By James Kwak
There’s a story you hear often these days. The story is that America has too many lawsuits: too many lawyers, too many people filing frivolous suits, too many excessive damages awards by juries, and so on. This story is the reason for all the “litigation reform” in recent decades: the Private Securities Litigation Reform Act of 1995, Prison Litigation Reform Act of 1996, the state-level tort reform movement, Bell Atlantic v. Twombly, Ashcroft v. Iqbal, and so on.
There are two problems with this story. The first is that it isn’t true. Take medical malpractice, for example—a frequent target of tort reform advocates. Only a tiny fraction—probably under 2%—of people harmed by negligent medical care actually file suit. Of suits that are filed, according to an after-the-fact review by unaffiliated doctors, 63% involved errors by doctors, and another 17% showed some evidence of error. According to the most basic economic theory of torts, we want people harmed by negligence to sue, because otherwise potential defendants (doctors, companies, etc.) will not have sufficient incentive to make the efficient level of investments in preventing injuries. In short, it is highly likely that we suffer from not enough lawsuits, not from too many lawsuits.
The second problem is more important, however. That problem is that while the costs of litigation are real—not just money but also defensive medicine, intimidation of startups by patent trolls, intimidation of the media by billionaires—the exclusive focus on costs overlooks the crucial role of litigation in our democracy. That is the focus of the new book In Praise of Litigation by Alexandra Lahav, a colleague of mine at the University of Connecticut School of Law. (The book is also where I got the statistics in the previous paragraph.)
By James Kwak
Charles Koch recently made headlines by saying that it is “possible another Clinton could be better than another Republican” in this year’s presidential race. Some people find this surprising: how could the Koch brothers sit by and let another Democrat be elected to the White House? But that’s a reflection less of the Kochs’ political acumen than of our collective quadrennial fixation on the presidential election.
I find it unlikely that the Kochs would actually support Hillary Clinton—it’s more likely Charles was taking the occasion to signal his displeasure with both Donald Trump and Ted Cruz—but it’s quite possible that they will simply sit out the battle for the White House. Unlike, oh, just about everyone in the Democratic Party, the Kochs have never panicked at the thought of losing any particular election. Instead, as Jacob Hacker and Paul Pierson put it:
When conservative business leaders such as Charles and David Koch invested in Cato, Heritage, the American Enterprise Institute, and all the other intellectual weapons of the right, they were playing the long game. When Republican political leaders like Newt Gingrich and Mitch McConnell developed new strategies for tearing down American government to build up GOP power, they were playing the long game.
That’s from the conclusion of their new book, American Amnesia (p. 369).
By James Kwak
From Sebastian Mallaby’s review of Robert Shiller’s new book:
Psychologists have established that the key to happiness lies not in riches but in social esteem; therefore, Shiller says, financiers face powerful emotional incentives to balance profit seeking with a social conscience. “The futility of conquest in business mirrors the futility of conquest in war,” he writes. Just as it is impossible to extract much wealth from conquered countries, so it is impossible to extract much happiness from wealth earned unscrupulously.
Does anyone actually think that Wall Street traders and Greenwich fund managers, in general, temper their profit seeking because they want to be seen as doing good for society?
(Besides, the first clause above is simply wrong as a matter of fact: psychologists have established that happiness is a complicated thing, and “social esteem” is only one part of it. See Haidt, Kahneman, Gilbert, etc.)
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