Correctly using assumptions in economic damage analyses

In almost every economic damage calculation assignment, the attorney managing the case, like it or not, will have to provide a number of assumptions to the economist who is evaluating the plaintiff's economic loss. These assumptions may be as simple as :'assume that the injured person would have retired at age 57' or 'assume that the person can now only work a half time schedule'.

Because the attorney will know the case better than anyone, these assumptions can actually improve the quality of the economic damage analysis in the case. However, if the attorney provides assumptions that are not grounded in facts or that conflict with generally accepted practices, the reliability of the economic damage research could be significantly damaged.

This post looks at some of the types of assumptions that should and should not be made in economic damage cases.

Attorney provided assumptions that are usually ok:

*Retirement age can be ok if there is a strong rationale
('assume that she would have worked until her pension kicked in')
*Reduced post-injury work ability
('assume that the plaintiff can now only work a half time schedule because of the injury)
*Promotion or terminations in an employment case
('assume that the plaintiff would have received a promotion')

Attorney provided assumptions that should be avoided

*unsubstantiated post-injury work ability
('assume that the plaintiff can only work a minimum wage job')
*Unsupported interest rates and discount factors
('assume that the plaintiff could have earned a higher interest rate')
*Using a methodology different from generally accepted in the area
('assume a 'zero discount factor')

At the end of the day, the best analysis are ones that are grounded in both the case facts and the science of forensic economics. Providing sound and realistic assumptions in injury and death cases helps achieve this goal.