Jim,

A few quick points. You misinterpreted my argument about actors and contigent fees. Your argument is that contingent fees encourage low probability, high award cases which in your opinion are mostly bad cases. By analogy paying actors on contingent fee should generate low probability, high award movies (blockbuster attempts) which mostly also turn out to be bad.

I, however, don't believe the theory for either lawyers or actors and hence I wrote "would changing how actors are paid really improve the quality of the movies? I doubt it." Similarly, I don't think that changing how lawyers are paid will improve the legal system.

I'm glad, by the way, that you agree that contingent fees in movies have not generated bad movies. If they had that would have been support for your theory.

It's not so much that I disagree with the thrust of your analysis, however. It's that I think you significantly overstate the influence of contingent fees.

Tips are a type of contingent fee (you pay only if you like the meal and it's a percent of the bill). Since tips are a big fraction of waiter income, waiters have an incentive to steer customers to expensive and big items on the menu. I wouldn't argue, however, that tips have created America's epidemic of obesity. We don't want to confuse an effect on the margin with a big total effect.

In short, contingent fees are the explanation for neither America's excess consumption of tortes nor it's excess consumption of torts.