The Valuation of Losses: Contrasting Views
Forensic economists often present to the courts an estimate of the value of amounts required to compensate for particular losses. Such estimates, dependent upon particular sets of unique circumstances, the timing of benefits and losses, and the replacement cost of the value of the specific losses sustained, vary over a wide range. Wide variations in these estimates, no matter the validity of the amounts projected, may prevent acceptance of any specific estimate by the judicial system. That is, the constraints imposed by the institutional structure of the judicial system may act to restrict the acceptability of properly estimated, economically justifiable estimates. Thus, if victims are "to be made whole" (a non-conflicting goal of both the courts and forensic economists) means to rectify institutional alienation must be developed and maintained. The Primary goal of this paper is to, at least in part, provide some insight into accomplishing this goal. In doing this, the following procedure is being followed: first, following an introduction an abbreviated description of the methods used by economists when making their estimates is provided; second, the legal institutional criteria imposed by the legal system and used to determine the acceptability of any given estimate is outlined; and, third a means of forecasting the legal acceptability of any specific economic estimate is presented. The economist can then use that knowledge when preparing testimony, thus increasing the probability that the resulting decision will better meet the standards imposed by the judicial system, without violating economic norms.
Journal of Business & Economic Research, Vol. 1, No. 12, 2003, 59-63.