Critique of the Pacific Research Institute’s Misleading “Jackpot Justice” Report
From the Becker-Posner Blog:
Is the Tort System Costing the United States $865 Billion a Year?--Posner
A study published last month, and favorably summarized in an op-ed in the Wall Street Journal, estimates that the American tort law system costs the nation $865 billion a year. The study, entitled Jackpot Justice: The Cost of America's Tort System, was written by Lawrence J. McQuillan and other members of the staff of the Pacific Research Institute, which published the study. (The study can be downloaded at www.pacificresearch.org.) How did the authors arrive at that figure, and is it meaningful?
They begin by estimating that the nominal (that is, dollar expenditures as distinct from social costs) annual cost of the tort system, consisting mainly of attorneys' fees and other costs of administering the system plus the amount of money paid to tort claimants in judgments and settlements, is $279 billion, of which $128 billion is the amount paid out to claimants. The estimate comes from a report (U.S. Tort Costs: 2003 Update) by Tillinghast-Towers Perrin, a consulting firm for the insurance industry, with the report's estimate updated to 2006. It is impossible to determine from Tillinghast-Towers Perrin’s report what the sources for most of its data are, and so the figures I have quoted must be taken with a grain of salt; indeed, so far as I can tell, they may be completely unreliable. They are almost certainly exaggerated, given the financial connection between the firm and the insurance industry. (keep reading)