Risk Aversion and the Desirability of Attenuated Legal Change

Steven Shavell ()

No 19879, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article develops two points. First, insurance against the risk of legal change is largely unavailable, primarily because of the correlated nature of the losses that legal change generates. Second, given the absence of insurance against legal change, it is generally desirable for legal change to be attenuated. Specifically, in a model of uncertainty about two different types of legal change--in regulatory standards, and in payments for harm caused--it is demonstrated that the optimal new regulatory standard is less than the conventionally efficient standard, and that the optimal new payment for harm is less than the harm.

JEL-codes: H8 K10 K20 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-ias, nep-law, nep-mic, nep-sog and nep-upt
Note: LE
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Citations: View citations in EconPapers (4)

Published as S. Shavell, 2014. "Risk Aversion and the Desirability of Attenuated Legal Change," American Law and Economics Review, vol 16(2), pages 366-402.

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