Michael Abramowicz over at Concurring Opinions has an interesting post about the ongoing litigation between economists John Lott and Steven Levitt. Lott’s suit alleges that Levitt defamed him in his recent book Freakonomics by suggesting that Lott’s research on the relation between guns and crime could not be “replicated” by other scholars and in a subsequent email to an economist suggesting that Lott had paid $15,000 to the Journal of Law & Economics to publish in a special issue a series of articles supporting Lott’s views on guns. This week, a federal district court in Chicago granted Levitt’s motion to dismiss the claim concerning the statement in Freakonomics but denied his motion to dismiss the claim concerning the email.
Abramowicz suggests in his post that Lott’s “potential damages are almost certainly low” and that this case “though not technically frivolous” is “of a type that our legal system does not handle well” and “a vexatious use of the legal system, because the cost of bringing the claim seems much larger than any plausible reputational damage to Lott.”
Leaving the merits of the dispute aside, my question is this: if the cost of bringing the claim is really much larger than any damages that Lott may recover, then why is Lott pursuing the case? Isn’t Lott’s pursuit of the case strong evidence that he believes he could recover more than his costs?
Moreover, if indeed the claim is worth less than the cost of litigating it, why is Levitt vigorously defending the suit? Why have he and HarperCollins (his publisher) spent so much money disputing liability (e.g., by filing the motion to dismiss) rather than simply relaxing, knowing that damages won’t be very high? Isn’t it just as “vexatious” to dispute a vexatious claim as it is to assert one?
The answer, I think, is that defamation suits implicate subjective nonpecuniary interests that are difficult for courts to value. The formal legal remedies available in such cases are thus usually undercompensatory and pale in comparison to the reputational effects of winning or losing. While the financial stakes may be low, more is at stake than simply the money. The case is about reputation, not money. Hence the current legal quagmire. Even a generous financial settlement is therefore not likely to satisfy Mr. Lott, and by the same token an admission of having made a false statement is not something that Mr. Levitt would likely consider offering.
Here’s my suggestion for the most efficient way to end the dispute: in exchange for Lott’s agreement to dismiss the suit with prejudice, Levitt could agree to issue a statement not admitting to having defamed Lott but rather simply saying that he respects John Lott’s intellect and his work as an economist even though he remains skeptical about Lott’s work on guns and crime.
Hopefully a settlement along these lines is in the works, especially now that HarperCollins is out of the case and Levitt will have to start paying his lawyers out of his own pocket. But then again, settlement of the case would deprive bloggers of an interesting topic about which to comment!