The Pacific Research Institute recently published a report titled "Tort Liability Index: 2006." This report purports to show that "a poor civil-justice system lowers the standard of living for ordinary citizens" and that "meaningful legal reform on the other hand pays dividends in the form of stronger economic growth and higher personal income."
"A poor civil-justice system lowers the standard of living for ordinary citizens?"
Last time I checked, not so many middle and working class families are talking about how they are really scared of being sued in the civil justice system if an SUV they manufactured in their kitchen rolls over and kills a family of five.
"Meaningful legal reform on the other hand, pays dividends in the form of stronger economic growth and higher personal income?"
Although a dubious assertion without methodologically rigorous support, assume, for the sake of argument, that this statement is true.
The issue then becomes: even if a non-existent or severely weakened civil justice system would make economic growth soar, would you want to live in such a world?
Even if business boomed around you, would you want to live in a world in which you could do nothing if a corporation's negligence, disregard, or indifference damaged human life as part of their business plan?
In a world without the civil justice system, we are left with only highly understaffed administrative agencies to regulate corporations. Some people are left with no protection at all. Indeed, this culture of corporations unregulated is likely all too familiar to many living in the developing world. I wonder if the authors have recently passed through many developing nations and observed their standards of living?
The most "flashy" statement the report makes is that:
"The President's Council of Economic Advisers estimated that the nationwide excessive costs of the tort system were $136 billion in 2000 - the equivalent of more than three months of groceries, six months of utilities, or eight months of health-care costs for the average family."
Where would such a statistic so damning to our civil justice system come from? What is the President's Council of Economic Advisers? This Council is:
"[C]omposed of three members who shall be appointed by the President, by and with the advice and consent of the Senate and...each of whom shall be a person who, as a result of his training, experience, and attainments, is exceptionally qualified to analyze and interpret economic developments, to appraise programs and activities of the Government...and to formulate and recommend national economic policy to promote employment, production, and purchasing power under free competitive enterprise."
What more reputable body could one cite for information about our national economy?
Unfortunately, it appears...just about any. The Council relied heavily on a report done by Tillinghast-Towers Perrin. And who is Tillinghast-Towers Perrin you may ask? Their self-description states that:
"The Tillinghast business of Towers Perrin provides consulting and software solutions to insurance and financial services companies and advises other organizations on risk financing and self-insurance."
This is a company that focuses on helping insurance companies make money.
The enormous flaws of the Tillinghast study are described in detail in a report by the Economic Policy Institute. Most discrediting, as found by the Institute:
"Although TTP's estimate is widely cited by journalists, politicians, and business lobbyists, it is impossible to know what the company is actually measuring in its calculation of tort costs, and impossible to verify its figures, because TTP will not share its data or its methodology, which it claims are 'proprietary.'
Indeed, Tillingahst has even admitted that "the costs tabulated in this study are not a reflection of litigated
claims or of the legal system." (U.S. Tort Costs: 2004 Update, at 4).