Excellent article, this is an issue that deserves far more attention. Also, if Abundance needs a villain, the lawyers and consultants are a strong candidate.
What is harder to quantify but equally important is what doesn't get built because of our culture of litigation. On a personal example, we used to have playground at our residential buildings until we got sued when someone fell off the jungle gym. So we stopped including playgrounds in our development plans because we couldn't take the risk.
I remember walking through a marketplace in Copenhagen in December. There was a beautiful beer garden, full of people despite the freezing cold. They had beautiful wood fire pits all throughout the marketplace. It made outdoor activities in the cold bearable, even enjoyable! Can you imagine Church Street in Burlington with 20 wood fire pits? I can't either, thanks to litigation!
It frustrates me how the people want to apply much stricter liability for tech companies want you to think that the status quo for other industries is good and normal, when it’s in fact quite costly for consumers and innovation
Not an attorney. So I have no axe to grind, here. That said, while there are lots of good points, one question this article raises is, “What would the costs be (and how would we even measure them?) of less litigation? Is it fair to assume there would be more shoddy construction, less safety conscious manufacturing, more frequent adverse medical outcomes, if the very real threat of a lawsuit didn’t exist or was severely limited by tort reform? Looked at another way, how do we quantify what price, if any, those other countries listed on the included chart, pay in the form of faulty or unsafe products?
On the other hand, when your townhome is built as a sieve, just like every other townhome in your development, it sure is nice to have a remedy. Ask me how I know...
Economists sometimes model policy as a choice between ex ante regulation (e.g., you can't sell your new pharmaceutical product unless and until it's approved by the FDA) and ex post litigation (e.g., lawsuits against the pharma manufacturer by patients who had injuries caused by the product). Reality is a mix of both: in the US, we have fairly weak ex ante regulations about who and under what circumstances a person can get a driver's license and a stronger ex post liability framework for injuries caused by drivers. At a very high level, the Eurozone reputation is that it's highly regulatory compared to the US, i.e., more ex ante rules/requirements. If that reputation is accurate, then isn't your comparison between the US and Europe somewhat incomplete? That is, we care about getting "costs" right, not just litigation costs, and if ex ante regulation and ex post litigation are substitutes, then some of the Eurozone's would-be litigation costs are instead realized in the form of compliance with Europe's (likely more costly to satisfy) up-front regulations.
I know this doesn't really undercut your point--we should look for sensible ways to reduce litigation costs. But: (a) what we really want is the best cost/quality combination we can get for all the products/services we can buy, and "cost" includes both ex post litigation costs AND ex ante regulatory compliance costs; and (b) reducing ex post litigation costs isn't necessarily a good thing if it leads to additional less efficient up-front regulatory compliance costs (which you might expect to happen in a place like California).
Yeah, I agree with this, which is why I was hesitant to advocate for something like the ‘loser pays’ rule being adopted here. That rule makes a lot of sense….if you have pretty strong ex ante régulations as they tend to do in civil law countries. Without it, that’s a tougher call. Thanks for commenting!
'Another option is to encourage parties to use more arbitration, which is a way to resolve a legal dispute outside of court, where both sides agree to have a neutral third party (an arbitrator) hear their case and make a binding decision.'
Arbitrators tend to get captured quickly because individuals only tend to have one case in front of them, and companies have many. So you get rulings that tend to go 98% towards the people who bring them future business.
Excellent article, this is an issue that deserves far more attention. Also, if Abundance needs a villain, the lawyers and consultants are a strong candidate.
What is harder to quantify but equally important is what doesn't get built because of our culture of litigation. On a personal example, we used to have playground at our residential buildings until we got sued when someone fell off the jungle gym. So we stopped including playgrounds in our development plans because we couldn't take the risk.
I remember walking through a marketplace in Copenhagen in December. There was a beautiful beer garden, full of people despite the freezing cold. They had beautiful wood fire pits all throughout the marketplace. It made outdoor activities in the cold bearable, even enjoyable! Can you imagine Church Street in Burlington with 20 wood fire pits? I can't either, thanks to litigation!
This was a great read. Such a good deep dive. I reflected on Dan Wang's arguments, from a different perspective/30,000 foot level, a few weeks ago -- sharing in case you're curious about the overlap: https://irrationalreview.substack.com/p/how-the-us-uses-red-tape-to-break
Thank again for such a useful analysis!
Great essay! I got somewhat radicalized by this topic from reading Dean Ball’s essay on the subject. https://open.substack.com/pub/hyperdimensional/p/how-should-ai-liability-work-part?r=5bhva&utm_medium=ios
It frustrates me how the people want to apply much stricter liability for tech companies want you to think that the status quo for other industries is good and normal, when it’s in fact quite costly for consumers and innovation
Not an attorney. So I have no axe to grind, here. That said, while there are lots of good points, one question this article raises is, “What would the costs be (and how would we even measure them?) of less litigation? Is it fair to assume there would be more shoddy construction, less safety conscious manufacturing, more frequent adverse medical outcomes, if the very real threat of a lawsuit didn’t exist or was severely limited by tort reform? Looked at another way, how do we quantify what price, if any, those other countries listed on the included chart, pay in the form of faulty or unsafe products?
On the other hand, when your townhome is built as a sieve, just like every other townhome in your development, it sure is nice to have a remedy. Ask me how I know...
Economists sometimes model policy as a choice between ex ante regulation (e.g., you can't sell your new pharmaceutical product unless and until it's approved by the FDA) and ex post litigation (e.g., lawsuits against the pharma manufacturer by patients who had injuries caused by the product). Reality is a mix of both: in the US, we have fairly weak ex ante regulations about who and under what circumstances a person can get a driver's license and a stronger ex post liability framework for injuries caused by drivers. At a very high level, the Eurozone reputation is that it's highly regulatory compared to the US, i.e., more ex ante rules/requirements. If that reputation is accurate, then isn't your comparison between the US and Europe somewhat incomplete? That is, we care about getting "costs" right, not just litigation costs, and if ex ante regulation and ex post litigation are substitutes, then some of the Eurozone's would-be litigation costs are instead realized in the form of compliance with Europe's (likely more costly to satisfy) up-front regulations.
I know this doesn't really undercut your point--we should look for sensible ways to reduce litigation costs. But: (a) what we really want is the best cost/quality combination we can get for all the products/services we can buy, and "cost" includes both ex post litigation costs AND ex ante regulatory compliance costs; and (b) reducing ex post litigation costs isn't necessarily a good thing if it leads to additional less efficient up-front regulatory compliance costs (which you might expect to happen in a place like California).
Yeah, I agree with this, which is why I was hesitant to advocate for something like the ‘loser pays’ rule being adopted here. That rule makes a lot of sense….if you have pretty strong ex ante régulations as they tend to do in civil law countries. Without it, that’s a tougher call. Thanks for commenting!
Good article. Only one concern from my side:
'Another option is to encourage parties to use more arbitration, which is a way to resolve a legal dispute outside of court, where both sides agree to have a neutral third party (an arbitrator) hear their case and make a binding decision.'
Arbitrators tend to get captured quickly because individuals only tend to have one case in front of them, and companies have many. So you get rulings that tend to go 98% towards the people who bring them future business.