[lbo-talk] It pays to be stupid in America

Jim Devine jdevine03 at gmail.com
Fri Feb 10 13:13:53 PST 2006


a economic journalist whose last name (I believe) is Rothenburg had a good proposal about law suits. Regular damages should be paid to the plaintiff (as happens now). But punitive damages should go into government revenues, The latter (1) plays the "governmental" role of punishing bad behavior without bringing in criminal law and (2) undermines the incentive to artificially expand punitive damages just so that the lawyer and (to a lesser extent) the plaintiff can get rich.

(The guy is well known in leftish policy circles, but I can't remember his name. He does education stuff usually.)

On 2/10/06, Wojtek Sokolowski <sokol at jhu.edu> wrote:
> Michael P:
>
> > Since the likelihood that a corporation will obey the law
> > depends on the likelihood of potential sanctions, only huge
> > judgments can deter business from cutting corners, even where
> > public safety is put at risk. Reducing the costs that
> > corporations face obviously increases their incentive to
> > ignore legal requirements. For example, Ford never faced
> > criminal charges in the Pinto case. Instead, those who
> > suffered injury or their loved ones could only sue the
> > company for damages in civil court.
>
> This is only one aspect of tort litigation, one that is least objectionable.
> I see nothing wrong with making corporations pay for "cutting corners."
> However, the above does not address my main objections to the current
> system. These are:
>
> 1. Litigations against government entities effectively "privatize" public
> resources i.e. transfer tax revenue that can be used for public purposes
> (e.g. schools, roads, etc.) into a private windfall. Compensation for
> actual losses is one thing but everything above it is windfall to the
> plaintiff, i.e. privatization of public resources.
>
> 2. Imposing added "transaction cost" for cutting corners on corporations -
> while justified - does not have to translate into private windfalls - it can
> be a sum paid to a public interest organization, as it is routinely
> practiced in Europe. Thus, if a plaintiff wins, he/she can win back actual
> losses (including time, lost earnings, actual legal cost etc.), but the
> "punitive damages" should go in their entirety to a public interest
> organization identified by the court; instead of ending up in the pockets of
> the defense attorneys and their clients.
>
> 3. Private litigation does not address the systemic problem of standard
> enforcement. In fact, corporations can afford the risk of individual
> litigation if they know that otherwise standards are not enforced. This is
> a casino style public policy enforcement is really a gamble on someone
> willing to file a suit, a gamble on legal manipulations, etc.
>
> 4. Using private litigation instead of public policy and taxation is a very
> ineffective way of recovering the cost of corporate malfeasance. In fact,
> the chances are that most of the cost of that malfeasance will never be
> recovered (cf. tobacco litigation). Passing an excise tax on products that
> are likely to produce public harm, and vigorous government enforcement of
> safety standards with hefty fees for violations are a much more effective
> way.
>
> Wojtek
>
>
>
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>

-- Jim Devine

Bust Big Brother Bush!



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