Polinsky, A. Mitchell; Shavell, Steven --- "Punitive Damages" [2009] ELECD 295; in Faure, Michael (ed), "Tort Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Tort Law and Economics

Editor(s): Faure, Michael

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847206596

Section: Chapter 9

Section Title: Punitive Damages

Author(s): Polinsky, A. Mitchell; Shavell, Steven

Number of pages: 17

Extract:

9 Punitive damages
A. Mitchell Polinsky and Steven Shavell


9.1 Introduction
This chapter concerns punitive damages, an important form of damages
that sometimes are awarded to plaintiffs in addition to compensatory
damages. (The term `punitive damages' is somewhat inapt because the
purpose of such damages is only partly, and perhaps not even mainly, to
punish; we nevertheless use the term because it is conventional.) In the
United States, punitive damages are awarded in approximately 6 percent
of all cases in which plaintiffs prevail. While punitive damages are granted
mainly in tort cases, they are increasingly employed in contract disputes
and other areas of litigation; see Eisenberg et al. (1997) for an evaluation
of the empirical significance of punitive damages. Outside of the United
States, punitive damages and other forms of extra-compensatory damages
are of lesser, though growing, importance; see Stoll (1983, pp. 99­106)
and Gotanda (2004). (Much of what we have to say, however, is relevant
to publicly imposed penalties that exceed harm, which are common in all
countries.)
In considering the justification for awarding punitive damages, we will
refer to two broad social goals: deterrence and punishment. By deterrence,
we mean the use of sanctions to influence behavior, so as to maximize the
following measure of social welfare: the benefits parties obtain from their
actions, less the costs of precautions, the harm done, and the expenses
due to use of the legal system. By punishment, we mean the imposition
of sanctions to satisfy a desire for ...