Economics in the Court

Here are some questions that must be answered to evaluate the damages in your case, and how I go about getting answers.

What is the law?
The measure of damages depends on the law of your jurisdiction. I send you a list of my normal assumptions about issues that I know can vary across jurisdictions. You can then alert me to change any assumptions that do not conform to your understanding of the law of your jurisdiction.

What are the facts?
I supply questionnaires for the facts I will need for your case. For plaintiffs these might include questions about personal consumption expenses (in death cases) and household services that can no longer be provided (in injury and death cases). National statistics provide average values for those items, but I prefer to ask the plaintiff to see if their circumstances are unusual. When appropriate I will conduct a telephone interview or meet with your client. For defendants, where there is no access to the plaintiff for information, I rely on answers to interrogatories or depositions, and hope to be engaged early enough to help formulate appropriate questions.

What are the damages?
Sometimes you will prefer not to provide an economist’s report that substantiates damages favorable to the other side of your case. If the facts suggest that my report might not be of value I will discuss it with you before completing my report, so as to minimize your cost. If time permits I ask for your review of my report before completion, to protect against any misunderstanding of facts or the law.

What is the appropriate discount rate?
In most cases, future damages can be expected to at least keep pace with price increases. I wash out the effect of inflation from my present value calculation by measuring damages in real dollars (dollars of constant buying power), then discounting future damages using a real interest rate (roughly speaking, the market interest rate minus the rate of inflation). For a safe interest rate appropriate to lost earnings or costs of life care I use the rates reported by the US Treasury for TIPS – Treasury Inflation Protected Securities. For cases of business loss, I adjust that rate upward to a higher real rate appropriate to the risk class of the investment or income stream.

When do you need a report?
How rapidly I can respond depends on the case. I am always happy to try to accommodate your needs, and can sometimes provide a report within days. However, early engagement allows me to gather more important background information, and may allow me to identify information that you can obtain from the other side by means of interrogatory or deposition. It also allows me to block out time on my calendar for possible trial testimony (in the case of competing demands I follow the practice of “first come, first served.”)