A Tuesday subscriber-only Wall Street Journal op-ed a week ago by Lawrence McQuillan and Hovannes Aramyan tablulated the damage (the Pacific Research Institute’s home page for the study is here, and has a PDF link to the full study, their press release, a number of other items):
The good news: We now have some reliable figures. The bad news: The costs are far higher than anyone imagined.
Based on our estimates, and applying the best available scholarly research, we believe America’s tort system imposes a total cost on the U.S. economy of $865 billion per year. This constitutes an annual “tort tax” of $9,827 on a family of four. It is equivalent to the total annual output of all six New England states, or the yearly sales of the entire U.S. restaurant industry.
How does the legal system extract such an astounding amount from our economy? We applied the rent-seeking theory of transfers from economic science to pick up where past studies — including the highly regarded Tillinghast-Towers Perrin study — leave off. We began by examining the static costs of litigation — including annual damage awards, plaintiff attorneys’ fees, defense costs, administrative costs and deadweight costs from torts such as product liability cases, medical malpractice litigation and class action lawsuits. The annual static costs, $328 billion per year, are well in excess of previous Tillinghast estimates.
But $328 billion is only the beginning. After all, litigation doesn’t just transfer wealth, it also changes behavior, and often in economically unproductive ways. Any true estimate of the costs of America’s tort system must also include these dynamic costs of litigation — the impact on research and development spending, the costs of defensive medicine and the related rise in health-care spending and reduced access to health care, and the loss of output from deaths due to excess liability.
Here are the beyond-static, or “dynamic,” costs identified:
- “….. medical liability concerns increase annual health care spending by $124 billion in 2006 dollars.”
- “(those liability concerns also add) 3.4 million Americans to the rolls of the uninsured ….. (causing) a total loss of output we estimate to be $39 billion per year.”
- “….. we found that foregone R&D due to excessive liability results in lost sales of new products every year of over $367 billion.”
- “….. we determined that more than 77,000 people would have been alive today and contributing to the workforce, but are not because of a failure to enact comprehensive tort reforms in the states. The cost of foregone output from these lost workers is more than $7 billion each year.”
So we’re left with the question of who ends up “paying” the tort tax. It would appear to be everyone who hasn’t collected a major judgment in the lawsuit lottery. More specifically, based on the first two bullet items above, you can state with a pretty high degree of confidence that the less well-off who end up without medical insurance thanks to litigation madness are carrying a disproportionate share of the “tort tax” burden.
As a sucker for lists, this one was irresistible.
Actually, Eweek’s full roster is 100 people long, broken into four parts, but I’ll stick to their top 25, who are:
25. Meg Whitman, Ebay
24. Mark Hurd, HP
23. Eric Schmidt, Google E-commerce
22. Mark Russinovich, Microsoft OS design and architecture
21. Rick Rashid, Microsoft R&D
20. Vincent Cerf, Google (co-inventor of TCP/IP)
19. Jonathan Schwartz, Sun Microsystems CEO
18. Paul Otellini, President and CEO of Intel
17. Tim O’Reilly, O’Reilly Media publisher
16. Dr. Alan Kay, Viewpoints Research Institute (pioneer in graphical interfaces and also involved in One Laptop per Child Initiative)
15. Rick Dalzell, Amazon.com CIO
14. Rollin Ford, Wal-Mart CIO
13. Ralph Szygenda, General Motors CIO
12. Blake Ross, Firefox
11. Sam Palmisano, IBM CEO
10. Diane Green, VMware
9. Nicholas Negroponte, One Laptop per Child Initiative
8. Ray Ozzie, Microsoft
7. Mark Benioff, Salesforce.com
6. Steve Jobs, Apple
5. Steve Ballmer, Microsoft
4. Larry Ellison, Oracle
3. Linus Torvalds, Linux
2. Tim Berners-Lee, W3C
1. Sergei Brin and Larry Page, Google
There is obviously a big difference between “influential” and “innovative,” as evidenced by the presence of four Microsofties on the list.
….. But based on the non-reaction from other African countries, it incredibly appears not (bolds are mine):
Zimbabwe’s President Robert Mugabe has told supporters that opposition leader Morgan Tsvangirai was attacked earlier this month – and deserved the beating.
At a Zanu-PF party meeting in Harare, he said Mr Tsvangirai was clearly told not to attend a banned rally.
Inside the meeting, Mr Mugabe called on Zanu-PF members to maintain party unity as he sought a new term as leader.
….. “Yes, I told them he was beaten but he asked for it,” AFP news agency quoted Mr Mugabe as saying.
“We got full backing, not even one [other African leader] criticised our actions.”
….. Zimbabwe’s economy is in meltdown, with inflation of 1,700% and widespread poverty and unemployment.
On Thursday, UN humanitarian director Rashid Khalikov said that 1.4 million Zimbabweans would need food aid this year, as harvests were only due to meet one-third of the country’s requirements.
Any kind of international intervention will be next to impossible if the neighbors of Mr. “Yeah, we savagely beat him — so what?” can’t even bring themselves to speak out against the humanitarian and human-rights calamity that continues to grow ever worse.
UPDATE 2: A subscription-only editorial in the Wall Street Journal today rips South African leader Thabo Mbeki for his passive role in Zimbabwe’s implosion:
The failure of African leadership on Zimbabwe reflects especially badly on President Mbeki and his government, led by the African National Congress. In the kindest interpretation, Pretoria fears a failed state on its northern border. But by what measure is Zimbabwe not already a failure? Once stable, its economy is a wreck, notching up the world’s highest inflation rate, at 1,700%. Millions of Zimbabweans are fleeing, mostly to fast-growing South Africa, where they work as domestics, waiters and teachers.
Less kindly, and more accurately, the South African leader has simply taken Mr. Mugabe’s side in his war on Zimbabwe’s democratic institutions, its press and opposition, and its people. The ANC and Zanu (PF) were both liberation movements that wrested power from white-led regimes and have held it since — the past 27 years in Zimbabwe and 13 in South Africa. Mr. Mugabe claims special cult status for winning a war, while the ANC merely settled — in the view of some in South Africa — for a negotiated transition from apartheid.
Starbury Says ‘Enough’ to High-Priced Sneakers
One NBA Star Says Fashion Doesn’t Have to Hurt Your Wallet
By JOHN STOSSEL and FRANK MASTROPOLO
March 21, 2007 â€” – Sneakers today are a hot fashion item. Hip-hop stars like Nelly rap about their Nikes in songs like “Air Force Ones,” named after Nike’s best-seller.
Kids get robbed for their sneakers, or worse — some have even been killed.
Sneakers are such a status symbol today that “sneakerheads,” as they call themselves, pay hundreds of dollars for custom-painted or vintage sneakers. They gather to buy, sell and trade sneakers at conventions like Dunkxchange, which stages shows across the country.
How did the simple sneaker change from a canvas and rubber thing that allows you to run in comfort to today’s $100-plus high fashion statement?
It began 20 years ago when Nike signed basketball superstar Michael Jordan and then hired movie director Spike Lee to make a series of commercials for Nike’s Air Jordan line. The ads popularized the catchphrase, “Money, it’s gotta be the shoes!”
And this led to a world where many kids believe “the shoes” help stars like Jordan play so well. They consider $100-plus sneakers, even $200 sneakers a necessity.
“Suddenly sneakers became a status symbol, when in the past, they were just completely utilitarian things to put on your feet when you ran around the street,” said Stuart Elliott, advertising columnist of The New York Times.
“Nike came along and began to sell sneakers in a completely different way, through talking about fashion, and the idea that the sneaker helped you run faster or jump higher began to allow them to charge more for it,” Elliott told me.
“If the sneaker was in vogue this year and would be out of style next year and you wouldn’t want to be caught dead on the street with it, then they can charge every year when they change the styles.”
Nike and other brands have made millions off of this ridiculous conceit. Now Nike even has stores that sell $2,000 sneakers, made of anaconda snake or crocodile with 18-karat gold accessories.
‘Starbury’ Had Enough
Enter Stephon Marbury, the NBA star of the New York Knicks, often called “Starbury.” He grew up poor, in a housing project in New York City. Marbury, one of seven children, wanted Air Jordans as a kid but for his mother, he says, that was an automatic “no.”
“She just wasn’t spending that type of money for sneakers,” Marbury said. But he had to beg for those sneakers. “Because it was just the shoe to have. It was a fashion statement,” Marbury said.
“Two hundred dollars was $200. It was a lot of money. It was a sacrifice,” said Mabel Marbury, Stephon’s mother. “Anybody that would take their money and buy a pair of sneakers and don’t have no food in their house — is silly.”
So when Marbury became Starbury, earning $17 million a year, he said “enough” — he would come out with a line of sneakers that sell for less than $15. He teamed with Steve & Barry’s University Sportswear, a national chain with 200 stores, and came out with the Starbury line of sneakers, hats and jerseys. Nothing sells for more than $14.98.
“I think Stephon’s own involvement is probably key here,” said Michael Atmore, editorial director of Footwear News. “There’s never been a big name athlete that’s come out and said you don’t need to pay as much. And that’s what Stephon is doing.”
Marbury made a 40-city tour when the sneakers debuted and Atmore credits that for the shoe’s success. “He showed the customer that he was behind it. And I think that’s critical for kids to connect to this brand.”
The Proof Is on the Court?
And Marbury wears the same sneakers on the basketball court that are sold in stores — proof, Marbury said, that he believes in their quality.
But will they do well? Will kids buy a low-priced sneaker?
Apparently yes. In city after city, kids and parents rushed in. Steve & Barry’s President Andy Todd told ABC News that the chain sold out two month’s inventory in just three days when the sneakers debuted last August. Seven months after the sneakers’ debut, Todd said, they continue to sell well…..
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