Jackpot Justice and the American Tort System: Thinking Beyond Junk Science

Abstract

In 2007 the Pacific Research Institute released a report, "Jackpot Justice: The True Cost of America's Tort System," that is widely available on the internet. The conclusion of the report is that America's tort system costs $865.37 billion annually, amounting to an "annual price tag, or 'tort tax' for a family of four in terms of costs and foregone benefits" of $9,827. As our report will demonstrate, the conclusions of Jackpot Justice are without scientific merit and present a very misleading picture of the American tort system and its costs.

Research on the tort system's efficiency, its fairness and other issues are legitimate topics of empirical inquiry and are to be encouraged. Indeed, the three authors of this report have collectively devoted many years to empirical investigation of the tort system. (Summary biographies of the authors appear at the end of this report.) However, when research findings, such as those in Jackpot Justice, are disseminated to the public and are intended to have effects on legislative and other public policy institutions, they deserve careful scrutiny, including close examination of the validity of the theoretical underpinnings, the methodologies used, the quality of the data reported, and the conclusions that are drawn from the analyses. Scrutiny of Jackpot Justice in this way reveals many flaws that strongly contradict the conclusions that the Pacific Research Institute authors have made.

Our report has four sections. In Section I we draw attention to Jackpot Justice's misleading claims about its scientific approach to the data and the claimed scholarly consensus that underlies their research. In section II we present a detailed critique of their analyses and conclusions. In Section III we address a missing part of the equation that Jackpot Justice uses to speculate about the "tort tax": the cost of torts to victims. The analyses we present in this section are simply illustrative of the kind of data that would be needed to assess the costs and benefits of the tort system. We do not claim that our rough estimates are accurate, but they help to point to the reasoning flaws in Jackpot Justice. In section IV we offer examples that are intended to counter general public misperceptions of three topics that are central targets of those who argue the tort system is unfair: medical malpractice litigation, products liability, and punitive damages. These examples are intended to put a concrete face on some of the technical issues discussed in the preceding sections of our report.

A central message of our report is that the tort system needs to be viewed in terms of its benefits as well as its costs. Moreover, our report draws attention to the social and political choices involved in policies directed toward the goals of promoting responsibility, preventing injuries and compensating victims of negligence. We do not contend that the American tort system is flawless. But it is important to be aware that the corporate critics of the tort system frequently use the same tort system in their disputes with other businesses.

Keywords: Torts

JEL Classification: K12, K41