The John M. Olin Center

Paper Abstract

285. Bruce Hay and David Rosenberg, The Individual Justice of Averaging, 06/2000.

Abstract: In this essay, we examine the perceived problem of individual justice posed by compulsory averaging to resolve civil cases. The norm of individual justice we focus on is that of effectuating the interests and welfare of the individual litigant. We investigate, in light of this norm, the choice between two general types of rule: a rule of "individualization," under which litigants may insist that a case be resolved according to its individual features; and a rule of "averaging," under which a case is resolved according to the features of the average case, notwithstanding either party's desire for individualization. We consider this choice from the standpoint of a (prospective) litigant who is uncertain about the quality of his own case.

Our principal claim is that a litigant in such conditions of uncertainty would frequently choose the rule of averaging, even though this would be disadvantageous in the event his case turns out to be better than average. In particular, our analysis shows that if a prospective litigant is concerned only with the expected relief to be awarded, he would be indifferent between averaging and individualization. Two factors, moreover, favor a strict preference for averaging: (1) the expense of litigation, which by its nature is higher under individualization; and (2) considerations of risk, which is generally though not always greater under individualization. However, transaction costs and incentive problems generally prevent litigants from effectuating their preference for averaging. Under such circumstances, norms of individual justice would support a court-imposed rule of compulsory averaging.

This argument calls into question the widely-held view that compulsory averaging infringes the autonomy or welfare of the individual litigant. The flaw in that view, we believe, is that it adopts an ex post perspective, taking as given the quality of the individual litigants' cases. For purposes of rule design, however, the appropriate focus is on the interests of the prospective litigant who is uncertain about the relative quality of his claim.

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