Wednesday, October 26, 2005
Firms aren’t parents, but money is life
Adam Gifford, a professor of mine, basically made the latter statement today. It was an epiphany to me.
He was going off on how our tort system doesn’t make sense. While there are multiple ways it’s unreasonable, the focus today was on the tendency juries have to punish the act of equating money with life.
Let me use an example: An auto manufacturer has to decide which safety devices to include in a car. They do that by figuring out which feature set will elicit the highest profit. If a feature helps sales, it’s because people want it, and so it should be included. If it hurts, it is not something people want, and it should be left out.
One could argue, “But that’s not fair! The consumer is uninformed about all the stuff that goes into an automobile, or any complicated machine. Producers therefore have a responsibility to make safe products, whether or not the consumer knows about it.” Well, in fact firms already do include safety features that most consumers don’t know or care about. That’s not weird: they have good market-based reasons to do it.
The question is not whether to include little-known safety features, but at what point to stop – and this is where juries get it wrong. There exist mechanisms that communicate to firms what is worth including and what is not. If you don’t trust the preferences revealed by most consumers’ purchases, there are those consumers who pay attention and make noise. Firms have reputations to protect. There exist consumer advocacy groups, watchdogs, and ratings services. Praise from them translates into profits; blacklisting translates into pain. And of course there’s government, which tells firms what they have to do.
Firms have to pay attention to that stuff. If they don’t, they go out of business. The question that I claim juries answer poorly is, supposing a firm adheres to all the guidelines laid out by the various groups keeping tabs on its products, does that firm have a duty to put even more safety into their stuff? If they want to, they certainly can … but I don’t think it’s a duty. It is the purpose of firms to provide people with what they want, not to tell them what they’re allowed to have.
We should not want it to be the duty of firms to invent safety standard. It would create a conflict of interest. If we want safety standards to be good, they should come from outside of the firm; the firm should be in the simple business of meeting those standards at low cost, thereby allowing consumers to enjoy those standards.
Not every safety feature is desirable – otherwise, everyone who could afford one would drive a $300,000 armored personnel vehicle. A producer by definition has to decide what’s worth producing, and if the benefit of a thing is less than its cost, that thing should not be produced. In following that principle, car manufacturers and other producers are basing life-or-death decisions on money.
Juries don’t like that. When they hear about a company that did not include some feature to make cars a little less dangerous, and there’s a chance that the left-out feature would have saved a plaintiff from injury, a jury finding in the plaintiff’s favor seems to routinely include a premium intended to punish the cavalier equation of life with dollars and cents.
But – and here’s the second point of this post – dollars and cents are life. You can turn your life (time) into money, and you can turn your money into life (time). The conversion isn’t perfect; every time it is made, something is lost. You’ll never be able to buy exactly the time that you spent earning money this year. But the conversion is real, and important, and it goes both ways. Every time you pay someone to do something that you could do if you spent enough time at it – sew your clothes, hook up your internet, cook your exotic lunch, raise your children – you are buying time. In that sense, we have more time now than ever before in history.
If we needed something to measure life in terms of, money would seem to be the only candidate. Is the measurement imperfect? Sure. But is it unreasonable? No.
In particular, juries don’t like to see life-or-death decisions based on money. But in many cases, that’s the only thing one could base them on.
Oh, I’m bored. Goodnight.