Re: More Liability Issues. Was: Re: Products Liability and Innovation.

[georgemw]

On 13 Aug 2001, at 13:33, Black Unicorn wrote:


> The theory is that if your goal is to reduce accidents and claims you allow
> the market to incorporate that sort of risk (which in early innovation looks a
> lot like an externality) into the innovation process.  Activities, it is
> argued, which cannot be made sufficiently safe to be economically viable in
> the market will not be undertaken because the market will not support such
> activities.

Strikes me as being a circular argument, since  which activities
are "sufficiently safe to be economically viable" depends on
the size of the awards.   

>  Proponents of products liability point to this in justifying the
> policy.  (Critics primarily point to the unfairness of assigning liability to
> actors who have not acted negligently).
> 

Less misanthropic ones,  maybe.  We more misanthropic
critics are more likely to complain about being prevented from
engaging activities which we know damn well contain an
element of risk,  a risk we are willing to assume  because
in our judgement the benefits outweigh the risks.

 


> The showing for a plaintiff for products liability works something like this,
> although admittedly this is very simplified:
> 
> 1.  Plaintiff used the product according to directions.
> 2.  Plaintiff was injured.
> 
> That's pretty much it.  This is why safety is a big deal in automobile design
> and why gun manufacturers have managed to duck major products liability issues
> for the most part (misuse).   Since automobile design flaws of sufficient
> magnitude can cause death and big money law suits, the market has incorporated
> that component of the risk into the design cost of the product either ex ante
> (during the design process) or ex post (by compensating the aggrieved
> parties).  Costs are shifted onto the market when they are passed on (ex ante
> or ex post) in the form of product cost.


I had to read this about a dozen times before it made sense to me,
here's why:  there's an implicit assumption here that the "damages"
awarded in liability lawsuits acurately reflects the actual damages
suffered by the plaintiff.  The impression I get is that awards tend to
be orders of magnitude larger than they should be.
> 
> This is the way that strict liability specifically, and the legal process in
> general, tends to spur on innovation.
> 
> > >The effect is to make safety profitable- or more accurately,
> > > to make unsafety unprofitable.
> >
> > Right.  Safety at all costs.  The cost of safety is already too
> > high in most industries IMNSHO.
> 
> Well, I would argue that it is self adjusted by the market when we are talking
> about products liability.  The market has put a price on safety by forcing
> producers either to design safe, and limit ex post costs incurred by
> litigation in favor of ex ante costs, or minimize safety spending and catch
> the costs ex post.  Either way the costs are spread over the market and at
> least mostly linked to the actual effect of safety provisions in reducing
> harm/accidents/etc.  If a mini-van is too costly to make "safe" then it will
> not be produced.  That's the point of strict liability.  Force the actor to
> spend more time evaluating the wisdom of the action.  This often necessitates
> more R&D and hence more innovation.  (Faster airbags, better seat belts, etc.)
> Saying "the cost of safety is already too high" is probably misplaced- at
> least in this isolated example of automotive manufacture.
> 

I really don't think so.  I think we're at the point where around 10-50 
million dollars are spent per life saved,  and I don't think most 
people are worth anything near that.  I wouldn't even value my
own life that highly;  that is to say,  I probably wouldn't take certain 
death for 50 million, because I'm not sure what I'd spend the money 
on if I were dead, booze and hookers would do me no good,  but
I'd probably take a 10% chance of death for 5 million.

I suspect when you do the economical analysis,  if you
assume your damages awarded actually equal damages suffered,
with strict liability you end up with the same products on the
market and the same corporate profits as you would in a world 
where you assume no strict liability but that assume customers 
are able to correctly evaluate risks in their purchasing decisions,
the main difference being that with strict liability the costs are 
smeared over all consumers and without it the costs are 
born solely by the ones that suffer mishaps.  

George

More Liability Issues. Was: Re: Products Liability and Innovation.

[Black Unicorn]

- Original Message -
From: <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Monday, August 13, 2001 12:34 PM
Subject: Re: Products Liability and Innovation.


> On 13 Aug 2001, at 9:42, Black Unicorn wrote:
>
> >
> > - Original Message -
> > From: "Eugene Leitl" <[EMAIL PROTECTED]>
> > To: "Trei, Peter" <[EMAIL PROTECTED]>
> > Cc: <[EMAIL PROTECTED]>; "Faustine" <[EMAIL PROTECTED]>;
<[EMAIL PROTECTED]>
> > Sent: Monday, August 13, 2001 7:49 AM
> > Subject: RE: Traceable Infrastructure is as vulnerable as traceable
messages.
> >
> > > On Mon, 13 Aug 2001, Trei, Peter wrote:
> > >
> > > > I hate to say this, but until software developers are held (at least
> > > > at the corporate level) in some way liable for their failures, there
> > > > will be little or no improvement in the situation.
> > >
> > > I think this is the wrong approach to the situation. Making people
liable
> > > stifles innovation.
> >
> > I think 30+ years of active products liability jurisprudence might
disagree
> > with you.  Just in the automotive world and off the top of my head:
Automatic
> > Breaking Systems, designed failure points (crumple zones), 6mph bumpers,
> > "safety glass," shoulder belts, passive belts, air bags and a host of
other
> > technologies or innovations that may or may not have been developed "but
for"
> > litigation are most probably the result of strict liability in products
> > liability cases.
>
> Well,  nobody can say with certainty exactly what would have
> happened in contrary-to-fact situations,  and litigation will
> probably encourage some innovations while discouraging others,

Points all taken.

> but it seems to me that litigation is highly unlikely to encourage
> innovation overall;  it seems to me that you are much more likely to
> lose a case if your product is hazardous in a way that
> distinguishes itself from the industry standard,  even if it's
> safer overall,  and in any case most potential innovations don't
> have anything to do with increasing safety.

Points also taken.

> In a more or less unregulated market,  consumers are
> free to value product safety as they choose.  Legislation which,
> say,  mandates air bags appears to assume that consumers tend
> to undervalue their own safety, a proposition I object to
> on philosophical grounds.  Liability works more or less the same
> way.

Think of it this way.  The proposition that the strict liability doctrine
makes is that certain activities are "ultra hazardous."  One of these is
product design.  Strict liability- essentially the proposition that no showing
of negligence is required for the plaintiff to prevail- is generally thought
of as a mechanism to allocate the risk onto the market actor.  Economically
speaking this is intended to spur the innovator to "self insure" or to design
safety (safety from litigation anyhow) into the product, or at least have a
strong regard for it during the development process.  This in contrast to the
negligence standard- where the innovator has to have been shown to be
willfully negligent in design and therefore a good portion of the risk of the
product development is shifted back to the end user.

The theory is that if your goal is to reduce accidents and claims you allow
the market to incorporate that sort of risk (which in early innovation looks a
lot like an externality) into the innovation process.  Activities, it is
argued, which cannot be made sufficiently safe to be economically viable in
the market will not be undertaken because the market will not support such
activities.  Proponents of products liability point to this in justifying the
policy.  (Critics primarily point to the unfairness of assigning liability to
actors who have not acted negligently).

The showing for a plaintiff for products liability works something like this,
although admittedly this is very simplified:

1.  Plaintiff used the product according to directions.
2.  Plaintiff was injured.

That's pretty much it.  This is why safety is a big deal in automobile design
and why gun manufacturers have managed to duck major products liability issues
for the most part (misuse).   Since automobile design flaws of sufficient
magnitude can cause death and big money law suits, the market has incorporated
that component of the risk into the design cost of the product either ex ante
(during the design process) or ex post (by compensating the aggrieved
parties).  Costs are shifted onto the market when they are passed on (ex ante
or ex post) in the form of product cost.

This is the way that strict liability specifically, and the legal process in
general, tends to spur on innovation.

> >The effect is to make safety profitable- or more accurately,
> > to make unsafety unprofitable.
>
> Right.  Safety at all costs.  The cost of safety is already too
> high in most industries IMNSHO.

Well, I would argue that it is self adjusted by the market when we are talking
about products liability.  The market has put a price on safety b