Do Extensive Government Social Programs Reduce Liability Costs?

A tort liability system involves two primary objectives: deterrence of unsafe behavior and compensation for resulting harms. In the U.S., where alternative methods to pay for resulting harms are not as available as in most other industrialized nations, both objectives seem equally important. In other nations where government programs are far more readily available to pay for health care and lost income, the compensation objective has far less purpose. We believe that this difference between the U.S. and much of the rest of the industrialized world may be a major factor in the relatively greater level of litigation in the U.S. than elsewhere. Our purpose here is to test that hypothesis. Using data from 24 countries over 12 years, and controlling for a variety of factors, we find a strong negative relationship between government social program expenditures and national liability costs, supporting our hypothesis.