Corporate & Securities Law

Presenting Complex Economic Theories to Judges

This fascinating OECD document compiling submissions on the topic is a gold mine of observations on purported best practices for presenting economic testimony to judges and issues facing competition authorities and judges deciding complex antitrust cases on the basis of complex economic evidence. Here is one excerpt from the U.S. submission that caught my eye:

The U.S. enforcement agencies believe that an economist is unable to educate or persuade a judge if the judge perceives that the economist is acting merely as an advocate for a litigating position.5 This perception is best avoided by making sure that an economist offers sound economics, and does nothing else, when appearing in court. In preparing for court, competition agencies should carefully consider both the conclusions and methodologies of their economists. Agencies should strongly discourage their economists from offering opinions for which they are unable to articulate a clear basis that is firmly grounded in the models and methods of economics and also the facts of the case.

Although economic experts should not act as advocates for a litigating position, they should act as advocates for their own economic analysis. In coming to any useful view in a competition case, an economist makes many choices. For example, an economist in a merger case may chose some particular basis for assigning market shares (e.g., sales or capacity) or rely on some particular theoretical model of competitive interaction for predicting the price effects of a proposed merger. If these choices appear to matter and yet seem arbitrary, a judge is unlikely give much weight to the economist?s conclusions. Thus, an economist should always explain the logic underlying these choices based on knowledge, experience, and especially the evidence in the case.

And a point of consensus from the executive summary:

Some courts have experienced difficulties with basic economic assumptions and theories. Indeed, in some jurisdictions the courts have expressly conceded that the economics can be too complex to understand. There is reason to be positive about progress, however: judges want to understand the economic issues; it is not the case that they are narrow in their thinking. While judges are often anxious about the methodologies employed by economists, they nonetheless wish that they could understand better the economic debate.

Divergence is particularly acute across jurisdictions concerning the extent to which they have developed rules and procedures regulating the introduction of economic evidence ? in particular expert witnesses ? in court proceedings. These rules and procedures aim to ensure the integrity and quality of economic evidence, including testimony at trial, and to persuade courts to accept this type of evidence. It is evident that these requirements are more developed in those states where litigation is a significant feature of the competition law landscape.

Full post as published by Truth on the Market on December 23, 2008 (boomark / email).