Editing Product liability (section)

==Debate over strict liability laws==
Advocates of strict liability laws argue that strict products liability causes manufacturers to internalize costs they would normally [[externality|externalize]]. Strict liability thus requires manufacturers to evaluate the full costs of their products. In this way, strict liability provides a mechanism for ensuring that a product's absolute good outweighs its absolute harm.<ref name="Heafey2">{{cite book |last1=Heafey |first1=Richard J. |last2=Kennedy |first2=Don M. |date=2006 |publisher=Law Journal Press |location=New York |isbn=1-58852-067-6 |pages=2–10 |url=https://books.google.com/books?id=qlFR0B05q0EC&pg=SA2-PA10|title=Product Liability: Winning Strategies and Techniques}}</ref>

Between two parties who are not negligent (manufacturer and consumer), one will necessarily shoulder the costs of product defects. Proponents say it is preferable to place the economic costs on the manufacturer because it can better absorb them and pass them on to other consumers. The manufacturer thus becomes a de facto insurer against its defective products, with premiums built into the product's price.<ref name="Heafey2" />

Strict liability also seeks to diminish the impact of [[information asymmetry]] between manufacturers and consumers. Manufacturers have better knowledge of their own products' dangers than do consumers. Therefore, manufacturers properly bear the burden of finding, correcting, and warning consumers of those dangers.<ref name="Heafey2" />

Strict liability reduces [[litigation]] costs, because a [[plaintiff]] need only prove [[Causation (law)|causation]], not imprudence. Where causation is easy to establish, parties to a strict liability suit will most likely settle, because only damages are in dispute.<ref name="Heafey2" />

Critics charge that strict liability creates risk of [[moral hazard]]. They claim that strict liability causes consumers to under invest in care even when they are the least-cost avoiders. This, they say, results in a lower aggregate level of care than under a negligence standard. Proponents counter that people have enough natural incentive to avoid inflicting serious harm on themselves to mitigate this concern.

Critics charge that the requiring manufacturers to internalize costs they would otherwise externalize increases the price of goods. Critics claim that in [[Elasticity (economics)|elastic]], price-sensitive markets, price increases cause some consumers to seek substitutes for that product. As a result, they say, manufacturers may not produce the socially optimal level of goods. Proponents respond that these consumer opt outs reflect a product whose absolute harm outweighs its absolute value; products that do more harm than good ought not be produced.

In the [[law and economics]] literature, there is a debate about whether liability and regulation are substitutes or complements.<ref>{{Cite journal|last1=Kolstad|first1=Charles D.|last2=Ulen|first2=Thomas S.|last3=Johnson|first3=Gary V.|date=1990|title=Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?|jstor=2006714|journal=The American Economic Review|volume=80|issue=4|pages=888–901}}</ref><ref>{{Cite journal|last1=Ewerhart|first1=Christian|last2=Schmitz|first2=Patrick W.|date=1998|title=Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements? Comment|jstor=117018|journal=The American Economic Review|volume=88|issue=4|pages=1027–1028}}</ref><ref>{{Cite journal|last=Shavell|first=Steven|date=1984|title=A Model of the Optimal Use of Liability and Safety Regulation|journal=The RAND Journal of Economics|volume=15|issue=2|pages=271–280|doi=10.2307/2555680|issn=0741-6261|jstor=2555680}}</ref><ref>{{Cite journal|last=Schmitz|first=Patrick W.|date=2000|title=On the joint use of liability and safety regulation|journal=International Review of Law and Economics|volume=20|issue=3|pages=371–382|doi=10.1016/s0144-8188(00)00037-5|issn=0144-8188|url=https://mpra.ub.uni-muenchen.de/12536/1/MPRA_paper_12536.pdf}}</ref> If they are substitutes, then either liability or regulation should be used. If they are complements, then the joint use of liability and regulation is optimal.