Realistic Assumptions, Economic Models, and the Admissibility of Expert Testimony in the Class Action Lawsuit Dover v. British Airways
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The “Assumptions Controversy” is a historical debate among economics methodologists regarding whether simplifying assumptions must be realistic for a model to be valid. Nobel Prize-winning economists have occupied both extremes: Milton Friedman claimed that predictive accuracy is the only relevant criterion for a model’s validity, while realists such as Paul Samuelson view realistic assumptions as intrinsically valuable and desirable.
This debate also has implications in the context of litigation. Economics expert testimony is key to establish causation and estimate damages in cases involving antitrust violations, employment discrimination, toxic torts, and more. Experts use idealizations and omissions to transform complex data into a simplified model whose conclusions can be understood by non-experts. These simplifying assumptions are often targeted by opponents as “unrealistic,” prompting motions to exclude the testimony. Judges act as “gatekeepers,” deciding whether the model-based testimony is reliable enough to be admitted to the jury, who weighs the credibility of evidence. Legal precedent and scholarship have failed to provide clear admissibility guidelines, resulting in inconsistent decisions that define multimillion-dollar cases.
Recent developments in the assumptions debate provide a dynamic approach by classifying different types of assumptions and realisticness. A synthesis of these typologies potentially offers courts a pragmatic solution to admissibility rulings that is based in theory from economics methodologists. This research applies the theoretical framework to Judge Dearie’s admissibility decision in the class action lawsuit Dover v. British Airways, where experts testified regarding whether the airline’s fuel surcharges were correlated with the market price of jet fuel.