In this paper I focus on the ability of tort law to reduce primary costs, or losses associated with the number and seriousness of accidents. In one sense I will be analysing the state as if it were a private firm in which losses suffered by private individuals and firms are externalities. Several years ago Mark Spitzer wrote a paper on this topic in which he posited several models of state activity and analysed the incentive effects of liability rules in each case. In my view Spitzer's general conclusion - the rule which may be synthesized from all of the models is that the government should be suable in tort-- is supportable, if at all, only under very constrained assumptions about state activity and the operations of the review institution. If one looks only at the incentive effects of tort law on public bureaucracies, one must conclude that the optimal liability rule applicable to state action is a 'no liability' rule.
David S. Cohen, Regulating Regulators: The Legal Environment of the State, U. Toronto L.J. 213 (1990), http://digitalcommons.pace.edu/lawfaculty/423/.