Tort Reform: More Chicago Contortions

Cass Sunstein is a moderate by today’s right wing standards.  Here is an example of moderation:  Happiness research show that people tend to adjust to traumatic events.  At first their self-reported happiness declines and then it move back near where it was before the trauma.

I suspect that these surveys do not encounter the homeless Vietnam veterans, but rather people who probably have a good support system.

Sunstein suggests that people who sue for injuries might ask for (and juries decide upon) inordinate amounts, since people get used to their injuries.

The same Chicago school suggests that CEOs need multimillion dollar incomes, even though happiness studies suggest that people might overestimate how much increase income will add to their happiness.

Anyway, here is the abstract of the article:

“Illusory Losses”

     U of Chicago Law & Economics, Olin Working Paper No. 340

          U of Chicago, Public Law Working Paper No. 164

 

 

 

  Contact:  CASS R. SUNSTEIN

              University of Chicago Law School

    Email:  csunstei@midway.uchicago.edu

Auth-Page:  http://ssrn.com/author=16333

 

Full Text:  http://ssrn.com/abstract=983810

 

ABSTRACT: Recent empirical work demonstrates that people’s self-reported happiness is remarkably resilient to many large changes in life conditions; apparently significant adverse events often inflict little or no hedonic damage. One reason for this surprising result is people’s power of adaptation. An additional and perhaps more fundamental reason involves attention: Most of the time, people go about their lives without attending to, or focusing on, adverse conditions, and hence those conditions inflict little hedonic harm. If people make “hedonic forecasting errors” about their own lives, they are highly likely to make such errors when assessing hedonic losses experienced by other people. These findings have important implications for the legal system, especially in the context of awards for pain, suffering, and hedonic losses. A special problem is that if people adapt to adverse changes because they cease to focus on them, the context of litigation will produce a serious distortion, because the attention of juries and judges is specifically focused on adverse changes. But there are two qualifications. First, some losses inflict significant hedonic damage, because people cannot help focusing on them; chronic pain, anxiety, and depression are the most obvious examples. Second, people may suffer “capability loss” without suffering hedonic loss, and the legal system should award compensation for “capability damages.”

These claims have broader implications for questions of law and policy, including appropriate priority-setting for governments concerned with the welfare of their citizens. For example, increases in Gross Domestic Product are not correlated with increases in self-reported happiness, in a way that raises serious questions about the focus on GDP; but perhaps GDP growth is connected with social gains that are not captured by self-reported happiness. There are also fundamental questions about the relationships among hedonic consequences, meaning, and

the ingredients of a good life. The simplest conclusion is that pervasive existence of hedonic forecasting errors raises the possibility that both economic and regulatory policies are misdirected.

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