IN THIS CHAPTER, I REVIEW THE EMPIRICAL ARGUMENTS OVER whether we have experienced a period of explosive growth in tort litigation. Pro-tort reformers refer to this expansion as a “litigation explosion.” Growth – even explosive growth – in tort litigation is not necessarily an adverse development. The issue is whether the increased litigation generates social costs that exceed the resulting benefits. Steven Shavell argues that the socially optimal level of suit is the perfect balance between social benefits (in the form of deterrence of injurers) and the social costs of litigation (the administrative costs of courts and judges). At some level, he states, an increase in the marginal cost of litigation may exceed the marginal deterrence benefit. In other words, if there are too many lawsuits, the public costs may outweigh the benefits of deterrence. On the other hand, if there are not enough lawsuits, product manufacturers may not sufficiently intensify precautions against harm.

Professor Shavell's theoretical model assumes that all tort litigation has a deterrent effect – an assumption that he has come to doubt – and that the social costs of litigation are purely administrative. In fact, many costs exist outside of Professor Shavell's model. For example, as I explain in Chapter 20, Section B(1), there was neither real compensation nor deterrence when tort lawyers came within an eyelash of enriching themselves by more than $100,000,000 at the expense of the State Farm Insurance Company and its policyholders.