Sunday, May 30, 2004

Tort Costs

The Financial Times of May 28 (sorry, I cannot link without agreeing to a 15-day trial subscription) reports on international comparisons of tort costs as percent of GDP. They are:

Denmark 0.4
UK 0.6
France 0.8
Canada 0.8
Japan 0.8
Switzerland 0.9
Spain 1.0
Australia 1.1
Belgium 1.1
Germany 1.3
Italy 1.7
U.S. 1.9

Depending on how one counts, we are the champions.

What explains the differences? Is it culture? Is it economics? Can we ever know?

America's lack of a loser-pays (contingency fee) system has been thought to be one cause of the problem. Defenders of our system argue that it is the best way to level the playing field.

Interestingly, the U.K. is the favorite example of loser-pays, the EU countries are thought to be closer to the U.K. and Australia's is an amalgam of U.S. and U.K. approaches. Jane Stapleton gives many more details.

The FT data do show that the U.K. and the U.S. are at opposite poles and that Australia is about half-way between them.

Bigger samples and we can get beyond the anecdotal. Good international cross-sectional comparisons are still the way to go.