05 Apr 2014

Thoughts on GM and Michael Moore

Economics, Shameless Self-Promotion, Steve Landsburg 12 Comments

At Mises Canada. An excerpt:

Suppose years ago when they discovered the problem, GM had contacted all of the 2.6 million customers driving the vehicles with a faulty switch and told them, “We think 13 of you will end up dying because of the faulty switch. The problem is, we don’t know which 13–if we did, we’d obviously fix your vehicles. Although the part itself is under $1, there is the labor involved, plus many of you will want a loaner while we fix the vehicle. All told, it would probably cost us about $50 per each of you to replace all 2.6 million switches. So we’ll give you all a choice: We can fix your switch, OR we can mail you a check for $40, and promise that if you die because of the faulty switch, we will pay your estate $1 million.”

I have no idea how many people would take that offer. I’m guessing out of 2.6 million, most would elect to get the switch fixed, but a good many would take the $40 and promise of indemnification. Certainly if we changed the numbers around–so that people got, say, a $400 check–the balance would tilt in favor of the “live with it” outcome.

The reason I have framed this hypothetical is that I’m trying to show that the underlying logic–that in situations where there is a very small chance of death–it really might make economic sense to not do a recall. In my scenario above, if a particular customer had elected to take the $40 rather than get the switch fixed, and then that person happened to die–with his estate then getting $1 million further compensation–people like Michael Moore could hardly complain about the absurdity of neglecting a repair because of cost. In such a hypothetical scenario, the victim himself (or herself) would have chosen to bear the risk in order to save on the repair cost.

For this post, I asked myself, “What would Steve Landsburg say, if he still blogged about economics?”

12 Responses to “Thoughts on GM and Michael Moore”

  1. Tel says:

    Anyone who could replace the switch themselves would ask for the $40.

    Anyone who knows someone willing to work for less than $40 would also ask for the $40.

    Toyota paid $1.2 billion for their faulty accelerators (for 2.6 million customers, that would be $460 per customer), and that was just the fine paid to the US government (nothing useful for Toyota owners) on top of that they had to fixup the cars as well. Mind you, Toyota don’t whinge as loud as GM.

  2. andrew' says:

    The left specializes in making hay off of what voters don’t understand, in this case quality management.

  3. Bitter Clinger says:

    The switch may be “only” forty dollars but the installation is $350. The switch has what is called a “passlock” code for theft deterrence, which requires a Tech II tool to reprogram the BCM (body control module). The going rate for this task at the GM dealer is $350.

    As to the Toyota business it is all a lie. Back in the day, when I was finishing my master’s degree one of the post docs at the university was working on the Audi unintended acceleration problem (thirty years ago if you can believe it). He knew it was not a mechanical problem and was trying to sort out whether it was ergonomic (part of the design of the pedal placement) or a problem with the operator’s kinesthesia (they couldn’t tell which pedal they were pushing). The reason we know that it is not mechanical is that of the 60 to 70 thousand cases of unintended acceleration reported to the NHTSA, not a one…zero in fact.. have been reported in cars with manual transmissions. The thought, of course, is that the left foot being on the clutch ‘locates’ the brake and accelerator pedals, but it hardly sorts out whether the problem stems from poor pedal placement or the fact that people are stupid. I think the “correct” solution is to ban the use of automatic transmissions, if you cannot drive manual, you can walk or take the bus. Good Luck Guys.

    • Andrew' says:

      “The going rate for this task at the GM dealer is $350.” I’ll only point out that that is a sticker price.

      The general public has no understanding or appreciation for sorting out a problem that an ME post doc can’t figure out.

      When he finally figures it out, and then decides it is because of pedal placement, the general public’s response will be:

      “I can’t believe they decided to save money on pedal placement so they could kill people!”

    • Tel says:

      It says a lot that the court investigation into the Toyota acceleration problems found very clear pointers to software problems, and no evidence of mechanical failure.

      However the fix was to replace floor mats and the various US govt agencies were happy to accept that.


      A lot of interesting reading there. One of the problems being that the software safety standards are all new and mostly unproven, opinions differ greatly about the right way to do it.

      Agree that a manual transmission is intrinsically safer, outlawing automatics would save a lot of lives, for all sorts of reasons. If it does go full throttle on you, at least you still have the option to drop it out of gear.

      • Tel says:


        That one is pretty interesting as well.

      • Bitter Clinger says:

        I read the article. Let me get this straight, the Toyota had a “drive by wire” system and somehow the spaghetti wiring went nuts and the crappy 3.3 liter started producing 900 HP overpowering the brakes. Here are my thoughts, there is no way a driver in an unintended acceleration event can get their hands off the steering wheel and engage the parking brake. Cannot happen. For a 76 year old woman to do it I will kiss her ass. You pick the cheek. I would not be able to do it. The passenger had to have done it. If the driver could have gotten their hand off the steering wheel, (that much better driver than I am) why didn’t they move the shift lever (it is beside the parking brake) to neutral? The fact that one skid mark went for 150 feet and the other for 25 feet shows me that the brakes were NOT being applied or else the skid marks would have been “intermittent” due to the anti-lock braking and much more even.
        The question brought out in the case is whether a car should be able to be brought to a halt with ONLY the parking brake (that is why it is called a PARKING brake and NOT an Emergency Brake). All the talk about computer code was a big smoke screen and a bunch of crap. IMHO My analysis of the situation is that Jean was exiting the freeway and was nodding off and Barbara, her friend, yelled “Watch out Jean, you are going too fast!” and Jean stomps down on the accelerator and Barbara pulls up the emergency brake lever to get them to slow down and then they crash. Jean of course feels very guilty about killing her friend so she gets a lawyer and sues Toyota. IT IS WHAT IT IS.

  4. Josiah says:

    Here’s an interesting fact about the “recall.” As I own one of the Saturn models in question, I received a nice letter telling me that I was subject to the recall, but that they didn’t have enough replacement parts right now, so I should just sit tight and wait for them to contact me again. Very reassuring.

  5. Scott says:

    “…people like Michael Moore could hardly complain about…”

    I think you grossly underestimate Michael Moore’s ability to complain.

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