While much effort has been devoted to ascertaining how the cost of providing highway facilities should be apportioned among various classes of traffic, less attention has been given by economists than by lawyers to the question of how the costs of accidents should be borne. This paper analyses this question from the economist's viewpoint, considering the incentives affecting the marginal decisions of motorists and the consequences for the allocation of resources. This analysis also covers the current practices in tort insurance premium and damage payments. Suggestions are made regarding ways of motivating better specific performance and of removing obstacles to fair settlements, such as liability limits and contingent fees. Modifications of the system through public agencies and/or the private insurance system are suggested to reduce the presently excessive overhead costs. (Author/publisher)
Abstract