Toxic Shock Absorber

New at Reason: Smelly waste? Birth-defect clusters? "Profound and devastating effects that "will never be fully measured?" Ron Bailey takes a second look at the most profondohorrificalissimus environmental accident in American history.

Comments

[Critic]

Yup.
And thousands died at our worst nuclear "disaster":
Three Mile Island.
Didn't they?

[Larry]

Shoot, you beat me too it. I was living with my wife and two daughters in Lebanon, PA, 30 or so miles from TMI when it "went up."

Not one of us even glows in the dark.

Imagine, a national disaster where no one was killed or injured and no private property was damaged. Other than it nearly shut down the reactor industry.

Next we'll be up in Alaska looking for the oily beaches left by the big spill.

[Jose Ortega y Gasset]

And yet there are many documented cases where corporations have knowingly created problems that damaged employees, the community or the environment. I generally enjoy Mr. Bailey's work and readily concede there are examples where the impact of situations like Love Canal have been grossly overstated. On the other hand, there are cases where corporate malfeasance has killed people. I look forward to Mr. Bailey's eloquence on a few of those situations.

[nobody]

Who has the shortest memory: Enviro Chicken Littles or the journalists who cover their comically overwrought doom scenarios?

[Cap'n (hic) Hazelwood]

This month also marks the fifteenth anniversary of the Exxon Valdez incident. Many happy returns.

[Mona]

Jose Ortega y Gasset writes that he'd like to see Ron Bailey address instances of corporation's killing people. I disagree; there is plenty, a virtual super-abundance, a plethora, of such stories. The bigger problem is the media's willingness to hype any eco-scare to the point where we end up with hasty, hysteria-driven legislation like Superfund.

What we need much more of, is Ron Baily doing his excellent debunking thing. Cloning, anyone?

--Mona--

[former Union Carbide executive]

I sure hope nobody mentions Bhopal.

[Jose Ortega y Gasset]

Perhaps what is lacking, Mona, is a legitimate free-market answer to what economists call so politely, "external costs."

It is easy to be glibly critical of environmental hystrionics. It is another to wake one day to find the groundwater on your property contaminated by volatile organic compounds where the culprit is a multi-billion corporation with seemingly limitless legal resources. It is easy to scoff at concerns about worker safety until you learn that you have spent decades breathign a toxic substance when your employer knew the health risks and did not want to bear the modest costs of providing appropriate safety equipment.

I am a firm believer in capitalism... but I also tend to believe that businesses rank among the most dangerous enemies of the free market. Businesses exist to maximize profit. This is why they collude, monopolize, pass on external costs, etc. I worry less about cartels and monopolies because they are difficult to maintain. External costs, however, have a "hit and run" quality, if you will pardon the phrase.

Let us assume for a moment that some corporations have behaved quite badly and killed workers or neighbors. Is there a libertarian answer? Or is the answer that these deaths are simply grist for the wheel?

[former UC exec]

Jose-
In line with what you said, I will paraphrase something said by Keynes: "What is rational (i.e. good) for the individual is often irrational (i.e. bad) for society at large." Stockholders and businesses make higher profits by ignoring basic safety procedures. Remember when Ford decided not to prevent Pintos from exploding, because it didn't want to add something like fifty cents to the production cost of each car?

[Shannon Love]

Jose Ortega y Gasset,

"Let us assume for a moment that some corporations have behaved quite badly and killed workers or neighbors. Is there a libertarian answer?"

Yes, there is an answer. In principle, the liability lawsuits could punish corporations for the violation of the property rights of others or harm caused to workers.

The current system fails in large part due to environmental histrionics. There is little connection between the actual harm a corporation may cause and the likelihood it will be sued. A corporation that is careful is just as likely to get sued as corporation that is reckless. The current system basically lacks accuracy. Ask Dow Corning.

This is in large part due to forcing lay juries to make highly technical decisions based on dueling testimony from hired gun expert witnesses and the awarding of punitive damages to plaintiffs instead of the the state.

it would help a lot if expert witnesses were appointed by the court not by the lawyers and if punitive damages were given to the state and not the plaintiffs since they are by definition intended as social punishments and not compensation to specific individuals.

[Dreamer]

How clever.
Some of us mention that viros tend to exaggerate.
Others point out that accidents do happen.
Thanks. I had previously assumed that accidents never happen.

[Jason Ligon]

But a former UC exec should surely get opportunity cost and the assumption of risk.

It is easy to pick on nickel per car gas tank, but how about a $1000 per car airbag that causes more liability even though the government requires you to install the damned thing on all cars? Not good enough? How about another one for the passenger? Maybe tire pressure warning systems?

Aww, screw it, lets just say that every car built must have a 100% survivability rating in a head on 65 mph collision. Anything else is just cutting corners, right?

[UC exec]

Jason-
There's a big difference between making a car's occupants safe regardless of the circumstances; it is another thing to make a car safe in the type of fender-bender collision that almost everybody is bound to have sooner or later. The old Pintos would explode if rear-ended by someone going around 30 miles an hour; this is the sort of accident people should walk away from, not the kind that results in a fireball.

If the Pinto case (and my own) were the ONLY two instances of corporate greed leading to mass harm in an otherwise perfect world, then your mocking, dismissive tone would be justified. Just because some environmentalists cry wolf doesn't mean all such claims are equally false. By the logic of some folks on this site, anti-rape laws should be rescinded because some women make false claims.

[Jose Ortega y Gasset]

First, I would like to see the data that support the assertion that prudent firms are as likely to be sued as reckless firms. If your premise were true, a prudent firm and a reckless firm, otherwise equal, will pay similar liability premiums. I suggest that reckless firms pay more, therefore, it would seem the market has concluded reckless behavior increases the chance of loss through events like litigation.

Second, the law in principle is nothing like the law in reality. Laaving aside that corporations influence the law itself, consider the prospect of suing a large firm. If you have ever litigated against a Fortune 500 firm, you may be aware of the phenomenal costs in both time and money. Most individuals cannot afford and therefore, cannot afford the redress you suggest as the alternative for defending their property rights.

In reality, large law firms bankroll some cases. They take these cases because of the economic incentive which includes a share of the punitive damages. If you remove the economic incentive for law firms to take these cases, who then will finance these legal struggles? Besides, I can think of few worse ideas than giving money to the State... who knows what mischief that might cause.

Everyone who has ever been involved with the American legal system has ideas on how it might be approved. Even with the some improvements, I find it less than satisfying to tell the injured worker or neighbor... "You can always sue."

The problem is that it is inherently profitable to impose external costs on others. Until some can design a legal system where a man with $100 h has a level playing field against a firm with $100 billion dollars, I am afraid the legal response will be less than satisfactory.

[Jason Ligon]

UC Exec;

There is no assumption of risk on her part in the case of a woman being attacked by another person. Willful harm is not the same thing as probability of accidental harm.

I fully support the idea that vehicles should have crash test information available, by the way.

[Jason Ligon]

Jose,

Prudent and reckless are not the characteristics accounted for in premiums. Frequently sued and not frequently sued are. In this way, the logic in this section of your comment is circular.

Wal mart is the most sued company in America. Is it the most reckless?

[Dreamer]

Bhopal was run and (mis)managed - in accordance with Indian law - by Indians, not Americans.

[Jose Ortega y Gasset]

Re: Dreamer

To knowingly expose workers to toxins is not an accident. To bury hazardous chemicals and conceal them is not an accident. My concerns are not about accidents, but about corporate malfeasance.

And Jason, you seem to describe the "Strawman-mobile." I have no objection to making every safety feature on an automobile optional. Let the market decides how to value safety. This issu we are discussing, however, is better described as one where a automobile maker builds a car with safety belts which do not work. You drive the car with the good faith assumption that the belts work. You have an accident and your belt fails leaving you paralyzed for life. Is your mobility simply part of the price we all must pay for economic freedom?

[Jose Ortega y Gasset]

If you read carefully, Jason, you'll note that I qualify my statement with "otherwise equal." To my knowledge, Wal-Mart has no equal, at least in the American retail marketplace. You will also note that we are discussing litigation as it relate to the original thread, i.e., The Love Canal. To my knowledge, the Love Canal incident did not involve sexual discrimation or unpaid overtime... two issues where Wal-Mart seems frequently involved in litigation. And if I might frequent a guess, as one of the largest companies in America, I think it reasonable to expect Wal-Mart to be sued more often than say, the local farmer's market.

Furthermore, liability insurance premiums are more than just a reflection of lawsuits. Liability firms have a vested interest to establish premiums that reflect risk. This is why they conduct inspections, check third-party safety records, note violations, track claims, etc. As such, liability insurance premiums seem a reasonable proxy for the degree of "prudence" a firm possesses.

[Russ D]

The logical free-market conclusion of his seat belt hypothetical is that if it would be that much liability to have seat belts that MAY malfunction, the automakers might not put seat belts in in the first place and it would be a completely optional aftermarket item.

This also ignores that it was the BAD DRIVING that caused the paralysis, not necessarily the seat belt.

Of course there are malfeasant companies. Their combined malfeasance is only a small fraction of the combined malfeasance of government.

[D Anghelone]

The Truth Seeps Out is one of the best reports Reason has done. Where has that sort of effort gone?

[Mona]

Jose, to build on the replies already offered to you, there are multiple tort as well as nuisance actions (at law, nuisance can be far more serious a matter than the connotation of the word implies) available to hold responsible any individual or corporation that harms others and/or their property. In general, libertarians support these traditional, common law remedies, and I certainly do. Further, the law and economics crowd do, in fact, have "answers" that deal well with externalities; see, e.g., much that Richard Posner writes.

None of that should be taken to mean I do not understand the many inadequacies of contemporary American adjudication. As another has pointed out, the issue of hired gun expert witnesses, as well as the incentive of punitive damages, are matters urgently needing attenion.

But you asked that Ron Bailey apply his mind and skills to highlighing corporate wrongdoing, and I oppose your implied criticism of Bailey; there is NO DEARTH of journalists muckraking in that area, some of which efforts are certainly righteous. What we have lacked, however, is a critical mass of calm, reasoned examination of every histrionic enviro and safety cause de jour. Bailey is one of the few who possess the education and ability to partially correct this imbalance, and I would implore him to continue in that vein.

--Mona--

[Mark Fox]

Is your mobility simply part of the price we all must pay for economic freedom?

Yes. More accurately, my mobility may be the price I pay for putting myself at risk in any vehicle, for resting on a good-faith assumption, and for not seeking third-party testing and verification (and paying ensuing costs).

...I find it less than satisfying to tell the injured worker or neighbor... "You can always sue." ...Until some can design a legal system where a man with $100 h has a level playing field against a firm with $100 billion dollars, I am afraid the legal response will be less than satisfactory.

The common refrain of "lawsuit" has undoubtedly developed because of the absurd awards and media coverage. It is unsatisfying, I agree, to have nothing else to offer. Yet, life entails risk, and no remedy will restore life; enjoy today. Further, the aggreived could seek a remedy outside the system. For all its shortcomings, the system actually works well-enough to keep most disgruntleds from assassinating CEOs.

Business, no matter what the original douchebag (Keynes) thought, is not inherently irrational. I am impressed still by his arrogant ability to divine what is best for everyone. Perhaps a few exploding Pintos led to a better society (more consumer awareness, for one?). Some corporations trade on their safety, their responsibility, and even their ethics. Customers often willingly pay more to deal with such companies, while other corporations find voluntary adherence to non-government standards actually helps them lower costs and prices (through lower insurance, higher productivity from less lost-time, and reduced employee turnover, to name a few).

Some people are ignorant and/or malicious, and some of those run businesses. This is not a free-market problem, but a human-nature problem. It may not even be a problem at all, as it seems to be the way all things work. Without "mistakes" and contrary perspectives, there's less learning, adapting, and growth. Humans will never be able to outsmart themselves.

[Mark Fox]

Jose: Yes, I do think it is one's own fault in most cases. In my fantasy world, a culture of personal resposibility rather than delegating safety to the state, would lead to more satisfying outcomes. It is amusing that "the public" trusts the state with their individual lives, while constantly complaining of all the corruption and murder it represents.

As to the recent wave corporate fraud, imagine if the state became the corporate accountant. Would you believe that such fraud would be eliminated?

The assassination comment was more of a reductio ad absurdum. The disgruntleds could monkeywrench an evil corporation in myriad ways without killing anyone while avoiding personal consequence.

Why does the common law solution work in theory but not practice? Does it fail to account for some aspect of human behaviour, or perhaps the web of external costs is large and the wise market finds most cost-shifting path more quickly than the state can adjust its influence?

[Jose Ortega y Gasset]

I will explain your "bad driving" hypothesis, Russ, to a friend of mine who was hit and injured by a drunk driver. Aside from giving me a cold chill, your argument also misses my point. What happens when a business knowingly sells a defective or ineffective product? Oh, and the "government = bad" "business = good" argument would be a more effective argument with some data to support the assertion.

And, Mark, the "it's your own damn fault" argument. Actually, society has decided to conduct "third party testing" and consumers do pay for this activity. Crash testing of automobiles is an apt example. The reason a government agency conducts this testing is because the American public suspects that private firms might be suspect. Perhaps they noticed that investors had the assurance of "third party" audit firms overseeing companies like Enron and Adelphia?

I disagree with your use of a lack of corporate assassinations as a performance measure. Most people rightfully conclude that murder is an action where the costs outweigh the benefits. This is due in no small measure to the deterrent effect of a lifetime in prison or execution. The penalties for corporate malfeasance, however, are much smaller and the potential benefits much greater.

Finally, external costs are a continuing free market problem. (With all due respect to Mona, Judge Posner has far more opinions than he has answers though I am forced to wonder if Mona wears heels.) The common law approach to externalities may work in theory, but it does not work in practice.

[JD]

Honestly, Jose, you seem sincere, but I have to wonder whether you're not being willfully ignorant and difficult. "What happens when a business knowingly sells a defective or ineffective product?" That's fraud, pure and simple. It would be a criminal offense in any conceivable "Libertopia". Have you seen anyone here claim otherwise?

Unfortunately, it's not usually so clear. To go back to the Pinto: people thought they should be able to walk away from a 30 mph crash. How about 40? 35? 37.5? Why one and not another? Is liability to be based solely on what people think they should be able to get away with? If we find 12 people who think you should be able to walk away from ramming your car into a bridge piling at 110 mph, does that mean the car company should be liable if even one crashing driver is injured? If you say it shouldn't be a jury, then who decides? Regulatory agencies? They don't have perfect information either, nor are they immune from other pressures, and even they still have to answer the question of why 35 mph and not 36 mph. There isn't any perfect answer, or even a very easy one, and for better or worse, the adversarial court system is what we've evolved over a couple thousand years; I'm leery of any attempts to replace it with the pronouncements of a gang of wise men.