A Stitch in Haste

Some defenders of a tort reform program implemented in Texas since 1995 try to pull a fast one:

Savings from reduced damages awarded by juries and fewer lawsuits filed against large businesses since the mid-'90s has created a climate in which medical and insurance companies can expand, the study states. Across Texas, the reforms have resulted in nearly $113 billion in additional annual spending, almost 500,000 new jobs and $2.6 billion a year in increased state budget resources.

As I commented over at Kevin, M.D., where I saw this sleight-of-hand:

Um, no.

This is what economists call the Broken Window Fallacy.

You are only seeing the macroeconomic benefits achieved (for insurance companies and defendants). You are not seeing the macroeconomic benefits foregone (for affected plaintiffs).

The additional money meritorious plaintiffs would have received but for tort reform would also have "stimulated the economy" in one form or another.

The net effects may tilt one way or the other -- there's little way to know for sure. But evaluating a policy -- any policy -- based only on the gross effects ("what is seen") while ignoring the offsets ("what is not seen") is an fundamental logical error.

Unfortunately, it is a fundamental logical error that permeates almost every aspect of American factional politics -- including health care policy generally and tort reform specifically.

I am fully aware that Texas was a unique situation in which fundamental legal injustices were reportedly occurring against malpractice and product liability defendants in civil lawsuits. Point conceded. But tort reform for the sake of better legal outcomes (i.e., more "fair and just" outcomes) is altogether different from tort reform for the sake of economic growth. That way madness lies.

Access to the Bastiat-betraying report here. My old chain on asbestos liability here; on Vioxx liability here.