Hedonic damages
Encyclopedia
Hedonic Damages, an economic
term of art, refers to loss of enjoyment of life damages
, the intangible value of life, as distinct from the human capital
value or lost earnings value.
Law & Economics, Olin Working Paper No. 340, July 2007. Such testimony has been admitted in state and federal court hundreds of times nationwide, increasingly gaining acceptance over the past decade, since 2000.
Hedonic damages also can apply in cases that involve no injury. Cases involving inmates wrongfully imprisoned have been won with Hedonic Damages approaches. Such were the plights of two former inmates, William Gregory and David Pope, convicted and later exonerated on rape charges. William Gregory, who served seven years in a Kentucky prison, received a $4.5 million dollar settlement, while David Pope, who served 15 years in Texas, received $385,000. While the inmates were free, according to David Hunt, another inmate later freed after serving 18 years, "we're still living the nightmare every day". Hedonic damages attempt to compensate for that suffering with settlements.
A person injured after falling from a defective chair was able to recover hedonic damages.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
term of art, refers to loss of enjoyment of life damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
, the intangible value of life, as distinct from the human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
value or lost earnings value.
History
The term achieved renown when coined by Stan V. Smith (economist) during his testimony, the first such testimony proffered nationwide, in the case of Sherrod v. Berry, 827 F.2d 195 (7th Cir. 1987). It has since been in widespread use in subsequent legal decisions, in law review articles, and in law and economics articles nationwide. See for example Professon Cass Sunstein's University of ChicagoUniversity of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
Law & Economics, Olin Working Paper No. 340, July 2007. Such testimony has been admitted in state and federal court hundreds of times nationwide, increasingly gaining acceptance over the past decade, since 2000.
Application
Hedonic damages, the loss of the value of life, are allowed in almost every state in a non-fatal injury case. Based on William Daubert et al. v. Merrell Dow Pharmaceuticals, Inc., and other admissibility tests, many but not all jurisdictions allow economic expert witness testimony on hedonic damages. For example, the Nevada Supreme Court unanimously approved of such testimony in Banks v. Sunrise Hospital, 120 Nev. Adv. Op. No. 89,102 P.3d 52 (2004). Similarly, the 4th Appellate District in Ohio allowed such testimony based on Daubert in Lewis v. Alfa Leval,128 Ohio App.3d.200 (1998). The Court of appeals in the Lewis case held that the trial judge properly ruled that the testimony met the Daubert Standards, and that it was within the discretion of the trial court to have admitted hedonic damages testimony. The measurement of hedonic damages is based on some 40 years of extensive, well-accepted, peer-reviewed, economic research on the value of a statistical life (VSL). This measurement is controversial among forensic economists. The Value of Statistical Life literature is accepted by most forensic economists, including those economists few who oppose the admission of hedonic damages testimony. Many courts nationwide have allowed such testimony but judges have significant discretion as to its admissibility. Economists generally agree that the VSL is in the $4 million to $5 million dollar range. This value is an average of many published results based on economic research using the Willingness-to-Pay model(WTP). Hedonic damages are not allowed in death cases in the great majority of the states. Some states do allow recovery in wrongful death cases, including New Hampshire, New Mexico, Georgia, Arkansas, Connecticut, Hawaii, and in Federal Section 1983 civil rights violation actions.Hedonic damages also can apply in cases that involve no injury. Cases involving inmates wrongfully imprisoned have been won with Hedonic Damages approaches. Such were the plights of two former inmates, William Gregory and David Pope, convicted and later exonerated on rape charges. William Gregory, who served seven years in a Kentucky prison, received a $4.5 million dollar settlement, while David Pope, who served 15 years in Texas, received $385,000. While the inmates were free, according to David Hunt, another inmate later freed after serving 18 years, "we're still living the nightmare every day". Hedonic damages attempt to compensate for that suffering with settlements.
A person injured after falling from a defective chair was able to recover hedonic damages.
Controversy
Economic testimony regarding hedonic damages has been allowed in over two thirds of the states and two thirds of the Federal District courts and has been endorsed in unanimous supreme court decisions in Nevada, New Mexico, and Mississippi and in appellate decisions in Ohio. In some states where trial judges have admitted the economic testimony a trial judge in another court may have not admitted the testimomy. The same holds true for Federal Circuit courts. Undeterred by a unimous Supreme Court decision endorsing hedonic damages testimony by an expert economist, The Mississippi legislature subsequently adopted tort reform that precludes loss of enjoyment of life testimony by economic experts. There is significant scholarship endorsing hedonic damages in personal injury and wrongful death cases. Further, Hedonic Damages were allowed as an element of recovery in the September 11, 2001 Victim Recovery Fund.Willingness-To-Pay Model
The WTP approach is based on measuring what people pay for safety that results in small reductions in their risk of death. For example, if average people are willing to pay $25 for a carbon monoxide detector that stands a one in two hundred thousand chance of saving their life, the WTP model would imply that such purchasers value their life at $5 million ($25 times 200,000). Economists generally use circumstances involving small risk reductions, recognizing that measuring WTP using larger risks will significantly increase the value of a statistical life.See also
- DamagesDamagesIn law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
- Measure of Damages (under English law)Measure of Damages (under English law)Damages for breach of contract is a common law remedy, available as of right. It is designed to compensate the victim for their actual loss as a result of the wrongdoer’s breach rather than to punish the wrongdoer...
- Pro-rataPro-rataPro rata is an adverb or adjective, meaning in proportion. The term is used in many legal and economic contexts. It is sometimes spelled pro-rata, but this is technically a misspelling of the Latin phrase...
- Punitive damagesPunitive damagesPunitive damages or exemplary damages are damages intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit...
- Pure economic lossPure economic lossEconomic loss refers to financial loss and damage suffered by a person such as can be seen only on a balance sheet rather than as physical injury to the person or destruction of property...