Assessing Punitive Damages (With Notes on Cognition and Valuation in Law)

Abstract

A. Two GoalsThis Article has two goals.The first is to investigate the sources of arbitrariness and unpredictability in punitive damage awards.On the basis of responses from 899 jury-eligible citizens, we estimate the results of deliberations consisting of all white juries, all African-American juries, all female juries, all male juries, all wealthy juries, all poor juries, and juries of widely diverse degrees of age and education.Our principal conclusions, stated briefly,' are that at least in the personal injury cases studied here, people's moral judgments are remarkably widely shared, but that people have a great deal of difficulty in mapping such judgments onto an unbounded scale of dollars.Shared moral judgments but erratic, unpredictable, and arbitrary awards, possibly even meaningless awards, are a potential product of this difficulty.Since participants in law are frequently asked to map their judgments onto an unbounded dollar scale, this problem relates not only to punitive damage reform but also to a number of other positive and normative questions now faced by the legal system, including the law governing awards for pain and suffering, libel, sexual harassment and other civil rights violations, intentional infliction of emotional distress, administrative penalties, and contingent valuation.In addition to identifying serious problems in current practices and suggesting possible reforms, our study points in the direction of a large and potentially fruitful research agenda.Our second goal involves what might be called the behavioral analysis of law.In the past three decades, a great deal of progress has come from the application of a certain understanding of economics to legal problems.Within economics and psychology, but outside law, that understanding has been under sustained attack.Within social science generally, the attack has produced insights that supplement, and sometimes undermine, those versions of economics that have undergirded economic analysis of law.These insights very much bear on law.Our study is thus an effort to contribute to the behavioral analysis of law, a field at its inception but showing signs of considerable growth. 2 Our findings also help show what might be missing, impractical, or 1.A technical version of the survey and study, accompanied with more detailed statistical analysis, is reported in Daniel Kahneman, David Schkade, & Cass R. Sunstein, Shared Outrage and Erratic Awards: The Psychology of Punitive Damages, 16 J.RISK & UNCERTAINTY (forthcoming Apr.1998).This Article provides a nontechnical summary of our findings and develops, as the technical paper does not, the implications of our findings for law and legal reform.2.