Kurt Schulzke, associate professor of accounting and law at the University of North Georgia (UNG), penned the cover article for the September/October 2019 issue of “The Value Examiner.” The article is “Estimating Economic Damages with Linear Regression and Bayesian Networks (Part I of II).” Part II is slated for the November/December issue.
Both parts will be required reading in Schulzke’s forensic accounting class at UNG in March 2020.
Part I focuses on errors frequently made by experts, attorneys, and judges in using linear regression to estimate damages and business value. To illustrate the problem, Schulzke used an actual breach of contract case in which a federal appeals court reduced the plaintiff’s $66 million jury verdict to zero. To reach this erroneous decision, the court misinterpreted point estimates and confidence intervals, misread correlation as causation, and wrongly insisted that costs must cause revenues, never the reverse.
Part II illustrates how Bayesian networks can help courts and experts avoid these common mistakes.
Schulzke said he hopes the articles will help improve the fairness of damage awards by highlighting this “serious problem in the U.S. court system” and offering solutions to it.