
What he is saying…
If the party’s cost of preventing accidents (burden) is less than the expected losses from accidents that party should be deemed negligent.
Otherwise it is better for accidents to occur and the party to compensate accordingly.
![Page 37: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/37.jpg)
Comparing Strict Liability (SL) and Negligence (N)
Who bears the costs of the accident differs. N- Victim sometimes bears the cost.SL- Injurer always bears the cost.
What are the Incentives?
![Page 38: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/38.jpg)
Comparing Strict Liability (SL) and Negligence (N)
Who bears the costs of the accident differs. N- Victim sometimes bears the cost.SL- Injurer always bears the cost.
What are the Incentives?If victims cannot affect risks:
Both could be efficient but need to get SDC just right and consistent for N to be efficient.
![Page 39: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/39.jpg)
Comparing Strict Liability (SL) and Negligence (N)
Who bears the costs of the accident differs. N- Victim sometimes bears the cost.SL- Injurer always bears the cost.
What are the Incentives?If victims cannot affect risks:
Both could be efficient but need to get SDC just right and consistent for N to be efficient.
If victims can affect risks:• SL is inefficient as the victim has no incentive to exert
precaution and because injurer has excessive incentive.• N could be more efficient as it provides incentives for
victim precaution too.
![Page 40: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/40.jpg)
Ex Ante Regulation or Ex Post Liability
Liability
- Avoids potentially complex legislation.
![Page 41: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/41.jpg)
Ex Ante Regulation or Ex Post Liability
Liability
- Avoids potentially complex legislation.- Regulations may give inadequate weight to
particular and even unforeseen circumstances.
![Page 42: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/42.jpg)
Ex Ante Regulation or Ex Post Liability
Liability
- Avoids potentially complex legislation.- Regulations may give inadequate weight to
particular and even unforeseen circumstances.- Regulation reduces the incentives to innovate in
precautionary technology.
![Page 43: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/43.jpg)
Ex Ante Regulation or Ex Post Liability
Pro-Regulation(1) Not everyone can bring court cases.
(Litigation costs, free rider problems in class actions, causality is often hard to prove).
![Page 44: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/44.jpg)
Ex Ante Regulation or Ex Post Liability
Pro-Regulation(1) Not everyone can bring court cases
(Litigation costs, free rider problems in class actions, causality is often hard to prove)
(2) Bankruptcy limits individual’s potential liability costs
![Page 45: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/45.jpg)
If A > value of the firm.=> F is the most the firm can pay
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs=A p(x)
Total Costs
Minimum = Efficient amount of precaution
x*
Actual Payout when accident = F p(x)
![Page 46: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/46.jpg)
Originally:
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs=A p(x)
Total Costs
Minimum = Efficient amount of precaution
x*
![Page 47: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/47.jpg)
If A > value of the firm.=> F is the most the firm can pay
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs=A p(x)
Total Costs
Minimum = Efficient amount of precaution
x*
Actual Payout when accident = F p(x)
![Page 48: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/48.jpg)
Resulting in inefficient amounts of precaution
Total Costs
x = Amount of precaution
wx = precaution cost
Expected Accident costs=A p(x)
Total Costs
Minimum = Efficient amount of precaution
x*
Actual Payout when accident = F p(x)
![Page 49: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/49.jpg)
Bankruptcy under Liability
Bankruptcy1. Reduces the incentives for taking care.2. Firms may escape the consequences of litigation
if they go bankrupt while the trial proceeds.3. Corporate restructuring can allow firms to
escape consequences of litigation.
![Page 50: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/50.jpg)
Uncertainty about the legal process
If the legal process or the standard applied in the courts in unclear or uncertain, then
This introduces
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Uncertainty about the legal process
If the legal process or the standard applied in the courts in unclear or uncertain, then
this introduces (1)a potential risky decision for claimants –
benefiting injurers and reducing the incentives for care.
![Page 52: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/52.jpg)
Uncertainty about the legal process
If the legal process or the standard applied in the courts in unclear or uncertain, then
this introduces (1)a potential risky decision for claimants –
benefiting injurers and reducing the incentives for care.
(2)a potential of escaping even when negligent again reducing the incentives for care.
![Page 53: Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.](https://reader030.fdocuments.net/reader030/viewer/2022033101/56649d1b5503460f949f092c/html5/thumbnails/53.jpg)
Ex Post and Ex Ante Together
Often these may be complementary rather than substitute policy choices.
If injurer may not be held liable, or does not correctly asses the probabilities of being held liable,
then a little ex ante regulation may push him in the right direction!