“ …the health of a state’s civil-justice system is a key indicator of its economic vitality and potential for future growth. A fair, stable, and predictable legal environment is critical to a state’s ability to attract investment, draw new businesses, and generate new jobs.…In many states, unfair and outdated liability laws reward lawsuit abuse, impede job creation, and impose higher costs on everything consumers buy—from new cars to medical care.”
-- John Engler
President and CEO, National Association of Manufacturers and former Governor of Michigan

They and others maintain that reforms to curb tort costs and reduce frivolous litigation would create an environment hospitable to enterprise profitability, thereby expanding investment, creating jobs, and raising living standards.

Mark Crain and Nicole Crain have been investigating this issue using two indices of state judicial quality, one produced by Harris Interactive, Inc. for the U.S. Chamber Institute for Legal Reform and the second by the Pacific Research Institute. Over the next several months, the two educators will work with economists and policy experts from the Pacific Research Institute to analyze the relative effectiveness of different tort reforms adopted in the states.

The study uses rigorous empirical methods to determine which reforms provide the biggest impact. This information will be useful for state and national lawmakers and tort-reform advocates across the country was they consider which reforms to prioritize, in addition to being of interest to the national media.

The study is using state-level data to look at the effect of tort reforms on three factors: tort insurance premiums, tort incurred losses (both insured and self-insured), and tort cases filed. These factors will be dependent variables in the statistical analysis. The independent variables will be the tort reforms enacted in the states, many of them derived from the U.S. Tort Liability Index, produced by PRI. No previous study has rigorously, comprehensively, and objectively measured the impact of reforms on premiums, losses, and litigiousness. The results of this study will greatly expand the understanding of tort reform.

Two policy studies faculty affiliates, Mark Crain and Nicole Crain, traveled to Guatemala in March to contribute to a dialogue on the institutions and legislation needed to promote a developing democracy. Hosted by the Universidad Francisco Marroquín (UFM), they met with scholars, business leaders, and government officials and appeared on two radio shows. Prensa Libre, the largest newspaper in Guatemala, interviewed the professors and published an article discussing their research.

During the weeklong visit, Mark Crain presented research titled “Institutions, Public Policy, and Economic Success in U.S. States” before the Fourth Interuniversity Seminar, which included participants from all ten Guatemala City universities. The research details the lessons that can be learned by the variations across U.S. state institutions, an expansion of the work in his recently published book Volatile States. Former President Francisco Flores of El Salvador was among the other speakers at the seminar.

Nicole Crain presented a lecture “How to Confront International Terrorism? The Economic and Political Impact of Terrorism,” which was followed by a panel discussion on whether public policy causes or deters terrorism and violence. Participating on the panel with her was Julio Godoy Anleu, the current Guatemalan vice-minister of security.

Nicole Crain also delivered the inaugural lecture of the security and defense course organized by the Security Council of the Ministry of Defense. She spoke on the economics of national security, discussing national security strategy and budgeting and performance measures, before roughly 70 civilian and military members of the defense community. At the conclusion of her address the Guatemalan National Ministry of Defense presented her with a Diploma de Reconocimiento from Brigadier General Edgar Sanchez.

The Crains engaged in academic discussions with members of the highly regarded Centro de Estudios Economico-Sociales, or Center for Social and Economic Research (CEES). Roberto (Bobby) Rios ’57 is the executive director of CEES, which was founded in 1959 by Manuel F. Ayau, UFM’s founding rector, and a group of friends, including Antonio Aycinena, Ernesto Rodriguez Briones, Imrich Fischmann, Enrique Matheu, Enrique Garcia Salas, and Alejandro Arenales Catalan. The current president of CEES is Giancarlo Ibarguen S.

In addition, the Crains lectured before UFM undergraduate and graduate students on strategic analysis, using empirical work to illustrate the theoretical aspects of the discussion. Throughout the week they had informal meetings with business leaders to discuss public policy, including the Central American Free Trade Agreement and potential constitutional reforms that might offer policy stability. Of particular note, the Crains met with a leading Guatemalan industrialist who has been successful in promoting public policies to discuss and advise on the institutions necessary to inhibit protectionism and the economic cost of security related to narco-trafficking.