Thursday, February 17, 2005

You can't have one without the other

So, I just got out of my Corporations class, which I like to call Economics 320. My professor comes from the University of Chicago Law School, which is famous for championing the Law and Economics theory--which basically says, laws are just if they're economically efficient. That is, when the winners win more than the losers lose, all is well. Well, I think it's pretty obvious that when it comes to practice, this theory is a load of caca. In the same way that the ideal gas law might be well and good inside the classroom, but has no basis in reality, so too does the Law and Economics ideal not fit with reality. Just ask anyone in North Portland whose house is next to a brownfield.

That said, I am now happily reading Priceless: On Knowing the Price of Everything and the Value of Nothing, by Frank Ackerman and Lisa Heinzerling. In it they describe the many failings of the cost-benefit analyses that our government utilizes to justify its actions. (All administrative agencies are required to undergo cost-benefit analyses prior to rulemaking). The problem lies in the difficulty of quantifying many intangible costs and beneifts. How much is a human life worth, and why has the price fallen in the last 20 years? How much is skin cancer worth? How about a specie of butterfly? My favorite example is the now infamous cost-benefit analysis done by Ford for its Pinto. When Ford realized that a design flaw made the Pinto blow up on impact, it calculated that the 180 lives it would save annually by redesigning the car was not worth the $11 per car it would cost to make the changes.

I'll let you know when I've finished the book (I've literally just started). Meanwhile, Stay Free! Magazine issue #23 has an interesting interview with Ackerman and Heinzerling. Prof. Heinzerling, incidentally has a lot in common with my Corporations professor. They're both graduates of University of Chicago Law School, and have worked for The Law and Economics King, 7th Circuit Judge Richard Posner.


Blogger jkf said...

What life is worth:

evidently 1 life is worth 850,000 hours of travel time saved by raising the speed limit from 55 to 65. go, go speedracer

NY times nov 28, 1984 at A16.

2:29 PM  

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