Opinion ID: 2260150
Heading Depth: 2
Heading Rank: 5

Heading: Fisher, The Theory of Interest 43 (1930).

Text: Since over the long run interest rates, and, therefore, the discount rates, will rise and fall with inflation, we shall exploit this natural adjustment by offsetting the two factors in computing lost future earning capacity. Accord, Freeport Sulphur Co. v. S.S. Hermosa, 526 F.2d 300, 310 (5th Cir. 1976) (concurring opinion). We are satisfied that the total offset method provides at least as much, if not greater, accuracy than an attempt to assign a factor that would reflect the varying changes in the rate of inflation over the years. Our experiences with the use of the six percent discount rate suggest the difficulties inherent in such an approach. As to the concomitant goals of efficiency and predictability, the desirability of the total offset method is obvious. There is no method that can assure absolute accuracy. An additional feature of the total offset method is that where there is a variance, it will be in favor of the innocent victim and not the tortfeasor who caused the loss. The superiority of the total offset approach becomes apparent upon comparison with the offset present value method. In Feldman, rather than forecasting the impact of inflation on future earnings, through the use of an inflation adjusted interest rate, Judge Blumenfeld discounted future earnings based upon 1971 dollars. However, from an analysis of the formula involved, it appears that predicting prospective interest rates is as difficult as forecasting future inflation. Freeport Sulphur Co. v. S.S. Hermosa, 526 F.2d 300, 310 (5th Cir. 1976) (concurring opinion). Notably, the merit of discounting to present value upon an inflation adjusted interest rate was questioned by the very court which originally proposed it. . . . [S]ince Connecticut law requires the discounting to present value of damages for the destruction of future earning capacity, and since such discounting demands assessment of the future earning power of money, the Court is compelled to engage in economic forecasting despite the inexactitude of the dismal science's soothsaying. It is not open to this Court to decide that the ascertainment of a discount rate has become too speculative to be fair, and that the statutory mandate of awarding `just damages' for wrongful death would be better served by dispensing with the discounting process altogether. 382 F.Supp. at 1293 n.30 Moreover, the complexities inherent in factoring the inflation out of the market rate of interest moved Judge Blumenfeld to observe that: Nothing is more conclusively established by the instant memorandum of decision than the difficulty of ascertaining the amount of damages due in this case. . . . . 382 F.Supp. at 1295. [23] An additional virtue of the total offset method is its contribution to judicial efficiency. Litigators are freed from introducing and verifying complex economic data. Judge and juries are not burdened with complicated, time consuming economic testimony. Finally, by eliminating the variables of inflation and future interest rates from the damage calculation, the ultimate award is more predictable.