A forensic economist measures economic losses for litigation: lost earnings and benefits, household services, support to survivors, the present value of future care, lost profits, and business value. The work is built from the records in the case and published government data, follows the methods published in the field's literature, and is presented so that every input can be traced and tested by the other side.
Forensic economics is the application of economic analysis to questions in litigation, almost always the question of what a loss is worth. The economist is retained to quantify economic damages: the money a person, a family, or a business did not receive and will not receive because of an injury, a death, a termination, a breach, or a fraud. The losses are measured in dollars over time and reduced to a single present value that a court can award.
The engagements fall into a few families. Lost earnings and earning capacity compare what a person would have earned with what the person can now earn. Wrongful death economic loss measures the support and services a decedent would have provided to survivors. Household services valuation puts a replacement cost on unpaid work at home. Life care plan cost projection reduces a clinician's plan for future care to present value. On the commercial side, lost profits measure what a business lost from an interruption, and business valuation measures what an interest was worth on a given date.
Every damages calculation has the same shape. The economist projects what would have happened but for the event, projects what will happen given the event, takes the difference year by year, and reduces the future portion to present value. What differs between engagements is which streams are in the comparison and what evidence supports each input.
The inputs come from two places. The records in the case, tax returns, pay and benefit records, medical and vocational opinions, financial statements, and contracts, establish the facts specific to the person or the business. Published government data supply what the records cannot: wage growth, labor force participation, hours spent on household work, the share of income a household spends on each member, and the yields at which an award can be invested. The earnings projection and present value method pages show how those pieces are assembled, and the guide to economic damages walks through the whole calculation.
Forensic economists typically hold graduate training in economics, finance, or a closely related field, and the discipline maintains its own literature and professional bodies. The National Association of Forensic Economics and the American Academy of Economic and Financial Experts publish peer-reviewed journals in which the methods used in damages work are developed and tested, and each publishes an ethics statement that calls for the same method regardless of the retaining party, disclosure of assumptions and their sources, and opinions limited to the economist's field. Our economists follow those statements in every engagement. The forensic economist credential page describes the family of qualifications, and the graduate economics page describes the training.
The economist does not opine on liability or on medical causation, does not decide what work a person can physically do, and does not author a life care plan. Those questions belong to other witnesses, and the economist adopts their findings as inputs and says so. The report is stronger for the discipline: a damages figure that rests on a medical opinion for the horizon and a vocational opinion for post-event capacity can be defended input by input, while a figure that rests on the economist's own guess about medicine or work cannot. The comparisons with the forensic accountant, the vocational discipline, and the author of a life care plan explain where each line is drawn.
Retain an economist whenever a claim includes a loss that runs over time: earnings, benefits, household services, support, future care, or profits. Early retention lets the economist identify the records the calculation will need and coordinate assumptions with the other experts before their reports are final. The when to retain guide lists the signals, and the contact page describes how an engagement begins.
No. The economist measures losses to people and households from records and published data; the forensic accountant works inside a company's books. The two disciplines meet on self-employed earnings, business owner death claims, and commercial damages, and some practitioners work in both.
No. The economist works from records and from the opinions of the medical and vocational witnesses. An interview with the person or the household is often useful for household services and for the earnings history, but it is not an examination.
Both. The method does not change with the retaining party. On the defense side the assignment is usually a review of the affirmative report and an alternative calculation.
Request a consultation on What Is a Forensic Economist? or call (201) 343-0700. Plaintiff and defense counsel.