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You're ignoring the fact that a person would not take a deal where they break even, even though that's what the law is trying to achieve. So yes, I wouldn't take a deal to cut my hands off for $5. But I also wouldn't take a fair deal where I get the value of my hands, either. I'm only going to take a deal where getting my hands cut off nets me a profit.
For example, let's take money out of the picture, since we can't really figure what the value of my hands is. Let's say that someone wanted to cut off my hands (which are in perfect shape and I have no reason to get rid of them), but that they would replace them with perfectly functional artificial hands. These artificial hands wouldn't be an improvement or a downgrade in any way compared to my natural hands. Furthermore, the procedure would take only seconds, be completely painless, and I would even be able to have my memory of the procedure erased if I wanted. In short, my life after getting my hands cut off would be the same as it was before.
Nobody would take this deal, or almost nobody would. Because - why should you? It benefits you nothing. I have perfectly good hands now, I don't need or want to replace them with hands that will do the same exact thing. Yet this is also a completely fair deal, the exact kind of deal the law strives to achieve. Even though it's perfectly fair, nobody would actually take it.
So then, since a person isn't going to take even a fair deal (only a profitable one), the fact that someone won't take a deal can't actually tell us anything. It could be that the deal is unfair, but it could just be that the deal is fair and therefore not worth the bother.
If typical person would not take the deal it tells us that compensation is not drastically overvalued.
No it doesn't. It's possible they just rate their chances of getting drastically overvalued compensation pretty high.
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