Economic Policy Institute Report: Tort Costs And The Economy
Here's the introduction from the Economic Policy Institute Report
Tort costs and the economy Myths, exaggerations, and propaganda By Ross Eisenbrey
The legal system for adjudicating tort claims in the United States delivers important beneﬁts to the American people. Most notably, these benefits include the compensation of injured persons (including people harmed by giant corporations and other powerful interests), the deterrence of wrongdoing, greater investments in product innovation and safety, and the civilized, non-violent settlement of disputes. These benefits are rarely quantified, and critics generally focus exclusively on the system's costs, whose magnitude and impact they tend to exaggerate, claiming that job growth, productivity, health care, and corporate profits suffer under the current system. Although a full review requires an examination of both the costs and benefits of the system, this briefing paper reviews only the tort system's most commonly alleged economic costs and impacts and shows that most have little or no basis in reality.
Despite evidence that the cost of tort insurance, litigation, and damage claims is lower now as a share of the economy than it was 20 years ago, various interest groups continue to claim there is a tort crisis and that the economy would benefit if the rights of tort plaintiffs were limited. According to insurance industry consultant Towers Perrin,1 tort costs as a percent of GDP fell from 2.28% in 1986 to 2.22% in 2004, the most recent year for which there are data (Tillinghast-Towers Perrin 2006, 15). Towers Perrin predicts tort costs will remain below 2.28% of GDP at least through 2007 (Tillinghast-Towers Perrin 2006, 15). Yet business groups and others advocating changes in U.S. tort laws often claim that our tort system hurts U.S. competitiveness and employment. The 2004 Economic Report of the President, for example, claimed that, “Tort liability leads to lower spending on research and development, higher health care costs, and job losses” (Executive Office of the President 2004, 203). In addition, the Economic Report suggested that tort costs hurt the economy by slowing productivity growth. Yet the Economic Report made no real attempt to substantiate these claims, and the available evidence indicates that each of these assertions is false. (link to report)