Thursday, June 26, 2008

The Exxon Valdez Ruling

I don't know very much about this, but the Supreme Court just ruled that punitive damages cannot exceed compensatory damages.  Having just take a survey class on law and economics, I know that there are some good reasons for punitive damages (the classic one is that compensatory damages should be scaled up by the inverse of the probability of getting caught for the misdeed), so this rule strikes me as slightly simplistic.  But I'm not clear on why, after paying for all the damage that they did, Exxon should be expected to pay an enormous amount in punitive damages.  

Yahoo News is covering this story from the victims' perspective.  Not surprisingly, many of them are unhappy to be getting less money rather than more.  In fact, many of them "were planning their retirements with the $2.5 billion in punitive damages that Exxon Mobil Corp. was expected to pay."  Given that these people received compensatory damages, which means that they were (at least in theory) compensated for lost earnings (and lost future productivity), is it reasonable for them to demand that Exxon also pay for their retirements?  I'm not convinced that the answer is "yes."  I'm quite sure that a lot of people do not feel that the compensatory damages were adequate, but nobody seems to care about the distinction between the types of damages.

On a lighter note, one fisherman attempted to express his indignation by saying,
It [the decision] really hurts...It gives big business the formula they need to calculate the cost of their actions when they destroy the environment.  This gives them the formula to calculate their risk, period.
Would he prefer that big business only have an unbiased estimate of the cost of their actions?


Andy Hall said...

Is this blog gonna be updated, or what?

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