musings > general
12 Feb, 2011 | 4 min read
In the 1970s Ford produced a car called the Pinto. The humble little car is no infamous for one thing, the positioning of the fuel tank. Because Ford were under pressure to produce the car quickly, they decided that the best place to put the thing that stores flammable liquid would be behind the rear axle. Essentially, this meant that if ever the car was involved in a rear-end accident, the fuel tank could rupture. I’m sure you don’t need me to tell you that this could cause big problems.
I was in a Politics lecture on Rationality the other day, where this was brought up. The reason was because of the way Ford dealt with the situation.
Installing a ‘shield’ for the tank could solve the whole car-blowing-up-in-an-accident thing, but this would obviously cost money. So they conducted a ‘Cost-Benefit Analysis’ of the situation.
In the case of the Pinto, the cost of adding the shields, which came to $137 million (roughly $600 million today), was weighed against the benefits it would bring — i.e. the value of the lives it could save. Ford estimated this benefit would total $50 million ($200 million today).
In other words, Ford had assigned a dollar value to someone’s life. When the public found out there was a huge uproar.
If you are having trouble working out why this is such a big deal, firstly congratulations — you live in the 21st century and are not phased by such corporate action. However, I would urge you to take a look at the figures again. The cost was $137 million, and the benefit was only $50 million. That means that, from a strictly business point of view, the estimated number of lives that could have been lost was not worth the cost involved in preventing their deaths. Of course there would be other consequences, such as probably the biggest consumer backlash and subsequent boycott in history then leading to the eventual bankruptcy of one of the biggest car manufacturers on the planet. But while, to my knowledge, the cost-benefit analysis didn’t include this eventuality, still the idea that saving lives could be too expensive seems a little unsettling (and of course if the CBA did include this, then it makes it even more so).
And yet, as uncomfortable a sentiment as this is, do we not do it all the time? Setting aside wars, where decisions on equipping soldiers with protective gear is a decision almost entirely rooted in money, insurance companies and even healthcare providers (to name two instances) actively make decisions based on the value of life.
Indeed, many studies have actively tried to put a value on the life of an individual. Different groups understandably vary but many seem to converge on around $1.5 million mark, which is based on such things as: income earned over the average life, any costs involved in any state welfare — health, education, etc., and other similar measures. (Incidentally, Ford valued a human life at $200,000 — a figure which, around the time, would be worth about $1 million today)
There are of course types of valuation that don’t necessarily centre on money. Take transplants, for example. If two people need a heart, a decision has to be made as to who has priority. Obviously the immediateness of the individuals’ need is an important factor. But if one is an alcoholic, or a smoker, or has any number of other ‘negatives’, then they are less likely to get priority. The fact that money doesn’t come into it has little bearing on the nature of the decision. Resources — be they transplant organs or the wealth of a business — are inherently scarce. We must therefore make judgements, rational judgements, on situations that sometimes can be unsettling.
To move back to the Pinto, or rather business in general, would it be rational to make all decisions based on a moral grounds? If every situation produced a cost-benefit analysis like the Pinto, then the business would go bankrupt fairly quickly. You could of course argue that if such a business existed, where every decision it made produced such an outcome, it would be better for it to fail as quickly as possible. But I think my point still has merit. While it is of course important to have some morality in business, and I’m not using this post to condone fixing fuel tanks to the back of cars in a less than safe manner, can we really expect a company to succeed if all its actions must benefit everyone.
To make an entirely different but not wholly unrelated point, if you had to make the decision between two people getting a heart transplant — one a 30-something teacher with two kids, and the other a 70-something smoker with an alcohol addiction — on what grounds would you make the decision? What if instead of a 70 year old smoker, the other was also a 30-something teacher, but without kids? How rational would either choice be? How moral? The two don’t always complement each other.