How Dangerous Do You Think it is? A Perception of Risk Approach to the Standard of Care in Negligence

Abstract

Be it driving a car, fixing your toaster or investing in complex derivatives, we have all grown accustomed to risk playing an integral part in our society. Nowhere is the idea of constant exposure to risk more clear than in the law of negligence. Indeed negligence in general and the standard of care in particular can be thought of as drawing the line between acceptable and unacceptable creation of and exposure to risk. This framework of thought, however, ignores a more basic role played by the law of negligence: deciding on the concept of risk our society should adopt. It is this preliminary discussion the article wish to address; challenging the current, technical approach to risk, for its failure to maximize social welfare, and proposing a Perception of Risk approach to replace it. After describing the Perception of Risk approach, the article continues in four parts. First, on a normative plane, the Perception of Risk approach is demonstrated as welfare maximizing. Second, a formal model of the Perception of Risk approach is presented. Third, the proposed approach is proven optimal when applied to case studies and compared with current legal doctrine. Fourth and finally, possible limitations of the Perception of Risk approach are addressed.