Information and the aim of adjudication: truth or consequences?

AuthorKaplow, Louis
PositionIntroduction through III. Accuracy in Adjudication A. Liability, p. 1303-1336 - Symposium: Festschrift in Honor of Richard Craswell

INTRODUCTION I. INFORMATION AND SUBSTANTIVE LEGAL COMMANDS A. Rules Versus Standards B. Precision II. DECISION CRITERIA IN ADJUDICATION A. Burden of Proof 1. Regulation of proposed conduct 2. Incentives for ex ante behavior B. Pretrial Terminations C. Substance Versus Procedure III. ACCURACY IN ADJUDICATION A. Liability B. Damages and Ex Ante Behavior C. Damages and Compensation IV. ENDOGENOUS BEHAVIOR IN ADJUDICATION A. Decision to File 1. Private suits 2. Public enforcement B. Incentive to Generate Information V. ADDITIONAL CONSEQUENCES OF TRUTH A. Legitimacy B. Abuse of Power and Corruption C. Participation and Other Process Values D. Preferences for Truth Per Se VI. TRUTH INSTEAD OF CONSEQUENCES CONCLUSION INTRODUCTION

Adjudication, at its core, is a process by which information is generated and assessed for purposes of obtaining an appropriate legal outcome. In some domains, adjudication concerns individuals' previous behavior (contract breaches, torts, crimes), wherein the prospect of legal redress may deter harmful acts and also, as a side effect, chill benign conduct. In others, often involving specialized agencies, adjudication determines whether proposed behavior will be allowed or prohibited. Legal system design is challenging in significant part because information ordinarily is costly and imperfect.

This Article analyzes a broad array of features of the legal system, asking throughout whether system designers should aim at the truth or at consequences. Here, truth is not taken as an abstract concept or a normative principle. Nor is it taken to have a unitary meaning in different realms. Instead, the notion is to be understood as a proxy criterion (or even a metaphor) that seems appealing in particular domains and thereby is often taken as an appropriate target by policy analysts when they assess pertinent elements of the legal system.

This Article will assume, until the final Part, that system engineers are in fact concerned entirely with consequences for social welfare. The question then is whether, in undertaking their work, it is a plausible strategy to aim at the truth with the expectation that this protocol will ordinarily lead to good consequences. Perhaps there are some moderate deviations, occasional exceptions, and limitations, but nevertheless the applicable notion of truth might typically provide a workable guide or at least a sensible starting point. A competing view is that system engineers need to focus quite explicitly on consequences themselves, largely setting truth to the side; indeed, perhaps they need to strive to ignore truth's siren call.

The Article examines how these two methodologies differ and what general lessons may be drawn from the comparison. It will emerge that a large divergence often exists and that its character can be counterintuitive. Accordingly, system engineers really do need to concentrate on consequences. This message is not one that is opposed to truth per se but rather a strong admonition: it is dangerous to be attached to the alluring view that adjudication is primarily about generating results most in accord with the truth of the matter at hand.

To frame the inquiry, it is useful to consider the underlying reason that truth and consequences can produce such divergent prescriptions. Start in an idealized world in which it is possible to achieve perfect accuracy in adjudication-such that every outcome corresponds to the truth--at zero cost. In such a world, in most instances and with some further simplifications, social welfare would be maximized by going with the truth. Adjudication would aim at the truth, it would in fact hit the bull's-eye every time, and it would achieve the best consequences. Harmful acts would always result in the appropriate sanction, benign acts would not be discouraged at all by the prospect of the mistaken imposition of sanctions, and system costs would be nonexistent. This is a first-best setting (or close to it), an analogue to a frictionless universe. Here, we do not see much reason for truth and consequences to conflict.

Our actual system design problem, of course, is in the world of the second best. Nontrivial system costs must usually be incurred to obtain even an approximation of the truth. Attempting to move closer is increasingly costly, and perfect truth is unobtainable. Should we nevertheless pretty much always aim at the truth?

The obvious answer is in the negative. The presence of costs alone tells us that we will need to make tradeoffs. Spending the entire GDP to get as close as possible to the truth in a single torts dispute would destroy society, not maximize social welfare. This simple point instructs us to avoid excess, but it fails to illuminate a course of analysis that can prescribe what moderation would look like and what it should depend on.

Moreover, once complete truth is off the table, we confront significant hurdles: the lack of an obvious metric for degrees of truth or of a way to place a value on truth units, whatever they may be. Inquiries are sometimes conducted as if there were some sort of Platonic truth measure, but little reflection is required to appreciate the need to dig deeper. More explicit treatments may invoke various criteria, such as the command to minimize the number of errors in adjudication or the command to aim at some ratio of true positives to false positives. Such guidelines, however, are ad hoc and conflicting, and they can have absurd implications. For example, it is obvious that adjudicative errors are minimized by eliminating adjudication, and further analysis indicates that some proposed performance ratios are improved by raising the flow of innocent acts into the system (because such may well improve the system's batting average). To foreshadow a bit, we can see from these examples that it is grossly insufficient to consider only what happens in adjudicated cases; underlying behavior and determinants of what enters the legal system will be central. The main purpose of the legal system is not for adjudication to look good according to some abstract standard but rather for its operation--including the anticipation thereof--to foster productive activity, restrain harmful conduct, and avoid undue expense.

More fundamentally, such precepts--whether focused entirely on some notion of truth or on related considerations involving types of errors--are ungrounded. As already mentioned, the approach this Article adopts is that legal system engineers should be guided by the maximization of social welfare. That is, adjudication should, in principle, aim at consequences. Whether, how, and to what extent truth is important will emerge in the course of the analysis. Any truth metric or valuation of truth will be a byproduct of the inquiry, not its driver. Aiming at the truth may sometimes be a good summary or proxy for part of what matters, but it is never the entire story (if for no other reason than cost), and is often a misleading guidepost.

In complex systems, this sort of perspective is familiar. Indeed, even when the setting is simpler, one does not always aim directly as one would in an idealized world. A marksman might optimally aim high and to the left to account for distance and wind. But that involves just a modest refinement: the maxim that one should aim true is approximately correct. When building a road to the top of a mountain, however, aiming straight for the top--following the precept that the shortest distance between two points is a straight line--is a prescription for disaster. Switchbacks will be required, so that much of the time the road is actually going in the wrong direction by reference to the ultimate endpoint. Moreover, depending on the conditions, it might be best to go down, not up; around to the other side; and only then begin a zigzagged ascent.

The foregoing should lead us to wonder whether adjudication design that aims primarily at the truth will perform poorly, but it does not tell us how worried we should be. That depends on whether this domain is more like a gradual incline with a few bumps or a treacherous mountainside with imposing obstacles. There are two general reasons to expect our challenge to be more like the latter.

The first is the presence of costs. Not only will we want to stop short of the top, but once we know this, it is impossible to determine how far to go without an explicit determination of the social value of moving closer. One can contemplate the meaning of truth until the end of days without illuminating that question. The value of truth in adjudication depends on its consequences, and valuing various outcomes is outside the realm of truth per se. As a comparison, how can we value an additional medical test of a stated precision without assessing the consequences of one or another course of treatment under different medical conditions? In this type of setting, truth is indeed something that matters, but it is only one element of a larger calculus. It is a start to recognize that tradeoffs must be made, but this recognition alone tells us little of their anatomy.

The second reason is that the design of adjudication in many settings influences behavior. We are centrally concerned about deterring harmful acts and avoiding the chilling of benign conduct. Such primary behavior, and also litigation itself, is endogenous; social welfare depends on the operation and feedbacks of the system as a whole. In such a complex and interactive environment, moving somewhat closer to truth in adjudication, by any simple metric, need not improve social welfare even without regard to costs. In addition, seemingly more expensive systems can be cheaper (for example, via deterrence, reducing the frequency of adjudication) and less expensive ones more costly. Due to these multiple and moving targets, the optimal design of adjudication may be more roundabout than building a road up a treacherous mountain: at least the mountain stands...

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