05
Apr
2014
Milton Friedman on Ford Pinto
Major Freedom reminds us (in the comments of the previous post) of this classic exchange. Without realizing it, I think my recent thoughts on GM are basically just channeling Friedman. I am too squeamish about confrontations like this; I literally can’t even watch the whole video because I am embarrassed for the kid.
I was told that the kid is actually a young Michael Moore. Watch his manuerisms. I think they may be right.
I watch all those old MF youtubes.. Great stuff.
Readers of this blog may find this one interesting:
https://www.youtube.com/watch?v=kG8iXMaZTXE
Although less for Friedman and more for how much Old Keynesianism sounds suspiciously like Market Monetarism.
He was a master at asking pointed questions that challenged people’s premises, instead of the superficial arguments they believed they were making.
Another favorite of mine:
http://www.youtube.com/watch?v=DvNzi7tmkx0#t=21m09s
Speaking of channeling…my username?
Ford was not estimating the value of a human life. They were estimating how much they would have to pay in a wrongful death claim. Milton Friedman is talking about estimating the value of a human life as a philosophical concept. He’s changing the hypothetical.
The question is pretty simple. If it costs $13 per car to estimate a human life and there are 1 million cars, the cost is 13 million dollars. Without the $13, 20 people will die with an average product liability reward of 200,000 for a total of 4,000,000. Since 13 million is far more than 4 million, it makes business sense to not install the part and allow 20 people to die. Do you support this decision or does Ford have a responsibility to the public to swallow the loss if they chose to produce this dangerous product?
The kid asked the question in a sloppy manner and Friedman played a trick on him.
But the young man in the audience agreed that it wouldn’t make sense for Ford to have paid $200 million to save one life. In other words, he really was talking about the pricing and costs, not the abstract “value of a human life.” Friedman did not change the hypothetical.
Your “simple” analysis of the question is inaccurate. The young man did not propose any “estimate of human life” to be $13 as a hypothetical.
No tricks.
What the kid was asking was is it wrong to produce dangerous products.
It is an even worse question than the one Friedman helped him into asking.
Friedman was being extremely generous to that guy (and the audience).
Why, oh why can’t we have a Milton Friedman of the left.
Think about it.
I think I understand what’s being said here. But is Bob’s position that what Ford and GM did is not reprehensible? Is the point that the conduct is morally acceptable?
Like Friedman said: People can have even less risk of death by not crossing the street.
People make risk assessments all the time; So risks of death, to them, DO have a price.
“They were estimating how much they would have to pay in a wrongful death claim. ”
Yes. That is called the government deciding the value of human life and Ford working with their numbers.
Wow, joe. Just wow.
What the kid should have said is, “Yes there’s a principle involved, it isn’t Ford’s choice to put a price on their customer’s life. The customer must make that choice for themselves.”
Isn’t the customer making that choice by not buying the car if they deem it unfit?
Only if Ford decides to release the information to the public about the danger.
This is the crux of the matter in all these cases, not that Ford/GM made a cost-benefit analysis but that they failed to inform their customers of a known defect and their potential consequences , however minuscule..
I believe this is normally referred to as “fraud”
In the general sense, how does the company know?
I know how they know. They don’t know. Customers usually have tell them.
Even then the statistics are difficult and nearly unknowable even with an outstanding returns program.
Even then, the same calculation has to be made.
Claiming the calculation shouldn’t be done at all is childish stupidity (not you).
How do you inform the public of a 6 parts per million problem that might be worse or might not without hurting yourself and your customers? It turns out pintos were no more globally dangerous in crashes than their competition. So for your trouble of chasing away customers and destroying their business the public would have been (likely) even less safe.
There is no “right” way. You can’t scrap them all like Tylenol had the luxury of doing in their tampering case.
I’d be with you on the uncertainty thing if companies regularly release all the available safety information that they do have.
As the kid says, that’s not what happens. They make an internal estimate of what it will cost them in court cases, then estimate the product improvement cost and make the decision internally on their own behalf without any customer consultation. Then they crack down hard as possible on whistleblowers or anyone even slightly likely to speak out about what’s going on.
Half the reason people are so pissed off about this sort of thing is the persistent dishonesty.
But think about the problem.
The winner is the one who releases the least damning information.
Which leads…thanks lawyers!…to not collecting the information at all.
Presumably, the dishonesty factors in to the eventual settlement though.
My guess is, had Ford or GM made their safety issues incredibly well known, they would still be liable to some extent, but the amount that the family of a dead person might recover in court would be far less, as the person then made a conscious decision to purchase the car/not get the switch fixed/etc.
The fact that fraud or dishonesty was involved means we get “punitive damages” and the lawsuits head into the millions range.
So yes, this is morally bad behavior, but it isn’t as if they are “getting away with it.” Consider a person who is in a hurry and illegally parks in a fire zone, knowing full well they will be severely fined for it. Yes, this person is doing a bad thing, but they will be appropriately punished for it. I believe the same principle applies here.
In the general sense, how does the company know?
I know how they know. They don’t know. Customers usually have tell them.
Even then the statistics are difficult and nearly unknowable even with an outstanding returns program.
Even then, the same calculation has to be made.
Claiming the calculation shouldn’t be done at all is childish stupidity (not anyone here, more like the 70s and 80s shock that this is how things are done). What is the alternative procedure? The kid in the video never offers any ideas. The problem is the public believes they can be blissfully ignorant because they have no understanding of hard problems.
How do you inform the public of a 6 parts per million problem that might be worse or might not without hurting yourself and your customers? It turns out pintos were no more globally dangerous in crashes than their competition. So for your trouble of chasing away customers and destroying their business the public would have been (likely) even less safe.
There is no “right” way. You can’t scrap them all like Tylenol had the luxury of doing in their tampering case.
Regardless of the cost and regardless of who pays the cost to repair the “defect”, does the manufacturer have any duty to warn users of its products about the discovery of a significant and extra-ordinary risk it discovers in its products?
THIS is an interesting question.
That obviously is a legal question. Given that there are such warning labels like these:
http://www.smosh.com/smosh-pit/photos/20-ridiculously-stupid-warning-labels
I guess yes.
Not unless the manufacturer insists on wanting to know whether or not there is a high probability that the money they receive is counterfeit, or that the check they receive has a high probability of exploding on impact 🙂
Full faith and credit of the US government, good as gold.
Well, in the legal system as it currently exists, yes, I think there would be a duty to warn of the types of design defects present in the Pinto and GM cases. I think the evidence is both companies knew quite early about the problems in their cars and elected to keep the problems a secret. Had they informed consumers, at that point the government would have probably stepped in and required a recall to fix the problems. I’m not sure I see the current system as fundamentally flawed in this regard. Is the argument that no recall should be required, and once the information regarding the design defect is in the market, that is all that is required? (Presumably no one is arguing that Ford or GM should have been permitted to keep these defects secret?)
“because they had failed to install a $13 plastic block in front of the gas tank”
As if Wal-Mart is full of gas tank blocks. People are stupid. That is what we have to wrestle with.
Ford didn’t know they needed the gas block until they knew. And then they didn’t even know until after the market knew. This is why firms have sophisticated returns and quality systems, and why the government has the NHTSA front-runners.
I liked this one “maybe they should have redesigned the entire car to be cheaper” (so they could afford the $13 gas block).
We are talking about less than 10 parts per million in the current snafu.
This is why we need more STEM.
Friedman would have done better had he started with $300,000 and worked up…as long as we are arm-chair quarterbacking 45 years later.
No Sunday post? Does anyone know if Bob is okay?
The Ford Pinto Memo wasn’t about possible wrongful death claims. It was part of an analysis submitted to the National Highway Traffic Safety Administration opposing a proposed regulation. The cost/benefit calculations (including the number assigned to the value of a human life) were based on NHTSA policy at the time. If anyone was undervaluing human life, it was the government.
“If anyone was undervaluing human life, it was the government.”
Impossible! If any organization treats human life with the respect and decency it deserves, surely it is the state!