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Cost vs. Risk
Personal Responsibility vs. Group Liability

Thomas Lee Abshier, ND

1/21/2011


----- Original Message -----

From: John
To: undisclosed-recipients:
Sent: Friday, January 21, 2011 11:18 AM
Subject: Milton Friedman Puts A Young Michael Moore In His Place


Check out this YouTube video

http://www.youtube.com/watch?v=cD0dmRJ0oWg&feature=youtube_gdata_player

Thanks,
John

‹(•¿•)›


On Jan 21, 2011, at 12:09 PM, "Thomas Lee Abshier, ND" wrote:

A teenage Michael Moore (or so it is presented, I do not know if this was Michael Moore or not) confronts Milton Friedman’s defense of the free market.  Moore relates the story of Ford’s decision not to put in a $13.00 plastic piece which would have prevented the explosion of the Ford Pinto.  The company had chosen not to put that piece in place based on the cost of the part, even after knowing that statistically, 200 people would probably die as a result of this cost saving omission.

The bottom line: People need to be informed of the known risks they are taking.  The manufacturer, drug maker, architect, scientist, theologian, economist, salesman, repairman, doctor, etcetera should disclose the known risks and deficiencies of a product, service, concept, and philosophy.

Debate is typically about winning, enrolling another person in your perspective.  This is but another example of the culture-wide obscuring of the truth that has been institutionalized.  Debate, salesmanship, and theory should all include an explicit consideration of the positives, negatives, and the unknowns.  The winner of the debate should be the person who gives the most complete analysis of all factors, and chooses a polarity, and then justifies it.

In the debate, Milton Friedman rebutted Michael Moore’s point based on the fact that there will be an unavoidable/inevitable compromise between risk and cost in every manufacturing decision.  He introduced the concept of informed decision, but did not examine the implication or implementation of it.

Internal to the consideration of making an informed decision is the issue of the moral responsibility of the someone providing that information, and someone processing that information in making that decision.  We can assume that Friedman felt that the market, with its impersonal cause and effect forces, was adequate to produce a resolution of these issues.

Of course, the market will always provide an equilibration between demand and supply, whether the product is information, goods, or services.  But, the question is whether men should apply forceful remedies (governmental mandate) other than simply offering solutions in the market?

did he examine or conclude who was responsible for the customer making that informed decision. Is it the responsibility of the customer to do the research into the cost-benefit considerations on every product he is considering prior to purchase?  Is it the responsibility of the manufacturer to do research on every possible cost-risk comparison?  Should government mandate enforce force manufacturers doing the research, publish the data, and salesmen to educate the customer?  Is printed warning and signs adequate to inform the customer/user of known or inherent operating risks?  Should a government agency serve the function of being a risk and failure data collection center for reporting and access of consumer data?  Should people be forced to pay for that service by taxes, or should it be supported by a fee for use basis?  Should the economy and society provide this service through a private company initiate or take over that function from government once it is has been initiated?  Should the media and public debate raise the awareness of this issue to the point of action and societal implementation?

All these questions bring in the philosophical considerations raised by the Libertarian, such as, “What right does a majority have to tell me what to do?”  “What right does a contract made before I was born have to force me to live under the terms of that contract?”  “I would rather make my own choices on issues of consumption, social organization, and personal behavior as an individual, via personal interaction and the market than via a disinterested, or agenda driven administrator.”  

There is a place for all the stations life, in particular government, market, groups, and the individual.  
* Government, if moral/Godly, can provide the minimal framework for industry and society to function.
* The market mediates satisfaction of the group-individual interface on an impersonal basis.  But, without a provision for information input, processing, and execution, the market functions poorly in evolving to higher levels of consumer satisfaction.
* Groups are the natural expression of individuals with common need, interest, or characteristic.  The group can function as a surrogate advocate for individual needs, and being larger in influence than the individual, can speak with more power to the market and government.  
* As individuals, exerting personal power to persuade, negotiate, and set boundaries is adequate to satisfy most individual needs.  Personal power is the elemental unit that composes and must be used to influence the market, groups, and government.

A complex flow chart between individuals, groups, and government could represent the organic/natural flow of power, information, and responsibility that produces the optimal level of freedom, happiness, and prosperity.  When each individual lives according to his best computation of the optimal moral code, and stays open to modifying it when he realizes a better standard, the society continually improves in its civility.  As a general first implementation of social code, I believe the Judeo-Christian ethic has the greatest probability of evolving the society into that optimal experience of freedom, happiness, and prosperity.  After that foundation is laid, it is then necessary for the individual, group, market, and government to establish proper domains of authority and function.  And then, each domain must establish laws/policies that codify the prescribed boundaries of acceptable behavior for their particular degrees of freedom.

The issue of diagramming and planning society is obviously complex.  It is too detailed to administer by an all powerful autocrat or bureaucracy.  The fact is, that individual satisfaction is the purpose of society, and there are too many individual needs to meet for a central planner/lawmaker to micro-manage the behavior of every individual.  Thus, autonomy and self-government are necessary on some level.  To the extent that the individual is always considering the needs of his fellow man, there will be less and less need for the enforcement of a group moral code upon individuals who stray from the moral center.  Thus, living by the commandment, “Love the Lord your God with all your heart, mind and strength, and your neighbor as yourself.” ends up being the center of the moral code that produces world of optimized freedom, happiness, and prosperity.

T.


Previous version of this article:

The issue of cost-risk balancing, and information about known risks and the associated costs for the increment of risk reduction deserves further elaboration.  The question is, who is responsible for providing the information from which the informed decision is made?  Is the manufacturer responsible to disclose the cost and risks associated with various manufacturing decisions?

When people are informed, they can decide on their own whether the cost savings are worth the risk to their lives.  Currently, there is no such disclosure made available from the manufacturer for the consumer to inform their judgment.

In the debate surrounding the point of contention, Milton Friedman’s point was an illustration of the fact that purchasing decisions will inevitably be made on a cost vs risk-benefit basis.  But, he did not examine the issue of enforcement or incentive regarding who is ultimately responsible for providing the information so that the consumer can make their purchasing decision around the issue of acceptable risk versus cost.

The argument presented by Michael Moore is a common critique of industry, and has resulted in corporations being hungry only for profits.  The story is a stark one, where the cost is only $13.00 to replace a part that would have saved 200 lives.  Probably, most people who actually lost their lives due to the exploding Pinto, if asked at the point of sale if they would like to spend an extra $13.00 on a piece that could potentially save their lives in the event of a rear end collision, would have been willing to make that extra expenditure.  But, that disclosure was not made, and the lawsuits, compensations, regulations instituted, etcetera all had underneath them the implicit issue of disclosure of the risk.  In effect, the company made the decision for the consumer, and without informing him of the cost-risk choices made in that product, the consumer saw only the integrated data, the blunt instrument of analysis, the final price.

Michael Moore did not make his objection to the Pinto fire clear.  He simply attributed corporate greed to Ford, and implied that greed was bad, and therefor Ford, or capitalism in general, was immoral.  He apparently was ambiguous about the value of life, since he was “pro choice/abortion”.  He was not using the issue of the sanctity of life as the sacred principle, nevertheless, there was an implicit recognition of the value of life since he was arguing that life should not be traded for $13.00.  

In any case, regardless of Michael Moore’s philosophy of life, the normal moral man would judge $13 to be a trivial expense, and that the normal consumer would be willing to pay that amount to prevent their gas tank from exploding in a rear-end collision.  But, apparently the Ford engineers, managers, and cost analysts judged that the extra $13.00 expenditure for the whole fleet would put the Pinto at a cost disadvantage, and chose to instead not spend that amount, increase their sales by the differential that the cost advantage afforded them, and put the 200 lives at risk.

Milton Friedman argued in favor of Ford making that decision based on the economic factors they used.  This type of reasoning on its surface sounds totally immoral, to not spend this small amount extra per car to save 200 lives.   

The rebuttal of this line of reasoning does not have much impact until it is illustrated in the extreme.  Milton Friedman’s position becomes clear when we realize that there is no clear cutoff point where we should stop adding additional costs to make it safer.  

If a vehicle were to be continually upgraded until there was no possibility of ever being hurt, then the cost would continue to rise on a continuum from the most obvious deficiencies (e.g. bolts, struts, and valves that only lasted 1000 miles, etc.) to the totally safe vehicle which would never jeopardize a person’s life, regardless of the accident or its rigor of use.  

The question is thus, at what point is the company not obligated to install additional safety equipment or reinforcement.  The only safe vehicle is unimaginably expensive, which makes automobiles unavailable to almost everyone.  This fact brings us to the realization that we must make a compromise between cost and safety.  

The question is then, who makes the decision about the level of safety that the car I drive must meet?  I believe it is the responsibility of the purchaser to make that choice/judgment, but that an informed decision can only be made when there is a full disclosure of the known tradeoffs between cost and safety.  

In our society, we have transferred the risk of death and injury to the state and company who manufactured the car.  With nationalized healthcare, the state has assumed the risk of paying for the injury, thus it now has standing in the judgment of the safety of the car.  The state has inserted itself into the transaction between buyer and manufacturer because of its interest in injury costs.  

On the issue of state power, the state is a a group, and groups evolve in their need to assume control, expand their area of influence, and reproduce themselves.  The evolution of state power can be seen in the natural move toward authoritarianism in most governments.  The evolution toward authoritarian government begins with the benign charge to insure that men behave at least fairly toward each other.  But, extreme circumstances always intrude in life that are so horrific that we wish to insure they never happen again.  Given that the individual has little control over the group, and the government can exert force to shape behavior, the people call on the government to protect themselves from a reoccurrence of the disaster.  Laws are passed, new bureaucracy created to regulate and ensure compliance, taxes are assessed, and compliance is enforced upon groups and individuals.  Eventually the state because the assumed agent who is responsible for the happiness, and protection from pain.  The government has become the all powerful father-mother-protector-provider for of all its citizens in all realms of life.  And, the government (animated by those who populates its ranks) gladly accommodates the desires of the populace for more safety and is rewarded by the thrill of “control” that comes naturally with power and authority.

This discussion started with attempting to solve the issue of the $13.00 part that cost 200 lives.  The solution implied by Milton Friedman is giving the individual the choice to decide which risks he is willing to pay for, and at what price.  

In a society with a mixed, co-equal responsibility, the individual, group, and government would all have a part in giving input to the decision.  Obviously, the engineering, sales, and profitability issues are far too complex to incorporate the consumer, manufacturer, and state into the design specifications, cost of every part and final product.  

But, the one aspect of the system that would be easy to implement is the transparent disclosure of cost and risk.  Of course, this would give the competition an advantage, since they could design around the known qualities of the alternative products.  

Thus, the issue becomes how to force companies to disclose information about the deficiencies and costs of their product.  Typically, government is the agent that exerts force and produces compliance in the face of resistance or pain.  The market functions in the same manner.  It gives feedback to the manufacturer/service provider about the desirability of a product in comparison to alternative expenditures.  

Market theory posits that a product will survive or fail based upon its inherent value in comparison to other alternatives.  But, there are flaws in this argument, as illustrated by a phrase used by Wall Street traders, “The market has an ability to stay irrational longer than you have the ability to stay solvent.”  In other words, bubbles, momentum, habit, and fad, can move the market in directions that really do not reflect very important market forces.  The same is true on the micro level with the consumer choosing to buy or not buy a superior product because of hype, ignorance, misinformation, or habit.  In other words, its hard to create an ideal and transparent world for people to make the best decisions to maximize their own welfare.

If the state tries to micro-manage the quality of every product and service by penalty and rule, the state will grow to gargantuan proportions.  And, if it assumes this role, it will be the de facto party responsible for all safety decisions (and the cost/risk calculations/tradeoffs) for every consumer product).

A government with such expansive regulatory powers, and responsibility for ensuring the safety of every product, would have the power to completely dominate the life of every man.  

Thus, a more realistic implementation of the watchdog, advocate, and regulatory function of the state would be as a point of information collection and retrieval.  The state could function as a research service for both consumer and manufacturer.  Of course, such a service would entail infrastructure and labor, and the society must decide how they wished to pay for this service.  

One method would be the government agency funded by taxes.  Another would be the market implementation that provided research on all products.  And, a third implementation is an industry-based risk and cost assessment provided by every company, on every product, with the funding of that service included within the cost of each product.

Any of these methods could work, and each of them have their own profile of costs and benefits that could be considered, debated, promoted, diminished, massaged, integrated, and ultimately compromised to produce the societal solution/implementation.  Usually society provides multiple venues of satisfaction of a need, since there are multiple vendors, each competing for business and survival, and there are a spectrum of consumer needs and individual considerations.  

On a very mundane level, one solution is to place a “Risk Assessment Seal” on products which have disclosed this design considerations.  This could be implemented by government mandate, or by an “Association of Responsible and Accountable Manufacturers.”  This seal could function as a mark of quality and choice, and as such would be an added value for the consumer.

The individual could pursue cost-risk assessments by doing personal research, but such would be impractical.  The individual, by being made aware of this consumer consideration, could force a market-based or government solution.  The transformation from opaque to transparent in the realm of cost-risk information will happen when there is a demand.  It could be touted by business as a feature worth paying for, required by regulation and enforced by penalty; or driven by consumers who refuse to buy anything until they have their need met.

We are talking about a revolution of societal paradigm in terms of the consumer’s considerations for purchase decisions.  Such a revolution will probably only grow from a small seed of concept and then through various iterations of societal implementation.  It may take the form of a government mandate initially, and then be turned over to the market to provide a web-based service on a fee-per use or subscription basis.

In the evolution of this new world where transparency around cost-risk was considered, it would first require the initiation of a broad societal recognition of the moral superiority of a world where cost-risk assessments are transparent and available as a tool in making purchase decisions.

But, usually revolutions start small.  Maybe a manufacturer could claim superiority, or social responsibility, and in so doing garner a cult following, and greater market share.  

Possibly a locality bands together under the banner of product cost-risk transparency, and gives a tax break, or preferential media attention, to vendors who supply information about their product risks and cost-benefit profiles.

While the state often becomes an agent of power usurpation, once taking, never releasing authority, this does not have to be the way that society organizes itself.  The state, if it truly is an idea supported by the people, could make quasi-laws, that make recommendations and statements.  This is currently a large and established modus of the media-state complex.  The ides promoted are not currently those of the people, or the Judeo-Christian ethic, rather they are the ideas of the socialist left, attempting to mold men into facile followers of authoritarian group-think.

I believe the best place for such new ides to start is in the localities, the small towns, where the group makes local non-binding (or force-backed) ordinances that declare their preferences in towns re, cars accessories, zoning, housing standards, lead, light bulbs, emissions, safety equipment, abortions, marijuana...  

When the town-group is the medium of social-industry demand, the individual is part of a larger voting block that can influence players through the tools of economy and law.  The individual cannot be entirely flexible (on all issues) in terms of the town-group he joins.  But, it is one of a number of advocacy groups that he may join.  

We are discussing here the process of shaping other groups by our stand and advocacy and in turn influencing the next larger group ideas/ideals to form around my desires.  Choosing a town that resonates with my values is a good first step in social participation.  Ultimately the goal is to create a reasonably homogenous society with the vast majority embracing the Judeo-Christian ethic.  

Of course, in respect to the Founders’ principle elaborated in the 10th Amendment, the moral codes, manufacturing standards, disclosure patterns, religious creeds, sexual behaviors, drug restrictions, etcetera would not be imposed on a national level.  The national law should concerned with defense and the few other enumerated areas of authority.  The states and localities should be free to experiment in the domains of market solutions, personal and interpersonal behavior, ideas, speech, and theory.  Any nationally imposed standards prevents the locality exercising their option to shape their small group (town) environment as they so choose.

 

T.