6 ms·

In academic US legal theory, litigation is frequently portrayed as an efficient substitute for regulation, particularly from a libertarian perspective. Our poli

by stult 9y ago

In academic US legal theory, litigation is frequently portrayed as an efficient substitute for regulation, particularly from a libertarian perspective. Our political narratives also tend to reject regulation as government overreach or unconstitutional when carried out at the federal level. So we ended up with a highly litigious system, which (unsurprisingly) resulted in high litigation costs. Corporations have responded (also unsurprisingly) by trying to reduce their litigation costs. Our childishly uninformed political discourse has prevented the libertarian/conservative elements of American society from having to confront this contradiction. It's idiotic. If litigation was efficient it would be cheap. Or at least as cheap as it can be and cheaper than the alternative. It's pretty clear that that isn't true.

jacquesm 9y ago
> Corporations have responded (also unsurprisingly) by trying to reduce their litigation costs. No, they simply pass those costs on to the consumers.
- wongarsu 9y ago
  And you are more competitive if you have fewer costs that have to be passed on to the consumers. Just because they can pass it on doesn't mean they don't try to reduce it.
- forapurpose 9y ago
  > No, they simply pass those costs on to the consumers. I believe this is a false narrative spread by those who want to reduce consumer access to courts. Businesses don't price their goods at (cost + profit). They price them at the level that will maximize profit. Sometimes that's at a loss, sometimes that's around break even, sometimes it provides a healthy profit, and sometimes they make extraordinary profits (what do you think the cost is for that $4 soda at the movie theater?). But the price is already set to maximize profits. If the seller's costs increase, raising the price won't increase profit or help them at all - it would merely reduce revenue due to the negative impact on sales volume. And if their costs go down, they of course don't lower the price, they take more profit.
  - jacquesm 9y ago
    > I believe this is a false narrative spread by those who want to reduce consumer access to courts. You are free to believe whatever you want but that's a quote straight from a conversation with the CEO of a very large manufacturer of consumer goods, who - in my experience - tended not to speak stuff that wasn't true.
    - ScottBurson 9y ago
      Demand is relatively inelastic in some markets; less so in others.
      - rayiner 9y ago
        Most consumer-goods markets have relatively elastic demand and high levels of competition. Companies have little ability to "pass on costs" in such markets.
      - forapurpose 9y ago
        Where it's inelastic then a profit-maximizing business would already have priced their goods accordingly, and there would be no room to raise prices. Most businesses won't just leave money on the table. There are exceptions and complexity, of course. In health care, raising the price of a good with inelastic demand such as, say, Epipens, might attract social and political penalties. On the other hand, pricing such goods (e.g., pills that cure terminal diseases) at very high levels to begin with is an accepted practice.
  - zerkten 9y ago
    I think one element of limiting access to courts is forcing binding arbitration (http://www.modernhealthcare.com/article/20170605/NEWS/170609949 http://www.modernhealthcare.com/article/20170605/NEWS/170609...). Are there others?
    - forapurpose 9y ago
      > Are there others? The ways discussed in the article and in this thread, as examples.
jerrac 9y ago
> ... litigation is frequently portrayed as an efficient substitute for regulation ... Can you source, or explain, this? I'm Conservative, and in all the Conservative circles I've run in, I can't recall ever hearing something like this. In fact, I usually hear more about how ridiculous it is that everyone sues about everything.
- rayiner 9y ago
  How do you deal with a negative externality, such as a factory dumping pollutants into the water? Liberals would say: strictly regulate the factory so it limits pollution to an acceptable level. (Statist) libertarians would say that pollution is an infringement of peoples' property rights, and that property owners should sue the polluter. Conservatives tend to reject both approaches as an impingement on business freedoms.
  - jerrac 9y ago
    Why do you say "Conservatives tend to reject both approaches as an impingement on business freedoms."? I really do want to know what you are basing your beliefs about Conservatives on. I, and the circles I've been in, would not necessarily do that. We would reject regulations that are too strict (which, lately, most environmental regulations have been). We would also reject the Federal Government being involved, since it would be a violation of the 10th Amendment in cases that don't cross the state lines. When they do cross the state lines, we'd still prefer it be left to the states, and the Federal government should keep their nose out of it unless the states just can't deal with it. As for State and Local governments, we would accept them implementing regulations when the factory and local residents are unable to come to an agreement on their own. Note, I'm a US citizen, so I'm referring to that Government. :)
    - stult 9y ago
      Well this is pretty much exactly what I meant when I said our political discourse is "childishly uninformed." You claim that environmental remedies should be worked out between factories and local residents. Disregarding the absurd implication that factories are the only or even the most important polluters, the only mechanism by which local residents can directly negotiate enforceable restrictions on factories is litigation. So you have unknowingly parroted the talking point you claim conservatives don't believe. You've just swallowed the misleading political messaging whole without realizing what it was euphemistically disguising. Failing direct negotiation you say states and localities should enact regulations where state boundaries aren't crossed. Essentially no environmental regulations deal with things that do not cross state boundaries. Water and air don't respect lines on a map. Nor do ecosystems. Worse yet, that isn't even really your position. You say "most" environmental regulations are too strict. So you actually don't think states and localities should regulate the environment. You think we should remove federal regulations and states should not replace them. So really you are parroting the exact positions we have described above without recognizing their true import.
forapurpose 9y ago
> litigation ... efficient I don't think anyone who has been involved in litigation would use these words in the same sentence, or paragraph. Whose theory says it's efficient?
- jopsen 9y ago
  It was certainly an interesting argument :) I suspect that the thinking is that it's efficient in the sense that you don't have the wrong regulation. ie. in the sense that wrong regulation is extremely expensive. And if people was always employing an optimal strategy, then litigation would rarely be needed as the outcome would be predictable. But I guess people aren't optimal :)
  - forapurpose 9y ago
    > it's efficient in the sense that you don't have the wrong regulation. ie. in the sense that wrong regulation is extremely expensive. How efficient is it to regulate the behavior on a case-by-case basis, taking years and often millions of dollars for each case, and with all the unpredictable outcomes of a lawsuit? Maybe one ruling by an expert regulator rather than many by inexpert judges and juries isn't such a bad idea after all. It sounds like a rationalization for deregulation. > if people was always employing an optimal strategy, then litigation would rarely be needed If people did that, we wouldn't need government at all. We could live in happy anarchy with all our well-meaning, honest, optimizing neighbors!
    - jopsen 9y ago
      Note: I'm not arguing that litigation is better :) Just saying, that's how it's rationalized...
      - forapurpose 9y ago
        Yeah, I got that. Sorry if my comment looked like it was arguing with you rather than with the theorists.
sageikosa 9y ago
I believe litigation in the United States is based on the idea that access to the courts to redress grievances (against private individuals or public institutions) is fundamental for a civil society. This goes as far as preventing habeas corpus from being suspended in Illinois during the American Civil War as the courts were still in operation, and the "justification" for holding people in Guantanamo. While I have heard the vague generalities of "overreach" and "unconstitutionality" levied against regulation by some opponents, the more nuanced economic argument is that regulation creates barriers to entry, slowness to adapt, and governmental bloat (i.e., bureaucracy which can only be reined in by more bureaucracy). The market solutions to regulation are more properly insurance (by producers) to cover claims and tort constraints. Snowflake society doesn't like calculating the economic (market) value of risk to life or limb, but the truth is that without reasonable tort the economic impact will still be born, but socialized by non-risk takers subsidizing expanding bureaucracies.
- jacquesm 9y ago
  Funny how litigation in the United States being based on the idea that access to the courts to redress grievances being fundamental for a civil society then causes that very same society to go out of its way to deny those rights to others. Fairly incredible actually if you think about it for a while.
  - sageikosa 9y ago
    Not sure what the subject of that sentence was; it appears to be passive (and actorless) in the first part but the dependent clause (after "then") seems active voice. What or whom is causing society to go out of its way...? Litigation?
- aseipp 9y ago
  > Snowflake society doesn't like calculating the economic (market) value of risk to life or limb, but the truth is that without reasonable tort the economic impact will still be born, but socialized by non-risk takers subsidizing expanding bureaucracies. Sounds like you should move to Somalia, land of the free market -- it's quite untouched and unregulated by nanny bureaucracies, in fact. Lots of opportunities to make money, I'm sure. Or perhaps you'll be lucky enough to break both your kneecaps and die on the streets, or get sold into slavery! I can only imagine the reason you wouldn't do this is due to being a needy snowflake yourself. Hmmm....
hsitz 9y ago
Yes, to academic idea that efficient litigation can be a substitute for regulation. That gets to the main issue in the linked article, which is that consumer financial contracts often require consumer to use arbitration and prohibit them from joining class actions. The issue isn't that consumers can't sue. It's that suing (or arbitrating) individual cases is inefficient. Claims never get brought because no sane person is going to waste their time going through an individual arbitration to recover a $10 or $20 claim. It's hard to imagine any legal system where a claim to recover a $10 or $20 injury in an individual lawsuit (or arbitration) could be efficient. Such claims could be aggregated in class actions, if consumer contract terms didn't prohibit it. Class action lawyers often think of themselves as doing "social engineering"; forcing companies to pay for injuries they cause in situations where nobody is likely to bring an individual suit at all (e.g., small harms). Class actions don't normally result in much of a recovery at all for individual consumers, both because amounts for each individual are typically quite small, and because costs of litigation and attorney fees eat up huge percentage of claims defendant corporations are forced to pay. But at least if there were threat of class actions it could scare corporations into not violating terms of consumer agreements. So even if class action suits do end up mostly enriching lawyers, they still help consumers by giving corporations a strong incentive to honor consumer agreements. Class action lawyers as "social engineers".
dclowd9901 9y ago
It isn't cheap, because (surprise) lawyers write laws to prevent efficiency from creeping in. Law should be as efficient and precise and cheap and scalable as code. Hell, that's why they use the term "codified" when they talk about laws on the books.

by stult 9y ago

jacquesm 9y ago

> Corporations have responded (also unsurprisingly) by trying to reduce their litigation costs. No, they simply pass those costs on to the consumers.

wongarsu 9y ago
And you are more competitive if you have fewer costs that have to be passed on to the consumers. Just because they can pass it on doesn't mean they don't try to reduce it.
forapurpose 9y ago
> No, they simply pass those costs on to the consumers. I believe this is a false narrative spread by those who want to reduce consumer access to courts. Businesses don't price their goods at (cost + profit). They price them at the level that will maximize profit. Sometimes that's at a loss, sometimes that's around break even, sometimes it provides a healthy profit, and sometimes they make extraordinary profits (what do you think the cost is for that $4 soda at the movie theater?). But the price is already set to maximize profits. If the seller's costs increase, raising the price won't increase profit or help them at all - it would merely reduce revenue due to the negative impact on sales volume. And if their costs go down, they of course don't lower the price, they take more profit.
- jacquesm 9y ago
  > I believe this is a false narrative spread by those who want to reduce consumer access to courts. You are free to believe whatever you want but that's a quote straight from a conversation with the CEO of a very large manufacturer of consumer goods, who - in my experience - tended not to speak stuff that wasn't true.
  - ScottBurson 9y ago
    Demand is relatively inelastic in some markets; less so in others.
    - rayiner 9y ago
      Most consumer-goods markets have relatively elastic demand and high levels of competition. Companies have little ability to "pass on costs" in such markets.
    - forapurpose 9y ago
      Where it's inelastic then a profit-maximizing business would already have priced their goods accordingly, and there would be no room to raise prices. Most businesses won't just leave money on the table. There are exceptions and complexity, of course. In health care, raising the price of a good with inelastic demand such as, say, Epipens, might attract social and political penalties. On the other hand, pricing such goods (e.g., pills that cure terminal diseases) at very high levels to begin with is an accepted practice.
- zerkten 9y ago
  I think one element of limiting access to courts is forcing binding arbitration (http://www.modernhealthcare.com/article/20170605/NEWS/170609949 http://www.modernhealthcare.com/article/20170605/NEWS/170609...). Are there others?
  - forapurpose 9y ago
    > Are there others? The ways discussed in the article and in this thread, as examples.

jerrac 9y ago

> ... litigation is frequently portrayed as an efficient substitute for regulation ... Can you source, or explain, this? I'm Conservative, and in all the Conservative circles I've run in, I can't recall ever hearing something like this. In fact, I usually hear more about how ridiculous it is that everyone sues about everything.

rayiner 9y ago
How do you deal with a negative externality, such as a factory dumping pollutants into the water? Liberals would say: strictly regulate the factory so it limits pollution to an acceptable level. (Statist) libertarians would say that pollution is an infringement of peoples' property rights, and that property owners should sue the polluter. Conservatives tend to reject both approaches as an impingement on business freedoms.
- jerrac 9y ago
  Why do you say "Conservatives tend to reject both approaches as an impingement on business freedoms."? I really do want to know what you are basing your beliefs about Conservatives on. I, and the circles I've been in, would not necessarily do that. We would reject regulations that are too strict (which, lately, most environmental regulations have been). We would also reject the Federal Government being involved, since it would be a violation of the 10th Amendment in cases that don't cross the state lines. When they do cross the state lines, we'd still prefer it be left to the states, and the Federal government should keep their nose out of it unless the states just can't deal with it. As for State and Local governments, we would accept them implementing regulations when the factory and local residents are unable to come to an agreement on their own. Note, I'm a US citizen, so I'm referring to that Government. :)
  - stult 9y ago
    Well this is pretty much exactly what I meant when I said our political discourse is "childishly uninformed." You claim that environmental remedies should be worked out between factories and local residents. Disregarding the absurd implication that factories are the only or even the most important polluters, the only mechanism by which local residents can directly negotiate enforceable restrictions on factories is litigation. So you have unknowingly parroted the talking point you claim conservatives don't believe. You've just swallowed the misleading political messaging whole without realizing what it was euphemistically disguising. Failing direct negotiation you say states and localities should enact regulations where state boundaries aren't crossed. Essentially no environmental regulations deal with things that do not cross state boundaries. Water and air don't respect lines on a map. Nor do ecosystems. Worse yet, that isn't even really your position. You say "most" environmental regulations are too strict. So you actually don't think states and localities should regulate the environment. You think we should remove federal regulations and states should not replace them. So really you are parroting the exact positions we have described above without recognizing their true import.

forapurpose 9y ago

> litigation ... efficient I don't think anyone who has been involved in litigation would use these words in the same sentence, or paragraph. Whose theory says it's efficient?

jopsen 9y ago
It was certainly an interesting argument :) I suspect that the thinking is that it's efficient in the sense that you don't have the wrong regulation. ie. in the sense that wrong regulation is extremely expensive. And if people was always employing an optimal strategy, then litigation would rarely be needed as the outcome would be predictable. But I guess people aren't optimal :)
- forapurpose 9y ago
  > it's efficient in the sense that you don't have the wrong regulation. ie. in the sense that wrong regulation is extremely expensive. How efficient is it to regulate the behavior on a case-by-case basis, taking years and often millions of dollars for each case, and with all the unpredictable outcomes of a lawsuit? Maybe one ruling by an expert regulator rather than many by inexpert judges and juries isn't such a bad idea after all. It sounds like a rationalization for deregulation. > if people was always employing an optimal strategy, then litigation would rarely be needed If people did that, we wouldn't need government at all. We could live in happy anarchy with all our well-meaning, honest, optimizing neighbors!
  - jopsen 9y ago
    Note: I'm not arguing that litigation is better :) Just saying, that's how it's rationalized...
    - forapurpose 9y ago
      Yeah, I got that. Sorry if my comment looked like it was arguing with you rather than with the theorists.

sageikosa 9y ago

I believe litigation in the United States is based on the idea that access to the courts to redress grievances (against private individuals or public institutions) is fundamental for a civil society. This goes as far as preventing habeas corpus from being suspended in Illinois during the American Civil War as the courts were still in operation, and the "justification" for holding people in Guantanamo. While I have heard the vague generalities of "overreach" and "unconstitutionality" levied against regulation by some opponents, the more nuanced economic argument is that regulation creates barriers to entry, slowness to adapt, and governmental bloat (i.e., bureaucracy which can only be reined in by more bureaucracy). The market solutions to regulation are more properly insurance (by producers) to cover claims and tort constraints. Snowflake society doesn't like calculating the economic (market) value of risk to life or limb, but the truth is that without reasonable tort the economic impact will still be born, but socialized by non-risk takers subsidizing expanding bureaucracies.

jacquesm 9y ago
Funny how litigation in the United States being based on the idea that access to the courts to redress grievances being fundamental for a civil society then causes that very same society to go out of its way to deny those rights to others. Fairly incredible actually if you think about it for a while.
- sageikosa 9y ago
  Not sure what the subject of that sentence was; it appears to be passive (and actorless) in the first part but the dependent clause (after "then") seems active voice. What or whom is causing society to go out of its way...? Litigation?
aseipp 9y ago
> Snowflake society doesn't like calculating the economic (market) value of risk to life or limb, but the truth is that without reasonable tort the economic impact will still be born, but socialized by non-risk takers subsidizing expanding bureaucracies. Sounds like you should move to Somalia, land of the free market -- it's quite untouched and unregulated by nanny bureaucracies, in fact. Lots of opportunities to make money, I'm sure. Or perhaps you'll be lucky enough to break both your kneecaps and die on the streets, or get sold into slavery! I can only imagine the reason you wouldn't do this is due to being a needy snowflake yourself. Hmmm....

hsitz 9y ago

Yes, to academic idea that efficient litigation can be a substitute for regulation. That gets to the main issue in the linked article, which is that consumer financial contracts often require consumer to use arbitration and prohibit them from joining class actions. The issue isn't that consumers can't sue. It's that suing (or arbitrating) individual cases is inefficient. Claims never get brought because no sane person is going to waste their time going through an individual arbitration to recover a $10 or $20 claim. It's hard to imagine any legal system where a claim to recover a $10 or $20 injury in an individual lawsuit (or arbitration) could be efficient. Such claims could be aggregated in class actions, if consumer contract terms didn't prohibit it. Class action lawyers often think of themselves as doing "social engineering"; forcing companies to pay for injuries they cause in situations where nobody is likely to bring an individual suit at all (e.g., small harms). Class actions don't normally result in much of a recovery at all for individual consumers, both because amounts for each individual are typically quite small, and because costs of litigation and attorney fees eat up huge percentage of claims defendant corporations are forced to pay. But at least if there were threat of class actions it could scare corporations into not violating terms of consumer agreements. So even if class action suits do end up mostly enriching lawyers, they still help consumers by giving corporations a strong incentive to honor consumer agreements. Class action lawyers as "social engineers".

dclowd9901 9y ago

It isn't cheap, because (surprise) lawyers write laws to prevent efficiency from creeping in. Law should be as efficient and precise and cheap and scalable as code. Hell, that's why they use the term "codified" when they talk about laws on the books.