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“Anchoring” And A New Argument Against Medical Malpractice Caps

Daniel Kahneman is known as perhaps the greatest living psychologist of the last half century. His work has spanned decades, including groundbreaking efforts on some of the most important psychological insights of all time. He won the Nobel Prize in Economics several years ago for the work he had done over a lifetime on the irrationality of human decision-making. Just this year he published his magnum opus, essentially a summary of all of his work and his current understandings of the most important psychological issues of the day. The book, “Thinking, Fast and Slow,” was recently named one of the New York Times ten best books of the year. It is also a treasure trove of fascinating information for all injury lawyers (as well as defense attorneys) as it provides the best overall analysis yet of how many people make choices and what influences those choices.

For example, Kahneman discusses one “heuristic” (a now commonly used term that Kahneman invented) known as “anchoring” and the perspective that it might provide in the context of medical malpractice damage caps. Anchoring is a phenomenon whereby individuals who are asked to consider a particular value (i.e. jurors considering a damage award) are influenced by some other subtle suggestions. Psychologists have found that no one is immune from it, and even when they are aware of its impact they are still affected. In that way anchoring effects are some of the most reliable and robust in all of psychology.

The most common studies analyzing the effect involve asking two questions of participants about an unknown quantity. Two possible questions might be asked in this exact order:

1. Is the tallest redwood tree more or less than 900 feet?
2. What would you guess is the height of the tallest redwood tree?

Some participants were asked the same question but 900 feet in the first question was replaced with 300 feet. The first question does not necessarily have any connection to the second. However, the exact quantity included in the first question highly influences what respondents guess in the second. Those whose first question included 900 feet guess a far higher estimate than those whose first question was 300 feet. In other words, the first question was an “anchor” that influenced the participants raw judgment of quantity in the second. Amazingly, these results hold even when the anchoring value is obviously wrong. Even if the question asked whether the tree was more or less than a mile high, individuals were still found to be influenced by the value of that anchoring text.

In his latest book Kahneman explained that this anchoring effect can have implications on damage amounts in personal injury cases. He suggested that implementation of a “cap” on damages might actually act as an anchor. If certain damages were capped at $1 million that value would likely be used by jurors as an influencing factor, often pulling up award amounts that would be lower than if jurors had no cap and could reach a decision on their own. Therefore, medical malpractice caps may actually “pull up” many awards that otherwise might be nowhere near the cap amount. The jurors will hear that the max that they can provide is $1 million and be influenced to award a sum closer to that amount, even if they otherwise would have awarded far less. This would hold even if jurors are aware of the anchoring effect-it is almost impossible to fend off. In this way, Kahneman suggests that it is only the largest, “serial” defendants who could ever benefit from these caps, as smaller companies are likely to be hurt by arbitrary damage limits.

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