Many controversies and policy issues surround the U.S. tort system, which holds parties liable for injuries to people or property. Critics charge that the system is costly and inefficient, arbitrary and open to abuse, and indirectly harmful through its adverse effects on economic vitality and consumers' choices. In contrast, defenders argue that the tort system serves important social objectives, such as compensating injury victims, improving product safety, and punishing egregious behavior. Several bills now before the Congress propose to change the rules that govern tort claims for medical malpractice and asbestos exposure and claims litigated as class actions.

This Congressional Budget Office (CBO) study--prepared at the request of the Senate Budget Committee--attempts to clarify the issues and policy options surrounding the tort system by presenting an economic perspective on tort liability. The study outlines the strengths and weaknesses of tort liability as a tool for promoting economic efficiency and fairness, discusses the available data on the benefits and costs of the tort system, and analyzes in qualitative terms the likely effects of various policy options for altering the system. In keeping with CBO's mandate to provide objective, impartial analysis, this study makes no recommendations.

Perry Beider and Cary Elliott of CBO's Microeconomic and Financial Studies Division wrote the study, under the supervision of David Moore and Roger Hitchner. The authors received valuable comments and assistance from Heywood Fleisig, Stuart Hagen, and Robert Murphy of CBO, as well as from Jeff O'Hara, formerly of CBO; Christopher DeMuth of the American Enterprise Institute; Paul Rubin of Emory University; Alan Sykes of the University of Chicago; and Paula Hannaford-Agor and Neil LaFountain of the National Center for State Courts.

Christian Spoor edited the study, and Christine Bogusz proofread it. Maureen Costantino took the cover photograph and designed the cover. Lenny Skutnik printed the initial copies of the report, and Annette Kalicki prepared the electronic versions for CBO's Web site.

Douglas Holtz-Eakin
Director
October 2003