Personal Consumption

Personal Consumption - Items purchased by an individual that are for the sole use of that individual. Such items include: Clothing, food, haircuts, etc.

 Application to Forensic Economics 

Personal consumption factors are calculated as the percentage of income that is spent on items solely for the individual in question. They are typically applied to damages calculations in wrongful death cases. In some special circumstances they are applied to personal injury cases. The reason for the personal consumption factor is to deduct from the damages award the amount of income that is no longer required due to the fact that the individual is deceased and no longer requires goods and services. In some injury cases, such as an indivudal who will become permanently hospitalized, personal consumption deductions may be applied because the costs of their consumption will already be included in the costs of the healthcare facilitiy that they will be in.

There is debate among forensic economists over which income personal consumption should be deducted from: the decedent's indivudal income, or the total household income.

Calculating Personal Consumption

One way to calculate personal consumption is by having case specific data from the family of deceased/injured party.

The other popular way is through the utilization of data from the Consumer Expenditure Survey, provided by the Bureau of Labor Statistics.


 * Personal Consumption and Maintenance (PCM). While sometimes defined restrictively in individual state law, this term generally refers to the amounts of money a decedent in a Wrongful Death litigation would have spent on himself or herself in a manner that would not have benefited the decedent’s survivors. The logic underlying this concept is that a part of an individual’s lost earnings would have been spent in a way that did not benefit survivors of the decedent. That amount should be subtracted to determine the losses of survivors.


 * Maintenance (as in Personal Consumption and Maintenance). In some states, there is a legal standard in Wrongful Death and Survival Action cases that only those types of consumption that are involved with narrowly “maintaining” a worker should be subtracted from a worker’s lost earnings and lost fringe benefits, rather than, as in most states, the total amounts of expenditures on personal consumption, net of family goods, that a worker would have been likely to have spent on himself. Where “maintenance” is used as the standard, it appears that the distinction is between minimum necessary expenditures required for a worker to provide his or her labor in the labor market, and discretionary expenditures by the worker on the worker’s own hobbies and interests, which could have been used to the benefit of other family members, but were not. In some states using a “maintenance” standard, legal conventions often develop for measuring maintenance that are not based on economic principles.


 * From: http://www.umsl.edu/divisions/artscience/economics/ForensicEconomics/definitions.html