Optimism Bias in Tort Law
Introduction (Luis Millian)
So many people underestimate the odds that something bad will happen to them—even though they have received accurate information about average risks—that a law professor is calling for a reassessment of the reasonable person standard in tort law, particularly in the area of negligence.
Calling for a dramatic departure from traditionally-held views on tort law, Francesco Parisi maintains that it would be far more effective in many situations to “forgive” people with the so-called “optimism bias” than to penalize them by imposing liability.
Based on behavioral economics, optimism bias is the notion that people make decisions, forecasts, and predictions that overestimate the positives and benefits while underestimating the negatives and risks. Acknowledging that optimism bias is a problem in planning and budgeting, the Economics and Finance Ministry of the United Kingdom went so far as to publish a Green Book several years ago that provided a range of tools to prevent the “demonstrated, systematic, tendency for project appraisers to be overly optimistic.”