Category: Law

SUV safety debate

A theme in writings about SUV’s (see here for a recent New Yorker article) is that consumers tend to overestimate SUV safety and grossly misunderstand the factors behind auto safety. The basic point is that safety comes from avoiding risky situations and quickly responding to danger. It turns out SUV’s tend to lull drivers into a false sense of safety and they respond more slowly to danger (e.g., SUV’s come to a complete stop much more slowly than many other popular types of cars). Because SUV’s are cosmetically altered trucks, they don’t have many basic safety features now standard in small cars or minivans, so you are more likely to die in an SUV accident than in another car (an anti-SUV site collects some Insurance industry reports). Consumer Reports has for many years argued that SUV’s are quite likely to tip over.

One response I’ve seen is to avidly defend consumer choice (see here for Car and Driver’s Brock Yate’s defense, or here for Peter Klein’s comment), or to minimize the SUV’s dangerous design. I think this misses a basic point. When events are infrequent (like fatal auto crashes), or when cause and effect are hard to link, people can opt to believe anything they want. All economics tells us is that markets are extremely good at responding to possibly erroneous consumer beliefs.

My take on this entire issue is that the central issue is liability. In general, you can’t hold someone accountable for the fatalities created by the use of a car with less then optimal safety features, any more than you can hold somebody accountable for the extra risk created by using a less than best bicycle, motorcycle or other device. In short, there is not much people can do about SUV safety because some people will always want to make the trade-off between safety and other product features.

Since the insurance industry is still willing to insure SUV’s, I wonder if the risk associated with them is tolerable given our current legal and economic standards. I invite knowledgable readers to email me information about how much more it costs to insure SUV vs. other vehicles.

Wacky Warnings

The Michigan Lawsuit Abuse Watch has posted the winners from their Wacky Warning Labels contest. First prize was for a warning on a bottle of drain cleaner which says: “If you do not understand, or cannot read, all directions, cautions and warnings, do not use this product.” Fifth prize went for a fishing lure which warns, “Harmful if swallowed.” Check out who won second prize.

Against Broken Windows

James Q. Wilson’s broken windows theory is simple: broken windows, or other symbols of public disorder, invite crime. Thus, if you clean up the neighborhood, crime should go away. The NY Times discusses research conducted by Felton Earls, Rob Samson, Steve Raudenbush and Jeanne Brooks-Gunn testing this theory. They drove an SUV through *thousands* of Chicago streets and recorded with a video camera just about everything that was visible on the street – garbage, loitering, grafitti, etc. They also had data on crime and the attitudes and behavior of residents. Analysis of data showed that public signs of disorder such as garbage were not linked to crime. Instead, concentrated poverty and the willingness of residents to self-police (“collective efficacy”) explained the incidence of crime. The Times quotes Earls:

“If you got a crew to clean up the mess,” Dr. Earls said, “it would last for two weeks and go back to where it was. The point of intervention is not to clean up the neighborhood, but to work on its collective efficacy. If you organized a community meeting in a local church or school, it’s a chance for people to meet and solve problems.

“If one of the ideas that comes out of the meeting is for them to clean up the graffiti in the neighborhood, the benefit will be much longer lasting, and will probably impact the development of kids in that area. But it would be based on this community action – not on a work crew coming in from the outside.”

This point should be taken to heart by all students of crime. Yes, of course, police are necessary for public order and safety. But the police are finite resource – they can’t possibly monitor every street and corner. Thus, on a fundamental level, public safety comes from a community’s ability to regulate itself. The next time you hear a call for more police, or more prisons, or more public works, think about this insight.

Marriage Brokers

An article in the current issue of Legal Affairs focuses on professional match makers and the difficulties inherent in the business. It’s been estimated that there at least 6000 matches each year and the fee can be about $2000.

How good are the matches? According to the article, a preliminary study conducted by the Department of Justice suggests that mail order brides might suffer less abuse than other wives. However, match makers sometimes fail to inform prospective wives of a future husband’s history of abusive behavior, which has resulted in some cases of abuse and state regulation of the industry.

Of course, regulation of the industry seems plausible – mail order brides don’t have the social networks that enable home-grown brides to learn about their future partner, and they might be susceptible to abuse because they don’t know their new country as well. But there are other ways of dealing with this. Like job applicants, match makers could perform basic screening of candidates – a check of the person’s criminal record might be useful. Match makers who failed to do some basic screening could be held liable for some damages, a proposal to be debated by the legal bloggers. A match maker subject to these professional norms might find better matches than the old fashioned match makers.

Liability and flu vaccine

Liability law appears to be a critical factor behind the vaccine shortage:

As legal liabilities have chased many vaccine-makers out of the market, there are fewer manufacturers. This means less overall ability to produce additional doses, and less investment on new, faster ways to make vaccines.

In the US about 185m people risk serious flu-related illness each year.

At one time the US had 20 flu vaccine manufacturers. Today there are just four: Aventis, GlaxoSmithKline, Merck and Wyeth.

After the second world war the science of cell cultures led a boom in vaccine production. But gradually profit margins thinned on vaccines, as the government became a big buyer of them. Increasing legal liability drove many makers out of the vaccine business.

Today smaller biotech companies have entered the game. But they lack the capacity and the distribution to solve near-term shortages, experts say.

“One of the problems with vaccines is you put them in healthy people,” says Louis Galambos, history professor at Johns Hopkins University and an expert on vaccine manufacturing. “Now we’re in a situation where we have too few producers.”

Congress passed a law in 1986 to limit liability on vaccines for children. There are no such liability limits for adults, however.

Pharmaceuticals companies are inhibited by the particular structure of the US vaccine market, experts say. The US government is a large buyer of vaccines, leaving relatively poor profit margins on vaccines.

Here is the full story from The Financial Times.

Regulation by Litigation

Elliot Spitzer, New York’s Attorney General, apparently misunderstands so let me make it clear – it’s the rule of law not the rule of lawyers. As I feared, a real but relatively minor scandal in the mutual fund industry, is becoming the excuse for grandstanders promoting their own agendas that have little do with the original issues. Professor Bainbridge lays it out here (I recommend following up on his links but of course ignore any criticism you might find of my arguments! :)).

A Romanian liability crisis?

A Romanian pensioner has lodged a complaint against a TV station claiming their horoscope is unreliable.

The woman, from Maramures, says the horoscope repeatedly predicted she would receive a big sum of money but it never arrived although she waited for three months.

Thanks to cronaca.com for the link to Ananova. Here is the clincher:

Officials said they will analyse the complaint and take a decision.

But they advised the broadcasters to include an announcement that the horoscope may not be 100% accurate and that they cannot warrant for the truth of astral predictions.

Perhaps they will consult their horoscope before rendering a final verdict.

Don’t let the bed bugs bite

…or Judge Posner will punish you. The punitive damages exceeded the compensatory damages in this bed bug case against Motel 6 by some 37 times. The Supreme Court’s recent line of argument in Pacific Mutual v. Haslip, State Farm v. Campbell and BMW v. Gore has suggested that “four times the amount of compensatory damages might be close to the line of constitutional impropriety.”

But the four-times figure is arbitrary. Judge Posner comes to the Supreme Court’s rescue by cogently laying out the theory of punitive damages, gently taking the Court to task in the process. A high multiple may be justified when the action to be punished is unlikely to be discovered or when the actual compensatory damages are low and would not motivate plaintiffs to otherwise bring suit against a legally-aggresive defendant. Both factors play a role in the bed bug case but would not justify absurdities such as the billions of dollars in punitive damages awarded against Exxon in the Exxon Valdez case.

My only worry with Posner’s analysis is that juries and judges may not be able to handle it. Perhaps the Supreme Court knows this and instead promulgates a foolish rule that is nevertheless easier to follow.

Addendum: Posner is the only person alive who deserves both a Nobel Prize and a seat on the U.S. Supreme Court. I put greater odds on the former than the latter but I happen to know that he recently visited the White House. Remember where you read it first.

What is the fair use doctrine?

Wired.com offers this very brief and useful summary, thanks to Geekpress.com for the pointer. This is the best simple statement I have seen of what “fair use” is all about. Note that the fair use doctrine will increase in importance, as companies put up tougher gates around their intellectual property. Bloggers must know about fair use as well, lest they quote too freely from copyrighted material and incur legal penalties.

For this economist, the courts aren’t nearly liberal enough in interpreting fair use. I think, for instance, that rappers should be able to sample songs without clearing copyright, at least provided they are doing more than simply copying large blocks of the song verbatim. Read Robert Christgau’s account of the famous Gilbert O’Sullivan case; O’Sullivan objected when rapper Biz Markie sampled his “Alone Again, Naturally,” a transformative use if I ever heard one. Will more sampling make rap better and cheaper? Yes. Will it diminish the supply of sample-ready material? Unlikely. So why not interpret fair use more liberally in this regard?

Sleazeball lawyer in a low-cut dress

I am speaking of Erin Brockovich. Sure, I liked the movie but the true story on which it was based was a lie. There was no cancer cluster in Hinkley, no scientific theory of harm, no coverup at the water office (see here for links). Having had one success in Hollywood, Brockovich is now after another this time by fanning hysteria that the kids at Beverly Hills High School (yes, 90210) are getting cancer from a nearby oil well. I smell a movie in the works.

Microsoft hires bounty hunters

Microsoft has put up “two $250,000 rewards, a total of $500,000, for information that leads to the arrest of the writers of two nasty computer worms — the Blaster worm and SoBig.” I am all for this as those guys sure wasted some of my time. As regular readers will know, I am also a fan of bounty hunters (see my earlier post; and my econometric paper – finding that bounty hunters reduce failure to appear rates and bring back fugitives much more succesfully than the public police).
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Dalkon Shield, Silicone Breast Implants, Fen-Phen

A bill to move class action lawsuits out of the state courts and into federal courts narrowly failed in the Senate. Senator Tom Daaschle, explained his opposition to the bill this way, “It is the Dalkon shield, it is silicone breast implants, it is fen/phen.”

Good list. Wrong conclusion. The A.H. Robins Co. was driven into bankruptcy and forced to pay 3 billion dollars in damages but the Dalkon shield has been shown to be effective and safe. Silicone breast implants have been reviewed in studies by the AMA, the Institute of Medicine, the Canadians, the French, the British and others. All conclude that there are no unusual problems with the implants (any surgery has risks of course). The FDA will probably soon allow the implants back onto the market but in the meantime Dow-Corning has been driven into bankruptcy and tens of millions of dollars have been spent on lawsuits. Fen/Phen does looks like a serious health risk but tort law had nothing to do with removing the product from the marketplace. (Moreover, the issue is complicated. Only the Fen in Fen/Phen looks dangerous and that was approved in 1973).