Discuss the effectiveness of the limitations that the law of negligence has imposed concerning the internalization of the costs of accidents The internalizing of the external costs associated with the consequences of negligent acts is a difficult proposition for academics, the courts, and government authorities. From the primary perspective of motor vehicle accidents, this paper examines the uneven internalisation of external accident costs obtained through the use of various negligence law tools in contrast with broader economic principles. All references are to the English tort system unless noted. The cost adjectives ‘internal’ and ‘external’ are imported into negligence law from the science of economics. The external costs of motor vehicle negligence are ones that affect society and which are not borne directly by the negligent party (Lindberg, 2004; p.1). The importance of these societal costs is underscored by the fact that over 20 million persons are injured or killed annually in motor vehicle accidents world wide, triggering cost consequences that reach as much as 2 percent of the Gross Domestic Product in some nations (Lindberg, 2001; p.400). A motor vehicle accident may precipitate environmental impacts, short term traffic congestion that affects the convenience of a potentially large number of other road users, a loss of productivity and labour, all of which occur in addition to property damage and personal injuries. The internal costs are the private costs that are the direct responsibility of the individual parties to the collision (Mattiacci, 2003; p.2). These are economic consequences that are personal to the vehicle users, whereas external costs have no impact upon a decision by the motor vehicle user to act in a particular fashion. To the economist, the external costs created by an act of negligence are a form of market failure, because there is a presumption of inefficiency in result. In economic terms, the desire to internalize these external accident costs is motivated by a need to correct a market imperfection and thus achieve a fair ‘price’ or outcome as a result of a negligent act.(Mattiacci, p.3) Motor vehicle operation in this context includes vehicle cost, fuel, maintenance, various forms of taxes, insurance premiums and the cost of time associated with vehicle operation. Both internal and external costs may also be understood by contrast with the various types of damages that may be awarded to a successful litigant in a conventional negligence action. This contrast is created by the intersection between economic theory and common law negligence principles, and it first achieved academic prominence through the work of Vickrey (1968), an economist, and the dissertations of legal commentators Calabresi (1970) and Stoljar (1973). These analyses may be regarded as seminal statements concerning the desired interplay between economics and the law of negligence. Each work identified the fundamental weakness of the tort system regarding the treatment of the external costs of a motor vehicle accident from two perspectives – the award of payments on a fault basis only, and the extent of compensation available. It was apparent that the tort system offered no incentive to drive safely and reduce the external cost of accidents.
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