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Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman Jan 2022

Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman

All Faculty Scholarship

Insurance can lead to loss or claim-creation not just by insureds themselves, but also by uninsured third parties. These externalities—which we term “third party moral hazard”—arise because insurance creates opportunities both to extract rents and to recover for otherwise unrecoverable losses. Using examples from health, automobile, kidnap, and liability insurance, we demonstrate that the phenomenon is widespread and important, and that the downsides of insurance are greater than previously believed. We explain the economic, social and psychological reasons for this phenomenon, and propose policy responses. Contract-based methods that are traditionally used to control first-party moral hazard can be welfare-reducing in …


Popular Enforcement Of Controversial Legislation, Randy Beck Jan 2022

Popular Enforcement Of Controversial Legislation, Randy Beck

Scholarly Works

Texas opted for popular enforcement of Senate Bill 8 (S.B. 8), prohibiting abortion once a fetal heartbeat can be detected. In an effort to prevent pre-enforcement judicial review, the legislature precluded enforcement of the statute by government officials. Instead, any member of the public may sue for statutory damages of at least $10,000 from any person who (1) performs an abortion violating the statute, (2) knowingly aids or abets such an abortion, or (3) “intends” to perform or aid and abet such an abortion.

The cause of action authorized by S.B. 8 is a “popular action,” a once common method …