The Ford Pinto Case
THE FORD PINTO CASE:
THE VALUATION OF LIFE AS IT APPLIES
TO THE NEGLIGENCE-EFFICIENCY ARGUMENT
Christopher Leggett
Law & Valuation
Professor Palmiter
Spring, 1999
Abstract
Text of Paper
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Abstract
The cases involving the explosion of Ford Pinto's due to a defective fuel system design led to the debate of many issues, most centering around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system based on this analysis.
ISSUE
Should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or seriously bodily harm, such as in the Ford Pinto situation?
RULE
There are arguments both for and against such an analysis. It is an economically efficient method which has been accepted by courts for numerous years, however, juries may not always agree, so companies should take this into account.
ANALYSIS
Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change. This risk/benefit analysis was created out of the development of product liability, culminating at Judge Learned Hand's BPL formula, where if the expected harm exceeded the cost to take the precaution, then the company must take the precaution, whereas if the
THE VALUATION OF LIFE AS IT APPLIES
TO THE NEGLIGENCE-EFFICIENCY ARGUMENT
Christopher Leggett
Law & Valuation
Professor Palmiter
Spring, 1999
Abstract
Text of Paper
--------------------------------------------------------------------------------
Abstract
The cases involving the explosion of Ford Pinto's due to a defective fuel system design led to the debate of many issues, most centering around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system based on this analysis.
ISSUE
Should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or seriously bodily harm, such as in the Ford Pinto situation?
RULE
There are arguments both for and against such an analysis. It is an economically efficient method which has been accepted by courts for numerous years, however, juries may not always agree, so companies should take this into account.
ANALYSIS
Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change. This risk/benefit analysis was created out of the development of product liability, culminating at Judge Learned Hand's BPL formula, where if the expected harm exceeded the cost to take the precaution, then the company must take the precaution, whereas if the