Nothing is certain except death and taxes. That old adage may be true, but frequently the unsure, risky happenings in life bother us the most.
Daily life does involve risk. Consider the risk of a tire failing catastrophically, as in the recent Bridgestone/Firestone recall. Or take the Food and Drug Administration’s recent warning that phenylpropanolamine, an ingredient in over-the-counter medicines for 50 years, may cause 500 hemorrhagic strokes a year.
The question of why people accept some risks and not others is still baffling to many economists. Moreover, while they recognize that how a society deals with risk has important effects on its economic performance, economic prescriptions for dealing with many types of risk are still rare, in part because individual reactions to risk are quirky.
Take auto and tire safety. I’ll never forget the first time I was in a car when a tire blew out. There were six of us, all farm kids, in my uncle’s 1951 Mercury as we headed for school one morning. The oldest, my cousin Marv, age 14 or 15, was driving. We were a bit late and were easily going the speed limit on a country gravel road when the right front tire blew out.
The Merc lurched to the right, across the mound of loose gravel left by the road grader, and nearly went onto the shoulder at a point where the road fell into a steep ditch. Marv did everything exactly right, steadying the car and slowing to a halt without trying to swerve back onto the road. He was visibly shaken, but we all piled out and, with farm kids’ aptitude for mechanical things, had the spare on and were rolling again in less than five minutes.
Attitudes toward the risk of catastrophic tire failure certainly have changed in 40 years. Blowouts were much more common 40 years ago, and were accepted as a normal risk in daily life. Few people in the 1950s would have thought of suing a tire company for damages caused by a blowout in the 1950s. Now it is highly likely, and the possibility that litigation over accidents caused by now-recalled Firestone tires may bankrupt the company is very real. Is this good or bad?
Congress has held hearings on the Bridgestone/Firestone accidents, and changes in federal legislation may be in the works. Should we require more regulation, standards and testing for tires and automobiles? Should we spend more on accident investigation and reporting, or devote more resources to combing existing reports for unusual patterns? A private insurance company analyst noted the Firestone tire/Ford Explorer combination in an unusual number of fatal rollovers.
The National Highway Traffic Safety Administration reportedly found no unusual pattern that was “statistically significant” for the same combination. Should we conclude that more regulation and data gathering is needed, or rather that regulation is ineffective?
The October issue of Harper’s notes that about 65 Iowans die each year in accidents in which tall cornstalks reduced visibility at rural intersections. In other words, tall cornstalks in a state of 3 million people contribute to as many fatalities every two years as Firestone tires on Explorers caused in a nation of 270 million in eight years. Are we sure that we should concentrate so much attention on increased tire safety and not more on rural-intersection safety?
Then again, rural-intersection fatalities easily could be reduced at the local level if rural counties and townships simply put at least one stop sign at each intersection and then enforced the law. If rural residents find that unnecessarily onerous, should the rest of us worry about how many of them die?
The FDA’s recent action on phenylpropanolamine, together with the finding a few years ago than an ingredient in common appetite suppressants caused heart-valve damage, point out that unknown side effects can elude even a careful regulatory regime. Exhaustive trials can still miss problems. We could make it even harder to market prescription or over-the-counter drugs, but then society will miss out on the good effects that such compounds may have.
Can we draw any conclusions from recent events? First, life is risky, and some people will inevitably be hurt by defective products or those with unintended effects. We want to protect people from harm or compensate them when it occurs, but so doing has its costs. We don’t want to make useful products inordinately expensive or keep them from being available at all.
Second, there is no response, whether it be government regulation or tort liability suits, that is a silver bullet that will magically solve all problems of risk. Any response involves trade-offs, and the trade-offs may vary from one situation to another.
Third, as the tires vs. tall-corn comparison shows, society might be better off if it looked at risk abatement more broadly, rather than focusing on high-profile cases in the news.
© 2000 Edward Lotterman
Chanarambie Consulting, Inc.