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Svorny says "Farber and White's evaluation of the tort system suggests it is well-situated to make judgment calls."

Svorny looks at the Farber-White study and sees a medical malpractice system that's working. I look at that exact same study, and see a world where medical malpractice law are so vague and indeterminate that in over 30% of the cases, internal experts hired by the defendant can't consistently determine whether legally-actionable malpractice has occurred; a regression model with the advantage of hindsight predicts only 40% of variation of settlement amounts even with the artificial kluge of regressing on a logarithm to depress variance; and the majority of malpractice cases brought are not good cases. That's aside from the fact that Farber-White had such a small sample that it didn't even include a single jury verdict for plaintiffs, much less one of the uncapped multi-million-dollar variety that can be so distorting. That level of randomness and indeterminacy demonstrated by Farber-White is not at all inconsistent with anything I've said, since, once again, I'm not claiming that the malpractice system is as random as a coin toss, just that it is sufficiently haphazard that the system does more harm than good at the margin.

I'd encourage everyone who hasn't done so to read in full my exchange with Cato adjunct scholar Shirley Svorny discussing her recent policy analysis, Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?

In her final comment, Svorny says "[w]hether the costs of the [medical-malpractice tort] system are greater than the benefits is not something we have a handle on." But that is the wrong question, since no one is feasibly advocating eliminating medical malpractice liability altogether: the policy question, as any economist should know, is whether the marginal costs of the system exceed the benefits. If so, then reforms at the margin that reduce liability will have benefits exceeding the costs. As I explained in my contributions to the debate, I believe that such marginal cost-benefit improvements do in fact flow from medical malpractice caps for noneconomic damages: such caps reduce inaccuracy of the system, reduce the incentive to bring low-merit cases, and send a better signal to doctors about the relative likelihood of being sued for malpractice versus being sued for malpractice wrongfully. (Thus, Svorny misstates my position when she says "Frank is convinced that the costs of the current system outweigh the benefits"; I am only claiming that this is the case at the margin.)

But Svorny's concession that she doesn't know even as an absolute matter whether the benefits of liability in toto exceed the costs is really extraordinary. In this debate, she says she cannot opine whether we would be better off if we abolished malpractice liability altogether. But abolishing medical malpractice altogether is a cap of zero, a far more radical cap than the one she condemns in her paper and in the Huffington Post, where she made widely-repeated claims that non-economic damage caps for medical malpractice cases were a bad idea. In this exchange, she has effectively acknowledged she has no basis for that unequivocal policy prescription that has headlined the discussion of her paper. I hope Cato prints a retraction, given that without it, that paper's non sequitur conclusion is destined to be misused to distort the debate for years to come.

Last week, PointofLaw launched a featured discussion with MI adjunct fellow and PoL editor, Ted Frank and Shirley Svorny, professor of economics at California State University, Northridge and adjunct scholar with the Cato Institute. Central to this discussion was a study authored by Professor Svorny claiming that existing empirical evidence suggests that "medical malpractice awards do track actual damages" and that noneconomic damage caps and other "policies that reduce liability or shield physicians from oversight by carriers may harm consumers."

Ted Frank articulated his dissent in the first comment of the discussion stating, "Shirley Svorny's paper for Cato arguing that caps on medical malpractice damages hurt consumers got a lot of attention. I found the paper very disappointing, however: it cherry-picked studies and ignored real-world practices by largely assuming away the problem. As such, it was not just contrarian, but counterproductive."

Throughout what manifested itself into a six-day debate, Ted made very compelling arguments to support his opposing viewpoint, for example:

Closer to home, Professor Svorny's students are not allowed to sue her for any alleged educational malpractice, another cap of zero. I trust that Svorny's lack of incentives created by liability do not reduce her efforts in teaching, even though she does not have an educational malpractice insurer charging her a quarter of her salary to work with her to minimize the risk of a student not being taught properly. How much more would Svorny demand in pay to keep teaching if she were exposed to potential liability, even if she believed the system was 100% rational and had no risk of haphazard false positives? (Even if the system never fails, Svorny would face real insurance costs, assuming she's not a perfect teacher. And note that even meritless claims properly dismissed by the courts would be costly to insure, because under the American system the winner of a lawsuit does not recover costs from the loser.) How many fewer students would take Svorny's classes because they couldn't afford to pay that marginal increase in cost? Would that be a social cost militating against liability for educational malpractice or not? Why is it inappropriate to apply the same analysis to doctors?

Professor Svorny then responded:

There are real benefits to liability that cannot be swept under the rug by laws that limit liability. Just because my students cannot sue me for educational malpractice, it does not mean it does not exist and that students are not harmed. If students could sue their professors, the outcome would probably be a lot like that for medical malpractice, but even fewer cases would move forward as educational malpractice would likely be harder to prove than medical malpractice. But, in a liability regime, education would be more expensive, many professors would take greater care in preparing their courses, and the most egregious teachers would be out of a job.

This debate was one of the most lively featured discussions we've hosted on PoL and we are very interested in your feedback.

Who do you think had the better argument and why? Please send your feedback and commentary via Twitter, #PoLdiscussion.

On Wednesday, the U.S. Supreme Court heard arguments in the case Mayo Collaborative Services v. Prometheus Laboratories, Inc. on whether "the correlation between blood test results and patient health is patentable." Prometheus Laboratories argues that it should have been allowed to "patent instructions for observing changes in a patient's body to set drug dosages."

Featured on our sister blog Medical Progress Today, Alex Tabarrok, Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University and director of research for The Independent Institute, explores the problems posed by medical patents.

Tabarrok writes:

Most importantly, patents can reduce innovation and are especially likely to do so in fields where innovations build on innovations. In fields of cumulative innovation, previous patents owners become veto players who can threaten to holdup the new innovation unless they are granted a share of the proceeds. In theory, bargaining can result in an efficient outcome. In practice, it means lawsuits, delay, waste and reduced innovation.

Since a smartphone may rely on many thousands of previous patents, the smartphone industry has heretofore been considered a classic case of how too many veto players can impede innovation. But now consider human metabolism, one of the most complicated systems known to man (just a tiny fraction of that system is shown at right), and note that if Prometheus is successful in this lawsuit that any correlation in that system can be patented. This is a recipe for disaster.

On October 20, our friends at the Cato Institute published a study by Cato adjunct scholar Shirley Svorny claiming that existing empirical evidence suggests that "medical malpractice awards do track actual damages" and that noneconomic damage caps and other "policies that reduce liability or shield physicians from oversight by carriers may harm consumers." An economics professor at California State University, Northridge, Svorny has since publicized her findings in outlets such as the Huffington Post, in which she not only argued against the medical-malpractice reform provision of the Jobs Through Growth Act but also suggested that "[r]educing liability, as caps do, is rarely a good idea in any situation."

Needless to say, Svorny's position is at odds with that we've generally taken here at Point of Law (see back posts here), including our former editor, Svorny's Cato colleague Walter Olson (see, e.g., here, here, here, here). (See also this seminal contribution by MI visiting scholar Richard Epstein and this Manhattan Institute study by libertarian economist Alex Tabarrok.)

This week, Professor Svorny has graciously agreed to come to Point of Law to discuss her paper with MI adjunct fellow and PoL editor Ted Frank. The featured discussion will be available here; please check back throughout the week as the discussion continues.

Join the debate! Please send your questions and commentary via Twitter, #PoLdiscussion.

A couple of weeks ago, we discussed how the poorly-drafted PPACA will end up being unworkable, a function of it being passed in a hurry through parliamentary tricks to get the skin-of-the-teeth votes it needed. The next step of that dance is occurring, with the Obama administration blithely claiming that it can ignore the statutory language, and Senator Hatch warning the administration not to act so lawlessly.

Congratulations to the Institute for Justice for their Ninth Circuit victory against government prohibitions on compensation for bone marrow donors. [Flynn v. Holder; earlier from Postrel]

Alas, the win was on narrow technical statutory interpretation grounds, rather than broad-ranging liberty-recognition grounds that could be easily applied to other government interferences with voluntary transactions that save lives, but a win is a win.

As reported earlier this month, U.S. District Court Judge Richard Leon in R.J. Reynolds Tobacco Co. v. FDA stayed the implementation of a federal requirement effective next year which mandates tobacco companies to put graphic images on their cigarette packages. The FDA has now filed to appeal this ruling in the U.S. Court of Appeals for the D.C. Circuit.

Gregory Conko, a senior fellow at the Competitive Enterprise Institute, a Washington D.C.-based public interest group, authored an interesting piece discussing the FDA's ban on off-label promotion published on our sister blog Medical Progress Today.

Greg writes,

The problem is that FDA bans not just false or misleading claims about an off-label use's safety and efficacy. That is, it's not just preventing snake oil salesmen from peddling quick fixes that don't work. The agency bans all promotion of off-label uses, even if those uses have been proven to be safe and effective in clinical trials. Even if those uses are considered to be the standard of care for a given ailment. And even if a physician could be liable for malpractice for not administering a drug off-label.

He also examines the ban in a First Amendment context,

Few would argue that false or misleading claims in a commercial context should be protected by the First Amendment. However, a few decades worth of now-well established case law concludes that government may not categorically bar truthful and non-misleading speech simply because its purpose is to promote a commercial transaction. Instead, government must have a substantial interest in regulating the speech in question, and the regulation must directly advance that governmental interest and be no more extensive than necessary to do so.

I'd previously complained that the Texas Medical Board only slapped Dr. Rolando Arafiles on the wrist with a $5000 fine after he brought false criminal charges against nurses that had dared to report on his questionable medical practices. AP is reporting that Arafiles will surrender his Texas license—but that is concurrent with his guilty plea to criminal charges stemming from the incident. Earlier.

Of course, effective discipline by medical licensing boards is a necessary prerequisite of effective medical-malpractice tort reform. If the medical boards aren't going to pull the plug on bad doctors, trial lawyers have a point that there needs to be a remedy in the civil tort system. Given that medical boards will do a much better job of sussing out bad medical behavior than the randomness of a civil justice system that judges largely on hindsight, that is certainly the preferable alternative.