“Wrongful Death of an Older Person”
Stan V. Smith Lecture on the Importance of Economic Theory
Bridging theory and practice. Stan’s lectures on the importance of applying economic theory into courtroom practice.
You know, you read in the papers about how economists make economic forecasts, none of which ever come true, and people say, “we don’t really know anything,” which is the thrust of the defense argument. I think we’ve got a bad rap on that account. I think you lawyers know about bad raps, and the truth is, we economists are often accused of having the personality of something between that of an aardvark and an actuary.
This just simply is not so. We actually have complex cognitive functioning.
When we see something work perfectly well in practice, we are the group of people that have the courage to say, “Aha! But will it work in theory?”
Well, the truth is, it was in this gap between theory and practice in 1984 that I learned that economists had developed a theory as to the value of life already in 1968, but that the courtroom practice was to award for damages—loss of society and companionship damages, loss of value of life damages, loss of enjoyment of life and injury—without any benefit of this theory. So, there was this courtroom practice and this economic theory, and the two had not met until 1984.
What I was asked to do was to bring this theory into the courtroom and try and tailor it to this particular case—the Sherrod case. I termed this loss, Hedonic Damages. I used this term to differentiate between the hard damages of the business losses that ensued in this 1983 wrongful death case, and the intangible losses that economists used what are called “hedonic price equations,” in order to sort out the wage-risk premium.