In Defense of Caveat Emptor

Abstract

As interpreted by McKean, legal experience suggests a gradual and perhaps accelerating shift toward strict liability on the part of manufacturers of products. My discussion is limited to predicting the economic effects of this movement. It is useful to note at the outset that accidents cannot be prevented, in the sense that the probability of occurrence cannot be reduced to zero. We live in an uncertain world, whether we like it or not, and the working properties of either human or material agents cannot be completely specified. Any discussion of products liability, therefore, involves only the possible modification in the probability distribution of accidents. Two categories of events may be distinguished: those which involve pure accidents and those whicih involve probably preventable accidents. A pure accident occurs stochastically in a sequence of possibilities, but the probability distribution of occurrence cannot be modified by personal behavior aimed at changing the quality or use of the product, whether this be the behavior of the manufacturer, seller, user, or nonuser. A probably preventable accident occurs stochastically in a sequence of possibilities and the probability distribution of occurrence can be modified by behavior on the part of manufacturers, sellers, users, or non-users aimed at changing the quality of the product or its use. When any given accident occurs, there remains only some positive probability that it could have been prevented with precautionary behavioral adjustments.