CHAPTER 3

Compensation for Loss

If we will be quiet and ready enough, we shall find compensation in every disappointment.

—Henry David Thoreau

Learning Objectives

  1. 1. Describe the court’s approach to compensation for economic loss.
  2. 2. Apply market principles to derive estimates of economic loss.
  3. 3. Estimate economic loss associated with earnings streams.
  4. 4. Estimate economic loss associated with options.

Compensation for economic loss is an economic transfer of opportunity, from one party to another. Earlier we noted that economic transfers are, in themselves, often socially undesirable. The reason that transfers work as compensation for economic loss or harm is that they act as a counterbalance that enforces the social contract, generating ...

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