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Below is a list of articles supporting use of the total offset method for calculation of present value of lost earnings. Brody, Michael T. “Inflation, Productivity, and the Total Offset Method of Calculating Damages for Lost Future Earnings.” The University of Chicago Law Review, 1982, 1003-1025. The author applies four different methods of calculating present value to historical data and finds that the total offset method predicted lost earnings most accurately. Carlson, John A. “Economic Analysis v. Courtroom Controversy: The Present Value of Future Earnings.” American Bar Association Journal, May 1976, 628-631. The author discusses issues related to earnings growth and discounting and influences that are common to both. He concludes that the pure offset method is a reasonable one to use when estimating the present value of future earnings. Lawlis, Frank and Robert Male. “Methodological Issues: Interest Rate and Wage Growth Forecasting.” Journal of Legal Economics, Winter 1994, 55-61. The authors study the relationship between wage growth and interest rates and determine that the relationship is random. Based on this, they conclude that the total offset method is the least biased method of calculating present value. Pelaez, Rolando F. “Pennsylvania’s Offset Rule: Fantasy Masquerading as Economics.” Journal of Legal Economics, Winter 1995, 1-16. The author notes that the offset method in Pennsylvania offsets interest, not with wage growth, but with inflation. This results in overcompensation of the plaintiff, since productivity increases are not included in this offset. The author concludes that the total offset method has a lower error rate. Pelaez, Rolando F. “The Total Offset Method.” Journal of Forensic Economics, April 1989, 45-60. This paper evaluates historical earnings for various industries and concludes that the total offset method results in awards that are not significantly different from fair awards. Schwartz, Eli. “Below-Market Interest Rates and the Total Offset Method Re-Visited.” Journal of Forensic Economics, Winter 1997, 91-94. The author notes that relating income growth to interest rates should be done over a longer period in order to derive reasonable results for estimating fair awards. When this is done, the rates approach equality, making the total offset method a fair one for estimating lost earnings. Schwartz, Eli. "Settling Claims for Lost Income: The Total Offset Method." Dickinson Law Review, 104(4), Summer 2000, 679-686. The author notes that total offset is "an efficient an fair method." Though the correlation between earnings growth and interest may not be strong over short periods, over longer periods, the correlation is "quite robust." Schwartz, Eli and Robert Thornton. “The Effect of Taxes and Inflation on the Real Interest Rate.” Journal of Forensic Economics, Winter 1991, 71-73. The authors note that when looking at the relationship between inflation and the pre-tax real interest rate, the total offset method is an appropriate method for calculating present value. Also see the Use of a Total Offset page for more detail on Vocational Economics' use of this methodology. Last modified: Friday July 15, 2005 04:10 PM |
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