What Is a Forensic Economist?

A forensic economist is an economist retained in a legal matter to measure economic loss and explain that measurement to a court. The job has two halves: building a damages calculation that can be tested — lost earnings, lost profits, lost business value, the cost of future care — and defending it in a report, at deposition, and in front of a jury.

This explainer is written by Roman Garagulagian, Ph.D., principal of Forensic Economic Services and Vice President–West and board member of the National Association of Forensic Economics, the discipline’s professional body. It covers what the work actually involves, where it is used, how it differs from neighboring experts, and what to look for when you retain one.

The short answer

Litigation constantly asks a question the law cannot answer on its own: what is this loss actually worth? A jury can decide that a contract was breached or that an injury was someone’s fault. It cannot, without help, translate that finding into a dollar figure that accounts for a 30-year working life, the difference between wages today and wages in 2050, or the profits a business would have earned had the breach never happened.

That translation is forensic economics. The National Association of Forensic Economics defines the field as the application of economic theory and methods to matters within a legal framework. In practice it means taking the facts of a case — pay records, tax returns, medical projections, financial statements, market data — and producing a number, with the assumptions and methods laid out so the other side can challenge them.

What a forensic economist actually does

Most engagements follow the same arc, whether the matter is a wrongful-death claim or a commercial dispute.

1. Establish the baseline

Before the injury, termination, or breach, what was the economic trajectory? For an individual: earnings history, benefits, occupation, education, expected working life. For a business: revenue, margins, growth, customer base, the market it operates in. This is the “but-for” world — what would have happened absent the event.

2. Measure the departure

What changed? Reduced earning capacity, a career interrupted, a contract not performed, a market share lost, a product not sold. The economist quantifies the gap between the but-for world and the actual one, year by year, into the future where necessary.

3. Bring it to present value

A dollar of lost income in 2045 is not worth a dollar today. Future losses are discounted to present value using a defensible discount rate, and future earnings are grown at a defensible rate. The choice of those two rates — and the relationship between them — is where a large share of expert disagreement lives, and where an economist earns the fee.

4. Write it down

The written report states every assumption, every data source, and every calculation, so that opposing counsel and the opposing expert can attack them. A number without a visible method is not evidence; it is an opinion.

5. Defend it

At deposition and trial, the economist explains the analysis to people who are not economists and answers cross-examination designed to find the assumption that, if changed, moves the number the most. An economist who has not sat through that process is guessing about what will survive it.

Where forensic economists are used

The same toolkit applies across a wide range of matters. The inputs change; the discipline does not.

• Personal injury and wrongful death. Lost earnings and earning capacity, lost household services, lost fringe benefits, and the present value of future medical care and life care plans. In California these track the items listed in CACI 3903.
• Employment. Back pay and front pay in wrongful termination and discrimination matters, mitigation analysis, and class or representative wage-and-hour exposure. See employment litigation support.
• Commercial disputes. Lost profits and lost business value from breach of contract, business interruption, and partnership or shareholder disputes.
• Intellectual property. Reasonable royalty and lost-profits damages in patent, trademark, and trade-secret cases.
• Antitrust and competition. Overcharge estimation, market definition, and class-wide damages.
• Securities. Event studies and loss causation in 10b-5 and related claims.
• Mass disaster and wildfire. Business destruction and personal losses across many claimants, where consistent method across the group matters as much as any single calculation.

Forensic economist vs. forensic accountant vs. vocational expert vs. life care planner

These roles overlap at the edges and are often confused. The distinction matters when you are deciding whom to retain.

Expert	Core question they answer	Typical output	Looks backward or forward?
Forensic economist	What is the economic loss worth, in today’s dollars?	Damages calculation, present value, but-for analysis	Both — projects future loss and discounts it
Forensic accountant	What happened to the money?	Tracing, fraud investigation, reconstruction of records, lost-profits from books	Mostly backward
Vocational expert	What can this person still do for work?	Residual earning capacity, transferable skills, labor-market access	Forward, but stops at capacity — does not price it over a lifetime
Life care planner	What care will this person need?	Itemized plan of future medical and support needs with unit costs	Forward, but stops at the plan — does not compute present value

In a serious injury case, all four may appear, and the economist is usually the one who takes the vocational expert’s capacity finding and the life care planner’s schedule and turns them into a single present-value figure. Forensic Economic Services staffs both the economics and the forensic accounting side, which avoids the seam between two experts that opposing counsel likes to pry at.

What goes into a damages calculation

For an individual’s lost earnings, the core inputs are:

• Earnings base. What the person was earning, or would have earned, at the time of loss — including wages, overtime, bonuses, and employer-paid benefits.
• Worklife expectancy. How many more years the person was statistically likely to work, drawn from published worklife tables by age, sex, and education.
• Earnings growth. How that base would have changed over the working life, from both general wage growth and the person’s own career path.
• Discount rate. The rate used to convert future dollars to present value, typically anchored to yields on low-risk government securities.
• Offsets. Actual post-event earnings, mitigation, and — in death cases — the decedent’s own personal consumption.
• Household services. The replacement cost of the unpaid work the person can no longer do at home, often a material part of the total.

For a business, the logic is the same at a different scale: a but-for revenue and cost projection, the actual results, the difference, and a discount rate that reflects the risk of the business rather than a risk-free rate. The two common measures — lost profits over a period, and the lost value of the business as a going concern — are not interchangeable, and choosing the wrong one is a recurring cross-examination theme.

How courts evaluate the work

In federal court, expert testimony is governed by Federal Rule of Evidence 702: the testimony must rest on sufficient facts, reliable methods, and a reliable application of those methods to the case. California’s Evidence Code §801 and the Sargon line of cases impose a similar gatekeeping standard in state court. Both put the burden on the economist to show that the method is one the field recognizes and that the inputs are tied to the record — not to the economist’s intuition.

Practically, this means the useful forensic economist is not the one who produces the largest (or smallest) number. It is the one whose number is built from sources the other side cannot easily discredit, with assumptions the economist can explain and, where they are judgment calls, can justify.

When to bring one in

Earlier than most counsel do. Three reasons:

1. Mediation. A defensible damages figure before mediation changes the negotiation. Without one, the number on the table is whichever side’s guess is louder.
2. Discovery. The economist knows which records will matter — pay stubs, W-2s, tax returns, benefits summaries, financial statements, the other side’s projections — and can shape requests before the window closes.
3. Deadlines. Expert designation and report deadlines arrive faster than the analysis can be done well. An economist retained three weeks before a report is due will produce a three-week report.

Defense counsel use forensic economists as often as plaintiffs do — to test the opposing calculation, identify the assumption that carries the number, and offer an alternative the jury can weigh.

What to look for when retaining one

• Training in economics. A doctorate is common and useful, particularly for the growth and discount questions, but it is the ability to explain the method that matters in the courtroom.
• Membership in the field’s professional body. NAFE publishes the Journal of Forensic Economics and maintains a statement of ethical principles that members agree to; the Journal of Legal Economics and the American Academy of Economic and Financial Experts serve the same function.
• Testimony experience. Ask how many times they have been deposed and how many times they have testified at trial, and in what kinds of cases. Read a redacted report.
• Fit to the matter. A wrongful-death specialist is not automatically the right expert for a trade-secret case, and vice versa. Look for work in your case type.
• A clear engagement process. Conflicts should be cleared before anything else is discussed, and the scope, the timeline, and the deliverable should be in writing.

Our own credentials and case work are on the About and Case studies pages; a guide to vetting any damages expert is at How to Vet an Economic Damages Expert.

Frequently asked questions

Is a forensic economist the same as an expert witness?

Not necessarily. Many forensic economists work as consulting experts who advise counsel without testifying. A testifying forensic economist is one whose report and opinions are disclosed and who is subject to deposition and cross-examination. Ask which role you are retaining.

Do you need a Ph.D. to be a forensic economist?

No formal license or degree is required. Most testifying forensic economists hold a doctorate or master’s degree in economics or a closely related field, and courts weigh training when assessing whether an expert is qualified to offer an opinion. The credential that matters most at trial is the ability to explain the method under cross-examination.

How much does a forensic economist cost?

Forensic economists generally bill by the hour, with separate rates for analysis and for testimony, and the total depends on the complexity of the matter and how much of the record needs to be built from scratch. A single-plaintiff lost-earnings analysis is a different engagement from a class-wide wage-and-hour exposure model. Any competent economist will scope the work and give a range before starting.

How much does a forensic economist earn?

There is no separate government statistic for forensic economists. The U.S. Bureau of Labor Statistics reports pay for economists as a whole; forensic work is typically practiced by economists who also hold academic, consulting, or industry positions and bill litigation work by the engagement.

What documents does a forensic economist need?

For an individual: pay records, W-2s or 1099s, several years of tax returns, benefits statements, the complaint, and any medical or vocational reports that bear on future work. For a business: financial statements, tax returns, budgets and projections prepared before the dispute, the contract at issue, and any industry or market data already in the record. The economist will tell you what else is needed once conflicts are cleared.

What is the difference between economic and non-economic damages?

Economic damages are losses that can be objectively verified and measured in money — earnings, medical costs, property, profits. Non-economic damages — pain, suffering, loss of companionship — have no market price and are set by the jury without expert calculation. Forensic economists work on the economic side only. In California the distinction is drawn in CACI 3903.

Can a forensic economist work for the defense?

Yes, and a credible one does both. The method is the same regardless of which side retains the expert; what changes is whether the economist is building the calculation or testing someone else’s.

Working with Forensic Economic Services

Forensic Economic Services is a forensic economics and forensic accounting practice based in downtown Los Angeles, retained by counsel nationwide. The fastest way to find out whether we can help is to send us the party names for a conflict check. There is no engagement and no cost to ask, and if we are conflicted or not the right expert for the matter, we will say so.

Run a conflict check →

References

• National Association of Forensic Economics, Journal of Forensic Economics and Statement of Ethical Principles — nafe.net
• Federal Rule of Evidence 702, Testimony by Expert Witnesses — law.cornell.edu
• California Evidence Code §801 — leginfo.legislature.ca.gov
• Judicial Council of California, CACI No. 3903, Items of Economic Damage — courts.ca.gov
• U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics — bls.gov/oes