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Psychological Factors At Play in Injury Lawsuit Damage Caps

The famed psychologist Daniel Kahneman has garnered much praise this year for his book entitled “Thinking, Fast and Slow.” The text is essentially a summary of the man’s lifetime of work and is an ideal primer on the current state of human knowledge as it relates to human thinking and decision making. Kahneman earned his place among psychology’s giants first and foremost for his work on discovering and defining “heuristics”-systematic errors that all humans make when reaching decisions. In fact, it was his work on heuristics with Amos Tversky that led to his winning the 2002 Nobel Prize in Economics.

Mr. Kahneman’s work has implications in a wide range of areas, including in personal injury lawsuits (of which all birth injury cases fall). In Thinking, Kahneman discussed a concept known as “anchoring.” Anchoring is a heuristic whereby individuals are prone to be influenced by suggestions, ideas, or figures they are exposed to immediately before making a decision. That influence exists in a wide range of contexts, even when the individuals are specifically told that the exposure might influence their thinking. In this way, it is one of the most reliable and robust principles measure in experimental psychology.

Usually anchoring influence occurs when individuals need to quantify something-such as the value of damages in a birth injury lawsuit. When forced to estimate a value, an anchoring value will be influential. For example, in the most common anchoring experiment a research participant will be asked two questions in a very specific order. Those two questions might be something like this:

1. What Mahatma Gandhi older or younger than 90 years old when he died?
2. How old would you guess Mahatma Gandhi was when he died?

In an experiment, half of participant would be asked the two questions above. The other half would have 45 years old substituted for 90years old in the first questions. The findings indicate that there is significant difference between the individual estimates in question two depending on the form of question one. In other words, the “anchor” of question one influences the guess. This influence was found even when the “anchor” was clearly incorrect. Even when the first question asked if Gandhi was older or younger than 190 years old (an obvious question), respondents were influenced in answering the second question. Specifically, the higher the age in the first question, the higher the average guess in the second.

In the personal injury lawsuit context, Kahneman suggests that this anchoring heuristic may have implications on the effect of damage award caps. He suggests in Thinking that the cap amount (perhaps $1 million) will act as an anchor when jurors are asked to specifically quantify damages that need to be awarded. Interestingly, he suggests that this may unfairly inflate juror awards in many contexts. While large judgments will be limited inherently by the law, the anchoring effect of the cap will raise what otherwise would be lower verdicts-closer to the “anchor” of $1 million. In this way, Kahneman believes that it is only the largest defendants or those who are serial defendants that stand to gain from medical malpractice caps. Many other defendants may actually be hurt by the arbitrary imposition of an award cap.

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