Abstract:
The purpose of this project is to examine the benefits of basing economic analysis
of accident law on the notion that individuals form a spontaneous order as they respond
to the institution of tort law, each other, and their environment. Furthermore, I examine
the efficacy of agent-based modeling as an analytical tool that exploits this realization. I
discuss the theoretical implications of the neoclassical analytical perspective and offer an
alternative based upon the insights of spontaneous order economics.
I develop an artificial society in which virtual agents pursue productive, though
inherently accident prone, activity. The accidents that occur are chance encounters and
agents bear a private cost for engaging in behavior that reduces their likelihood. First, I
employ empirical techniques based on neoclassical theory and fit regression models to
simulation data in order to determine the wealth maximizing behavior under various
liability rules. I confirm some of the major theoretical conclusions but I also identify
several common simplifying assumptions that may adversely affect the accuracy of
conclusions under certain circumstances.
I contrast the mainstream mode of analysis with an evolutionary approach that
uses a computational model comprised of heterogeneous agents that implement
satisficing algorithms to select strategies on the basis of their individual experience. The
power of this perspective is not simply that it assists in developing a genetic-causal
explanation as a means for evaluating the desirability of various liability rules, but it
enables the detailed exploration of population dynamics and a close examination of out of
equilibrium behavior. I find that for the artificial society under consideration, system
level steady-state does not necessarily imply agent equilibrium, agents often elect to be
careful even when the neoclassical theory predicts otherwise, and negligence rules differ
in their ability to rid society of negligent behavior. Ultimately, I conclude that the
emergent approach is complementary to the mainstream neoclassical perspective and
holds the promise of opening up new avenues for future research.
