43 Pages Posted: 26 Jun 2002
This article reviews empirical studies of litigation costs for the purpose of learning whether they support a particular version of the claim that civil justice processes consume too many resources. The inefficiency claim considered posits that these processes could transfer the same number of dollars to the same recipients at far less cost. The belief that costs can be reduced while keeping redistributive effects constant is a mainstay of the tort reform movement and the movement for alternative dispute resolution.
The article argues that it should not be possible to reduce dollar-transfer costs dramatically without also changing distributive outcomes because parties should already be acting rationally to minimize these costs. Settlements and judgments are exchanges at prices set by parties or courts. Therefore, it is reasonable to expect litigants to act like exchange partners more generally and to minimize the cost of transacting.
The review of empirical studies of discovery costs, alternative dispute resolution, litigation costs, and other subjects supports the suggestion that parties are acting rationally.
JEL Classification: K40, K41
Suggested Citation: Suggested Citation