This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
11/30/2007
Don’t Blame The Burgers
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This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
8 comments:
Agreed. Doesn't it just kill you how much worse the fries are at McDonald's these days?
This is getting into a legal issue here, but I think the real problem is that there is no punishment for bringing a frivolous suit (it is called "English rule" when there is a potential for a penalty).
The economics is that this has reduced the fixed costs associated with pursuing a lawsuit. It's a more complex idea that we skip until the Ph.D. level, but when you are offering differentiated products increases in fixed costs lead to fewer firms entering the market. In this case, by reducing the fixed costs of lawsuits - all of which are differentiated from each other - we increase the supply of them.
I agree that it is ridiculous that people who choose to put fattening foods in their bodies can sue a restaurant on the basis that the restaurant should have warned them that fattening foods can kill you. That's not a restaurant's job. Maybe those people should be suing their moms or their health teachers.
Dr. Tufte's comment that these higher fixed costs will lead to fewer firms entering the market reminds me of the pharmaceutical industry. These drug companies have many great solutions to curing diseases, but because of the threat of lawsuits and high barriers/rules, many great drugs never make it to the people who could benefit from them.
It's funny you mention a tax on fatty foods. That is exactly what many people are beginning to suggest. A fatty food tax on fast food that would slow the use of the product while raising money to help fight the negative externalities caused by the effects of obesity.
Sue Fast Food?
I agree that it is ridiculous that people who choose to put fattening foods in their bodies can sue a restaurant on the basis that the restaurant should have warned them that fattening foods can kill you. That's not a restaurant's job. Maybe those people should be suing their moms or their health teachers.
Dr. Tufte's comment that these higher fixed costs will lead to fewer firms entering the market reminds me of the pharmaceutical industry. These drug companies have many great solutions to curing diseases, but because of the threat of lawsuits and high barriers/rules, many great drugs never make it to the people who could benefit from them.
Extra Credit - Dr. Tufte
Dr. Tufte said that not having a penalty for frivolous lawsuits is part of the problem. A $20 insurance co-pay greatly reduces the number of doctor visits for insurance holders. If a minimum penalty were established for frivolous suits, I think we would see a large reduction.
Dr. Tufte,
I think it is ridiculous that these are even allowed to get into the court systems. When are people going to face up and be accountable for their decisions? No one is forcing them to choose the fries versus eating a healthy meal at home. People need to take responsibility and deal with the consequences of their decision. Dr. Tufte you made the comment about how worse the fries are, but it seems to me that it doesn’t matter if it is one million calories; no one is making them eat it. It is a conscious decision that they make. They know that it is unhealthy and yet get mad when they have to deal with the consequences. It seems that in our society we never take responsibility for our decisions.
Dr. Tufte-Extra Credit
The economics in legal issues is an interesting topic. Doctors, nurses, and hospitals are dealing with the same issue. People need to understand that many bad things that happen in the world are uncontrollable. In many cases the bad things that happen are avoidable by the person being hurt. The economic question is what could you do to raise the fixed costs of litigation so pursuing frivolous lawsuits will not be encouraged? Maybe a refundable pretrial payment that is paid to the accused if they are found innocent? Or how about a mandatory 12 month fitness program if you loose the case? I bet that would clear up the docket in the courtroom.
I have a couple of additions.
1) The desire for compensation through lawsuits is another expression of the conflict in human societies between predation and production. The former splits up the pie differently, while the latter makes it bigger. We ought to do more to discourage the former.
2) Another problem with taxes that are supposed to discourage behavior is that they are usually completely out of proportion to the problem. Two examples come to mind: 1) cigarette taxes were high enough to cover all of societies medical costs from smoking before the huge increases in the wake of the late 90's settlement, and 2) calculations of the optimal carbon tax to discourage driving to address global warming are smaller than what the government already collects.
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