Judges, lawyers, and cognitive bias

by Ted Frank on August 8, 2008

“Sixty-five percent of those attending the ABA Annual Meeting session said they were better than average at predicting the settlement value of a case, and 76 percent said they were better than average at predicting when a trial court judgment would be reversed on appeal.”  But when asked a multiple-choice question on basic Bayesian statistics, only 34% of the attendees got it right–just nine points better than chance.  (The most popular answer was also the most incorrect.)  The ABA Journal blog also reports that attendees also suffered from severe cognitive bias on such issues as non-economic damages:

A hypothetical described a case involving a school teacher who lost his arm in an accident. Half were told that the plaintiff offered to settle for $100,000, and the other half learned of a $10 million settlement offer.

A majority of the $100,000 group said a judge would assess the value of pain and suffering between $500,000 and $2 million. But a majority of the $10 million group went higher, saying the value would be between $1 million and $5 million.

When even the lawyers and judges can’t accurately peg noneconomic damages, what other evidence do we need to show that uncapped and unscheduled noneconomic damages are unconstitutionally arbitrary and irrational?

{ 12 comments }

1 Justinian Lane 08.08.08 at 3:16 pm

Do you also believe juries shouldn’t be allowed to set the punishment in criminal cases for the same reason?

2 Jason Barney 08.08.08 at 6:03 pm

Good question. Isn’t the punishment often set at least in part by the judge according to sentencing guidelines? I’m not nearly as familiar with criminal law but that’s how I think it works, at least in some (many?) instances.

3 VMS 08.08.08 at 6:10 pm

Maybe jury verdicts are sometimes arbitrary and irrational. That’s one motivation for parties to settle. Whether such arbitrariness and irrationality amounts to unconstitutionality is a MAJOR stretch. I believe just the opposite. The Seventh Amendment guarantees a right to trial by jury “and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.” Nice try Ted, but you can’t throw the unconstitutionality fastball past all your readers!

The flip side of the coin is also a problem, but it’s a problem we ahve to live with under our system. A plaintiff who is severely injured as a result of malpractice or other negligence often walks away with nothing whe a jury makes a fact finding that there was no deviation from the standard of care or no proximate cause.

4 Bumper 08.08.08 at 6:31 pm

VMS,

Feel free to take a stab at further defining “often.” Seems like such a nebulous term to use when commenting on an article about “severe cognitive bias.” My experience is that more often than not plaintiffs walk away with boodles of cash in spite of the fact there was no malpractice or negligence. But maybe I just know more unluckier defendants.

5 roy 08.08.08 at 8:43 pm

Speaking of poor statistical skills, it is plausible for a majority to be better than average. It just requires a minority to be dramatically worse than the majority. Suppose there are ten people in the world, rated 5, 10, 15, 50, 55, 60, 65, 70, 75, and 80. The average rating is 48.5, and 70% of the population is above average. I’m glossing over units of measure, but the example works for illustration.

And what does “better than average” even mean? Better than the average attendee, the average lawyer, or the average adult? Does being better mean more likely to be exactly correct, having a smaller margin of error at 95% confidence, or what? Were attendees asked in such a way that these terms were defined consistently?

Worst of all, the writeup doesn’t say whether the attendees are actually better than average. Statistics is hard; the average is probably pretty bad.

6 Tom T. 08.09.08 at 2:05 am

I take Ted’s point, and I don’t particularly disagree with his assessment of the problem. However, a cap on non-economic damages is also arbitrary, and it’s not necessarily clear to me which form of arbitrariness is better than the other.

7 Ted Frank 08.09.08 at 9:25 am

@6, Predictable arbitrariness from a schedule created by the democratically-elected legislative branch (or their agency) is better than unpredictable arbitrariness from an unelected jury.

@3, Whether unpredictability is problematic is not such a major stretch when a majority of the Supreme Court endorsed that proposition in Exxon Shipping v. Baker.

8 Bernie S 08.09.08 at 1:16 pm

So, lawyers are all from Lake Woebegon? Seriously @5 shows that “average” becomes more meaningless in statistics as distribution becomes more skewed. Mean, Median, and Mode all differ and permit different (valid or invalid) conclusions from data sets.

9 VMS 08.09.08 at 2:54 pm

@7 Ted: Read Exxon v Baker CAREFULLY. The issue there was punitive damages (i.e. excessive FINES under the eighth amendment) and NOT compensatory damages. The compensatory damages stood, but the MAGNITUDE of punitive award for derivative liability under maritime law was limited to a ratio of 1:1 (compensatory to punitive). The SC specifically rejected dollar caps on punitive damages under these circumstance and instead made a ratio limit.

The unconstitutionality argument for large non-economic damages falls by the waistside. But that’s what remittitur is for. Please note that there is no additur in federal court under Dimick v. Schiedt, 293 U.S. 474 (1935).

10 Ted Frank 08.09.08 at 3:12 pm

@8, I suggest you take your own advice. What’s important about a court opinion is the reasoning, and the reason why the court found the punitive damages in Exxon problematic was the inherent unpredictability. The Eighth Amendment had nothing to do with it.

11 JTT 08.10.08 at 9:14 am

VMS,

The Supreme Court has said clearly that the Eighth Amendment’s excessive fines provision is no limitation on punitive damages assessed in a civil case.

12 Christoph 08.12.08 at 3:40 am

Did you know that in Germany the cap for immaterial damages for pain and suffering (Schmerzensgeld) is 500,000 Euros? (That’s an obiter dictum of the highest civil court, not a codified rule.)

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