John O. Ward

Estimating Economic Loss in the Case of a Death of a Child

Torts involving the wrongful death of a child present unique and perplexing problems for both the judicial system and the economist retained to calculate economic damages in such cases. The judicial system has dealt with the problem of damages in a variety of ways. Historically, severe limits were placed on the recovery of damages for the parents’ pain and suffering on the basis that this issue was too emotionally charged. The calculation of pecuniary damages to the parents thus became critical. State courts generated widely different standards for the calculation of pecuniary damages.~ Prior to 1960, most jurisdictions restricted recovery to lost provable earnings and services support to parents. This view of damages was appropriate where an older child in a family business or farm contributed significant economic benefits to parents or where young children were labor force participants. However, by the later half of the 20th Century such laws did not fit the reality of the roles of children in American society. In a sense, this view treated the child as a product, with economic loss equal to the probable value of the child’s output to the parents beyond the date of death less the parents future expenditures in raising the child (inputs). Given the fact that the cost of raising a child could exceed the direct economic benefits the parents might expect to receive from the child in the forms of household services or earnings, a rather callous view that parents may economically benefit from a child’s death prevailed.

Introduction to the Whole-time Concept

The value of time is a relevant aspect of economic valuations of life. The value of time affects the optimum combination of inputs in home production, the investments made by a household for its economic improvement, the household’s supply of labor for market employment and its demand for goods, and other household economic decisions. This paper introduces a whole-time methodology useful to forensic economics in valuing a number of economic losses associated with personal injury. The whole-time approach originates the concept that since all of the uses of time have a direct bearing on economic value in life, the whole amount of time available for productive use is a direct input to (or a subset of) the totality of life’s economic value. Within the wholetime concept, personal injury economic damages are the measurable changes in economic welfare as result of a reduction in the productive use of time because of injury. A pre-cursor methodology in the forensic economic literature addressing economic valuation of life is hedonics. The methodology of hedonics was one of the first attempts to incorporate the totality of life’s economic value in the calculation of personal injury damages. Unlike the whole-time concept, the hedonic approach is unable to make direct assignment of economic value to specific time. However, the hedonic methodology, like the whole-time concept, incorporates the principle that the economic value of time is relevant to the totality of life’s economic value.1 While there are variants to the hedonic methods, the approach most commonly discussed (the willingness-to-pay method) assumes that the economic behavior of a population in the avoidance of death provides insight to the totality of economic value assigned by the population to life. There are hedonic models that do not segment economic values in life and other models calculate a residual enjoyment of life as the difference between the estimate of the totality of life’s economic value and other measurable economic values based in time such as earnings and household work services. In summary, the common feature of all hedonic models is their beginning at the highest level of economic valuation, the totality of life’s economic value, before addressing subset economic values in life. In contrast, the whole-time concept begins at the root level of economic valuation—how an individual values time for production and consumption—to work upward towards (but not necessarily reaching) the totality of life’s economic value.

Assessing Economic Damages in Personal Injury and Wrongful Death Litigation: the State of Kansas

The purpose of this paper is to present the statutes, rules, and case law that govern the practice of forensic economics for personal injury (PI) and wrongful death (WD) in the state courts of Kansas. Following the format of previous articles in this Journal of Forensic Economics series, Section II provides a listing of the controlling statutes, pattern jury instructions, and general case law pertaining to economic damages in PI and WD. Section III discusses the concept of earning capacity which appears in PI and WD case law in Kansas. Section IV discusses discounting to present value. Section V discusses the treatment of income taxes in PI cases. Services are discussed in Section VI, and the personal consumption deduction is discussed in Section VII. Section VIII discusses the handling of medical expenses, and Section IX covers hedonic damages. Section X addresses special issues in WD. Section XI presents concluding summary remarks including guidance on the admissibility of forensic economic testimony in the State of Kansas.

Time Valuation as an Alternative to Lost Enjoyment of Life in Determining Wrongful Death Damages

In a wrongful death case1 the task of the jury, if liability is found, is to award those pecuniary and non-pecuniary damages to the decedent’s survivor(s) that would make them whole. Steven Shavell (2004) defines pecuniary and non-pecuniary losses as follows: Pecuniary losses are those that either are monetary or are losses of goods that can be purchased in markets, in which case the measure of the losses comprises the replacement costs. Non-pecuniary losses correspond to the losses in utility suffered when irreplaceable things have been destroyed, such as family portraits or other unique objects. Making the survivors of a decedent whole, of course, is impossible and, in practice, testimony by a forensic economist on wrongful death damages is usually limited to calculations of lost earnings support and household work services the decedent could have provided survivors. There are other compensable pecuniary damages suffered by survivors of a decedent such as the advice, counsel, instruction, supervision, and care a decedent may have provided survivors for which a replacement cost might be calculated. Finally there are the usual non-pecuniary losses of pure companionship, consortia, love, affection, the loss of the enjoyment of the decedent’s life and bereavement suffered by survivors which are usually categorized as intangibles and left to a jury to decide or are prescribed by statute. The fundamental difference between pecuniary and non-pecuniary damages is that pecuniary damages are associated with a productive use of time (such as work, offering advice and counsel, or giving care, support, or assistance) while non-pecuniary damages derive from the pure utility of relationships alone. Schwartz and Thornton (1989) suggest that economists should approach damages from a utility base which would incorporate both the tangible (pecuniary) and intangible (non-pecuniary) losses suffered by survivors of a decedent. Such a holistic approach to damages is beyond the capacity of traditional means of calculating wrongful death damages by economists. A number of states, over the past two decades, have attempted to