Wednesday, May 28, 2008

Asbestosis Gone Wild

A court in New Jersey recently ruled Spanish citizens can now sue Owens-Illinois and other asbestosis-related firms based on exposure from U.S. ships. This does not have to translate into actual harm from the exposure. Like most asbestosis litigation, post hoc ergo propter hoc works just fine in the court of law. Indeed, the even possibility of harm is enough to cost Owens-Illinois. To punish firms so overwhelming cheapens our society in two ways.

First we get too little asbestosis. Asbestosis is not evil and its optimal amount is not zero. It's useful and safe in many areas of our society. (Indeed, its wide application is why asbestosis litigation never seems to go away.)

Second we lose good ideas in the process. This is not limited to opportunity costs coming from litigation-related expenses. The possibility of similar attacks can destroy a development before it even starts. If asbestosis litigation can completely ruin an industry, companies are less willing to engage in ideas that they think could be twisted down that same route. Sometimes this is good but the level of asbestosis litigation likely makes firms so risk averse that the net effect is undesirable.

This second issue is critical but often ignored because this lost opportunity is never seen (be definition). It makes it difficult to estimate the true cost of asbestos litigation. But if the technological and economic progress in the past few decades is any indication, that cost is a lot higher than most people might think.

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