Saturday, June 30, 2018

How do people who claim the free market solves all problems explain the Ford Pinto case?

Ford purposefully used an engine in a car known to have a high risk of exploding and killing the driver despite having a better engine because they did a cost-benefit analysis and found that using the cheaper engine would outweigh the cost of any legal fees due to people harmed from the dangerous engine.

"Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design… The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit… This risk/benefit analysis was created out of the development of product liability, culminating at Judge Learned Hand's BPL formula, where if the expected harm exceeded the cost to take the precaution, then the company must take the precaution, whereas if the cost was liable, then it did not have to."

https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html

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