Americans are uniquely litigious. There are reforms that could be made to the legal system that would fix this, but lawyers are financially incentivized to resist them.
You've seen the commercials.
"If you or someone you know has been harmed by X, call our legal firm right now! You may be entitled to compensation." X could be anything from asbestos, which really does cause cancer, to baby powder and glyphosate, which do not.
This mass recruitment of victims, both real and imagined, is a key weapon deployed by the activist-legal complex in its attempt to shake down companies for money. And they can get away with it because America is a uniquely litigious society. Why?
For starters, the United States has more lawsuits per 100,000 people than similar countries. Harvard's John M. Olin Center for Law, Economics, and Business published a report in 2010 that measured various aspects of the legal systems of the U.S., UK, Japan, France, Canada, and Australia. The lawsuit rate in the U.S. is higher than Canada (by 4 times), Australia (3.8x), Japan (3.3x), France (2.4x), and the UK (1.6x). Additionally, the U.S. has more lawyers per capita (except Israel) and more judges per capita (except France).
Why Americans Are So Litigious
But simply having a lot of lawyers around does not explain why Americans are so litigious. Indeed, the arrow of causation probably points the other way: We have a lot lawyers because we are uniquely litigious. So, what features of the American legal system make us that way? An opinion article by Saurabh Jha published in the Journal of the American College of Radiology, which was built on the work of Walter Olson of the libertarian Cato Institute, attempts to provide an answer. It gives several reasons:
- Allowing "direct-to-plaintiff" advertising. Typically, when a person is injured, he seeks out a lawyer. Now, we have lawyers seeking out injured people. Trial lawyers are drumming up business for themselves in the same way that pharmaceutical companies do when they advertise prescription drugs directly to consumers.
- "No win, no fee" contingency payments. Under this model, a plaintiff only pays a fee to the lawyer if he wins the case. This encourages the lawyer to be as aggressive as possible. Simultaneously, from the plaintiff's perspective, it's all benefit and no risk, which incentivizes people to find sympathetic lawyers eager to sue.
- Perceiving lawsuits as good for society. Lawyers justify lawsuits by claiming that they help fix wealth inequality and prevent bad behavior. In the words of Dr. Jha, "litigation changed from 'necessary evil' to 'social good'." Apparently, lawyers believe they are doing God's work.
All of these take a toll on society. For instance, medical malpractice lawsuits are simply the "cost of doing business" for many doctors. These costs, of course, are passed on to you. One study showed that the cost of liability claims constitutes 1.66% of U.S. GDP, which is over 2.5 times the average cost of liability claims for Eurozone countries.
There Are Solutions, But We Won't Implement Them
There are solutions that could decrease the frequency of lawsuits. One is to follow Europe's model by implementing "loser pay" (i.e., the losing side pays all legal expenses for everyone) and having judges rather than juries try civil cases.
Of course, we'll never reform the legal system. Lawyers make a ton of money (at your expense), so they aren't interested in change. And good luck getting Congress to act; more than 1 in 3 members of Congress hold law degrees. Those who have the sole power to fix our broken legal system are financially incentivized not to.