Thomas R. Ireland

The calculus of philanthropy

Economics is the science concerned with individuals as they allocate scarce resources among wants and needs. As individuals allocate money, time and effort to philanthropic causes, they are allocating resources into the area of nongovernmental, but public goods. Yet private interests, as in all human affairs, must intervene and have a significant effect on the goals and outcomes of philanthropic work and organization. This article will briefly analyze how public and private motives mesh together in the theory of individual philanthropic action.

Recent Legal Decisions Regarding Hedonic Damages: An Update

This paper examines trends in court decisions involving hedonic damages as a follow up to an earlier survey of cases described by Ireland, Johnson and Taylor in a 1997 article. The trend continues to be against admissibility of expert economic testimony on hedonic damages or other methods for placing dollar values on intangible losses. However, there have been successes for hedonic damage testimony that receive special attention in this paper. Paper also addresses special factors that apply to decisions in the states of New Mexico, Louisiana, Mississippi, Ohio and Texas. It also examines the nexus between law and economics concerns about “value of life” issues in tort litigation and what judges are actually considering. Finally, it provides an analytic examination of a special “whole life” issue posed by the treatment of survival actions in New Mexico in conjunction with requirements of consciousness for awards of hedonic damages in other states.

The formation of organizations, networks, and markets

Abstract “Entrepreneurs” in economic theory are like supermen. Organizers of real world organizations are far less dramatic, playing roles that defy simple unimotivational characterizations. Likewise, “firms” in economic theory are simple black boxes from which come profit maximization assumptions. Real world organizations are much more complex in type, function, and structure. The usual economic distinctions between for-profit businesses, not-for-profit corporations, and government bureaus are often quite inaccurate or misleading. Even the distinction between organizations and markets developed by Ronald Coase ignores an important intermediate category of networks. This paper offers a complete reconceptualization of the role of organizers, organizations, networks, and markets. It is a fundamental challenge to the traditional paradigm of neoclassical economics. The alternative presented here incorporates the basic public choice perspective of Buchanan and Tullock, the new institutionalism of Williamson, and the informational concepts of Hayek. It also introduces the very important notion of correct agency identification for social analysis and what is called “social human capital” within the framework of organizational teams. Organizers, at the most fundamental level, organize new organizations when an organizer or group of organizers perceive a way to pursue their goals and objectives more effectively through the creation of new organizations than through the next best way of pursuing those goals and objectives. It is as simple and complicated as that.

Hedonic Damages - One More Time: A Symposium

On January 5, 2008, the National Association of Forensic Economics (NAFE) sponsored its third symposium on “hedonic damages,” this time entitled “Hedonic Damages – One More Time.” The first symposium on hedonic damages was presented at the December 1989 Allied Social Sciences meetings in Atlanta, Georgia with the title “Hedonic Damages and the Value of Life.” Papers from that session by W. Kip Viscusi, Ted R. Miller, Stan V. Smith, and William T. Dickens were published in Volume 3, No. 3 of this journal (1990). The second symposium on hedonic damages was presented at the January 2000 Allied Social Sciences meetings in Boston, Massachusetts with the title “Hedonic Damages Ten Years Later.” Papers from that session by W. Kip Viscusi, J. Paul Leigh and Jorge A. Garcia, Ted R. Miller, Stan V. Smith and Thomas R. Ireland, along with an introduction by Peter Marks and Thomas R. Ireland were published in Volume 13, No. 2 of this journal (2000). W. Kip Viscusi and Ted R. Miller returned as presenters for a third time at the January, 2008 symposium, along with Brian McDonald and John O. Ward. Thomas Ireland acted as the organizer of the 2008 symposium and Peter Marks served as its chair. The term “hedonic damages” first entered general public consciousness on December 12, 1988 with a front page story in the Wall Street Journal by Paul M Barrett on “The Price of Pleasure,” featuring Stan V. Smith and his successful presentation of hedonic damages testimony in the case of Sherrod v. Berry (1985, 1987, and 1988). Two federal judges in Illinois had commented favorably about Smith’s testimony in the original opinion and one of the appeals decisions before the case was reversed on other grounds in 1988. The NAFE symposium in December of 1989 was designed to explore this interesting new development in the field of forensic economics. As of the 2000 symposium hedonic damages testimony had enjoyed several successes in individual states, but had been rejected by the courts in a number of reported decisions, particularly at the federal level. The threat of Daubert and Frye standards for admission of expert testimony being applied negatively to hedonic damage testimony had become one of the central features in the debate over this concept. As of 2008 hedonic damages testimony had become much more specialized. Because hedonic damages testimony had been rejected in a number of legal decisions, fewer and fewer forensic economists were involved, but Stan Smith, Robert Johnson, Brian McDonald, as well as several other economic experts

Converting From A Present Value Lump Sum To A Future Payment Stream

The objective of our original research was to correct a problem in the calculation of hedonic damages. We have found several applications in forensic economics, which are discussed below. They require the derivation of a start-of-the-period, annual amount, which when projected by a known (net) discount rate produces a present value that is also known. Let us illustrate the problem with an application that occurs (but rarely), derive the formula, and then move to several applications. Assume that, as an economist for the defense, one is reviewing the conclusions of a plaintiffs economist about the present value of a lost earnings stream. You know the economist’s projected present value, that he or she is using a constant wage growth factor of 4% per year and a discount rate of 5.5%. You also know that the economist is using a worklife expectancy of 20 years. What you don’t know and need is the value of the base starting-income figure in the current year, from which he or she projects the future income stream and the present value. This base figure may be critical to criticisms of the plaintiffs economic loss projections.

Categories of Time Use for Forensic Economics

There is an old saying that “Time is money.” The meaning of this saying is that time can be sold if you have a valuable service to provide, such that wasting time is wasting the opportunity to make money. Time, as such, is the ultimate scarce resource in life. It is the scarcity of time that gives it value. None of us has as much of it as we would like, though perhaps none of us would really like to have an infinite amount of time available. However, time is not really equivalent to money in several very important senses. Of greatest importance to forensic economists, not all time is equal in value—unlike money, which has constant purchasing power, at least within short time frames. The reasons why all time is not of equal value are based on three factors: energy, scheduling constraints and investment in human capital. (1) When an individual has high energy, time is more valuable than time when an individual is tired and has less energy (Ireland, 1982). (2) Time when an individual is under no specific scheduling constraints may be more valuable than time that is subject to precise scheduling constraints (Caragonne, 1997). If a forensic economist arrives at an attorney’s office 15 minutes before an appointment, that extra 15 minutes might or might not have as much value as 15 minutes on a Sunday afternoon with no scheduling pressure (Mason and Fabritius, 1997). (3) Time spent improving one’s own human capital can increase the value of time in the future relative to time in the present (Becker, 1993). Another general difference between time and money is that time must be spent to maintain the value of time. One of the most important uses of time is for sleep. An individual who sleeps eight hours a night spends one-third of his or her life sleeping. Time spent sleeping is needed to maintain the energy and health that makes waking time more valuable. Likewise, time spent on exercise and other health-producing activities such as seeing physicians and dentists and even on relaxation activities may be necessary to maintain the value of other time spent on labor-market activities, non-market services, human capital investments, or true leisure activities. One can think of such uses of time as maintenance activities necessary to maintain the optimum value of time during an individual’s lifetime. The “whole-time” concept in forensic economics deals with the valuation of lost time due to a tortious action. This concept is generally relevant in personal

Hedonic Damages Ten Years Later: A Symposium

This paper is an overview paper for the “Hedonic Damages--Ten Years Later” symposium held at the January 2000 meetings of the Allied Social Sciences meetings in Boston, Massachusetts. It provides an overview for papers by W. Kip Viscusi, Paul Leigh and Jose Garcia, Ted Miller, Stan V. Smith and Thomas R. Ireland. It also provides coverage of some of the issues discussed during the question and answer part of the symposium and suggests needed areas for research.

Loss in the Death of a Child: An Extension of the Ward Analysis

John Ward has provided the first definitive treatment of the forensic treatment of damages to parents in the loss of a child (this journal, Ward 1989). His preferred treatment, however, provides for a significant underestimate of the value of the household services of both mother and father, but particularly the child’s mother in cases when the mother is a full time homemaker. This note is designed to suggest somewhat more inclusive meaning of the investment value and a better method for projecting the investment value of time spent in mothering, fathering and other household services the parents have invested in the child. Ward suggests that there are conceptually three methods that an economist could use in estimating the economic loss to parents because of the wrongful death of a child: 1) Product valuation through estimating the value of the flow of emotional support, advice and counsel and direct pecuniary support the child, as an adult, might have been expected to render to its parents; 2) Investment valuation through projecting the value of the investment of both time and effort and money costs involved in raising the child; and 3) Hedonic valuation through estimates based on kidnap ransoms or parental expenditures to save a critically ill child. Ward rejects the product valuation approach on the grounds that it is very difficult to establish a foundation for distant future support a child would render to its parents in the absence of a past record of earnings or services by the child. Further, this approach implies that parents are investing in children to produce this flow of old age benefits rather than the continuous flow of relational values most parents place on interactions with their children at all stages of life. The hedonic approach is rejected on the grounds that there is no reward that would be truly compensatory to parents for the death of their child. Further, this approach would lead to higher valuation by rich parents than poor parents based strictly on access to financial resources to pay ransoms or for medical treatment for the child. Ward accepts the investment approach as more valid because of a more exact basis for estimation and because the investment concept is consistent with existing human capital theory as applied by Becker (1981), Turchi (1975) and others to the choices of parents in producing children. Up to this point, I am in total agreement with Ward. However, Ward’s illustration of this approach in an actual measurement example has two major shortcomings, both of which lead to an underestimate of actual losses. These will be considered in turn.

The politician's dilemma: What to represent

ConclusionIt is clear that the survival rate of officials who choose “popular” courses of action is greater than that of officials who choose “best” courses of action. Still, there are few officials who would vote forany course of action merely because it was popular. There are also several factors which limit the proposition that politicians to survive must be mercurial barometers of public opinion.First, a large number of politicians represent constituencies in which they are “safe” in following their own judgments within a wide range of latitude. Thus, as long as William Fulbright does not offend the voters of Arkansas on the civil rights issue, he can take a position contrary to the views of the largest part of his constituency on foreign policy and still be re-elected.Secondly, there seems to be some tendency for the politician to resolve the dilemma of what to represent by allowing himself to actually believe the popular position. In other words, in his own mind, the divergence between his judgment and the popular position merges as he pays more attention to reasons in defense of the popular position than the reasons opposed to it. The author experienced this phenomenon in his own campaign. The politician, as a politician, is primarily interested in election, no objective social analysis, and his judgment can become quite biased by his political interest.

A Comment on “One More Time: New York's Structured Settlement Statutes, Rent Seeking and the Pro-Plaintiff Bias”

In “Unintended Consequences of Tort Reform: Rent Seeking in New York State’s Structured Settlements Statutes” Spizman and Schmitt (2000) demonstrate mathematically that the structured judgment provisions for future periodic payments, under New York State’s Civil Practice Law & Rules Article 50-A and 50-B, overcompensate plaintiffs in the vast majority of cases. This pro-plaintiff bias is relative to the present value of the true stream of damages and independent of the discount rate. Anthony Riccardi’s (2001) critique of Spizman and Schmitt centers around the representation of the structured settlement process, the usefulness of present value calculations as a benchmark in evaluating plaintiff compensation and the misunderstanding surrounding New York State structured settlement statues. This reply to Riccardi reviews the simple mathematical principles associated with the overestimation aspect of the legislation, refutes the use of mortality-based adjustments, and further illustrates the substantial misunderstandings and inefficiencies that surround this legislation.