April 23, 2008

National Law Journal on Michael LeRoy employment arbitration study

Marcia Coyle at National Law Journal parrots the conclusions of Professor Michael LeRoy's study attacking employment arbitration, even though those conclusions are, as I discussed last week, completely divorced from his underlying dataset and thus have no empirical basis. The article does have a good discussion of the trial bar's divide-and-conquer strategy to gradually eliminate consumers' ability to choose the benefits from mandatory binding arbitration, though not of the tactic of trumpeting bogus studies to further that goal.

April 14, 2008

LeRoy: "Do Courts Create Moral Hazard? When Judges Nullify Employer Liability in Arbitrations: An Empirical Analysis"

Michael LeRoy of the University of Illinois Law School has posted a working paper to SSRN that is getting a lot of blogosphere attention: Storm's Employment Law; Workplace Prof Blog. Unfortunately, the paper follows a disturbing academic trend of correctly compiling quantitative data sets that are qualitatively ambiguous, and then jumping to a qualitative conclusion when the quantitative data is more likely to reject that qualitative hypothesis. Torturing the data set to make it confess to information it does not have, however, tends to tell us more about the confirmation biases of the author than the state of the world.

Continue reading   LeRoy: "Do Courts Create Moral Hazard? When Judges Nullify Employer Liability in Arbitrations: An Empirical Analysis"

April 1, 2008

Yes, Virginia, doctors respond to incentives

Martin Grace saves me the trouble of refuting a dishonest and silly Concord Monitor op-ed by trial lawyer Christopher Seufert (via Robinette) claiming that doctors don't care about medical malpractice laws when making location decisions.

What I want to know is: don't trial lawyers realize they're shooting themselves in the foot when they claim doctors don't respond to incentives? After all, if the medical malpractice suits don't affect doctors' behavior, why have the suits at all? Surely trial lawyers can make the intellectually honest argument against medical malpractice reform: they think doctors should be paying higher malpractice rates than they do. Of course, to be intellectually consistent with the trial lawyer argument that malpractice is underpunished, they then have to believe that doctors do more harm through malpractice than they do through practice, and should just be banned. Which is why I guess we never see the fully-fledged intellectually consistent or honest argument against medical malpractice reform: if you oppose reform, you have a choice between disingenuous or untenable.

March 4, 2008

The health costs of defensive medicine

There is no shortage of examples of medical malpractice litigation where plaintiffs blame doctors for failing to perform a CT scan. E.g., Oct. 2006 and Feb. 2004. This plainly raises costs far more than the direct costs of medical malpractice insurance that you see when the trial bar claims that malpractice reflects only 1-2% of health-care expenses. Tom Baker, among others, argues that defensive medicine has to be viewed as good with bad, because of improved health-care outcomes from the additional care. But not all defensive medicine is positive; it can be irrelevant, or, worse, adversely affects health results.

Malpractice litigation does change doctors' incentives, but only with respect to short-term results. Because doctors won't be sued for long-term consequences of defensive medicine, there is a substantial risk of overexposure to radiation in the course of defensive CT scans—a problem identified in a study in the latest issue of Annals of Emergency Medicine (Winslow, et al., Quantitative Assessment of Diagnostic Radiation Doses in Adult Blunt Trauma Patients; Reuters summary), finding that standard trauma treatment—1005 chest X-ray equivalents—results in an additional 322 cases of cancer per 100,000 treated because of use of CT scans. Earlier: Feb. 2004.

February 1, 2008

New Hyman/Black/Silver/Sage paper on med mal caps

As always, they do interesting empirical work:

Using claim-level data, we simulate the effect of Texas's 2003 cap on non-economic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47% of verdicts, and reduces mean allowed non-economic damages, mean allowed verdict, and mean payout by 73%, 37%, and 26%, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18% of cases; and reduces predicted mean payout for non-economic damages (predicted mean total payout) by 38% (18%). The non-econ cap has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts.

The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs, these differences are statistically significant for the first two comparisons.

We also simulate the effects of different caps, and find substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16% and 65% (7% and 42%). Caps on total damages have especially large effects.

Available at SSRN.

January 10, 2008

Obama and Behavioral Economics

Professor Bainbridge writes on the extensive publicity and blogosphere commentary relating to Senator Obama's supposed adoption of behavioral economics in policy-making. Behavioral economics makes claims that human irrationality leads to market failures. While it is questionable that Obama's proposed policies really do account for this new field of economics, it is in any event worth noting Josh Wright's paper asking if there's anything to the behaviorial economics claims in the first place:

Modern legal scholars frequently and increasingly base their analyses on the assumption, grounded largely in the extensive experimental literature, that individuals are subject to a number of systematic behavioral biases. Within the legal literature, behavioral economic analysis has been relied upon to generate a significant number of proposals for paternalistic regulation. These proposals are frequently accompanied by claims that neoclassical economics is insufficiently flexible to deal with these empirical observations, and that behavioral law and economics is as a superior guide for policy analysis. These claims must ultimately be resolved empirically and turn on whether incorporating insights from behavioral economics improves our ability to explain the law, understand the behavior of economic agents, or predict the consequences of legal change. This paper focuses on the shared interest of both neoclassical and behavioral economists in empiricism and explanatory power. It asks whether behavioral economic analysis of law has increased our knowledge in an area of “consumer contracts.” Specifically, the paper surveys the available empirical evidence to assess claims from the behavioral law and economics literature involving exploitation of consumer biases with credit cards, standard form contracts, and shelf space contracts. I find that the empirical studies of firm and consumer behavior in these examples do not support the claims that behavioral law and economics generates greater predictive power than conventional price theory.

October 26, 2007

Long jury trials

A study in which jurors in long (more than 20 days) and short (1 to 6 days) federal trials (albeit civil rather than criminal) were interviewed found a number of disquieting differences. Jurors in the long trials were substantially more likely to be retired or unemployed and substantially less likely to have a college education. Nearly three-fourths of the jurors in the lengthy trials said the evidence was “difficult” or “very difficult” to understand, compared to 30 percent who reported the same in short trials. Of course the length of the trial might be correlated with the complexity of the evidence, and the latter might be the befuddling force. But this would not adequately explain why twice as many jurors in long than in short trials reported their attention wandering during the presentation of evidence either “occasionally” or “quite a lot,” and why more than twice as many (amounting to almost half of all the jurors who were interviewed) found it difficult or very difficult to understand how they were supposed to reach a verdict. Joe S. Cecil et al., Jury Service in Lengthy Civil Trials 1, 9, 11–13, 28 (tab. 7), 33 (tab. 8) (Fed. Judic. Center 1987).

United States v. Warner (Posner, J., dissenting from the denial of rehearing en banc) (7th Cir. Oct. 25, 2007). Howard Bashman has a linkwrap of the coverage of the decision on the George Ryan case.

October 18, 2007

Public Citizen, "The Arbitration Trap"

I've got some thoughts at Overlawyered about a Public Citizen report assailing credit card arbitration clauses, the centerpiece of which is a "consumer win rate" number that might, if one were being charitable, be termed extremely misleading.

July 13, 2007

"Gap Seen Between Court-Appointed Lawyers and Public Defenders"

Some poor people accused of federal crimes are represented by full-time federal public defenders who earn salaries, others by court-appointed lawyers who bill by the hour. ...

... [A] study concludes that lawyers paid by the hour are less qualified and let cases drag on even as they achieve worse results for their clients, including sentences that average eight months longer. Appointed lawyers also cost taxpayers $61 million a year more than salaried public defenders would.

(Adam Liptak, NY Times, Jul. 13).

June 26, 2007

Overestimates and underestimates of hedonic damages

Cass Sunstein has a paper out suggesting that judges and juries consistently overestimate the value of some losses involving so-called hedonic damages, or those that cover foregone gains or opportunities, as opposed to affirmative distress like long-lasting pain. His observations: people who suffer a traumatic event like the loss of fingers or toes or who become paraplegics are able to recover their former degree of happiness relatively quickly, and do not focus on their loss on a day-to-day basis. On the other hand, Sunstein says, consistent low-level pain may be undervalued in that it has a much greater impact on day-to-day happiness. Naturally, however, he concludes that all this supports a greater government emphasis on social welfare and efforts to improve social well-being. The abstract of his paper is available here, and you can easily obtain a copy of the complete text of the paper by e-mail at the same source.