Global Economics

Tom Keene's Econo Chat


Suppose I have a shrimp boat, and I haven't been able to get out and catch any shrimp because of the oil spill. How do you calculate what I have coming to me?
First, it is very hard to calculate losses from a long-term business interruption as long as the leak continues. Once the leak stops, I will sit down with that shrimper. We will try and agree on a loss. I will offer a check. He can either take it or say "no, thank you" and litigate.

Ken, you did seminal work establishing just compensation for the victims of 9/11. Now give us a framework of how you establish that shrimper's check. Is it a net present value analysis of a 20-year work life?
You're not far off. I'll say, "Mr. Shrimper or Mrs. Shrimper, let's see what you have been doing in the past, pre-leak. Let's see what your tax returns or your profit-and-loss statements show. Let's try and agree on what the likely impact will be going forward."

What about my pain and suffering if I planned a vacation and I can't go to the beach?
No pain and suffering for a vacation loss. Also, don't forget the real challenge here is not the shrimper. It's that restaurant in New York City that says "Mr. Feinberg, I have the best shrimp scampi in the city, but I can't get Gulf shrimp now. I am losing business. Give me a check." How attenuated or indirect will you allow claims rising out of this spill? That is a challenge.

Keene hosts Bloomberg Surveillance 7-10 a.m. ET on 1130 AM in the New York metro area and nationally on SiriusXM 113.

Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus