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April 2003, Volume 21, Number 4

The Free Market and Job Safety

George Reisman

The New York Times recently ran a three-part series on a string of tragic industrial accidents at facilities owned by McWane Inc., a large producer of sewer and water pipe based in Alabama. The series describes nine apparently needless and sometimes especially gruesome deaths, as well as several horrendous injuries suffered by workmen. All of them are presented as taking place in an environment of such reckless irresponsibility and callous disregard for the value of human life as to strain credulity.

While one cannot help but feel the greatest sympathy for those whom the series describes as having lost life or limb or suffered disfigurement, and utter horror at the manner in which they suffered, one must also identify the series for what it is, namely, a totally misguided attack on the profit motive, and a call for further government intervention to overcome the alleged evil of the profit motive. Indeed, the second installment of the series is titled "Family's Profits, Wrung From Blood and Sweat." 

The remedy it proposes is increased budgets and greater powers for OSHA, despite the fact that if the series has proved anything it is the uselessness of OSHA and government safety regulations as a means of preventing the kind of accidents it describes. The apparent formula of the series' authors is that no matter how much government intervention may have failed up to now, still more of it will surely succeed. 

One must first of all realize that job safety is rarely, if ever, a matter of black and white. Probably almost everything could be done more safely than it is done. And, hopefully, as time goes on and further economic progress takes place, everything actually will be done more safely than is now the case, just as today practically everything is done more safely than was the case in the past, when a lower state of economic development prevailed. But, in the very nature of human mortality, it will never be the case that danger can be entirely avoided and safety absolutely secured. 

Thus, today, there is growing use of safer, antilock brakes in automobiles and other motor vehicles. In the future, hopefully, there will be cost-effective computer-radar controlled automatic brakes. But even with such brakes, there will still be dangers of collision, if for no other reason than that of possible computer failure.

Safety and danger exist in different degrees and at any given time further increases in the former and decreases in the latter can take place only at increasing degrees of cost. Improvements in safety that are costless or of insignificant cost can be assumed to be enacted immediately, as soon as awareness of them exists. Indeed, not to enact such improvements is what is costly—in terms of the damage that can be suffered by failing to do so. 

In addition to the problem of costs, further complicating matters is that degrees of safety and danger are differently evaluated by different people. There are drivers who take the appearance of a yellow light as a signal to speed up, in order to get through before it turns red, while there are other drivers who respond by slowing down in preparation for coming to a stop. There are workers prepared to make a living catching hot rivets while standing exposed on a steel girder 50 floors up, and other workers who find the mere trip to their workplace to be an anxiety-producing experience. 

Perhaps even more importantly, the variety of conditions in which safety and danger exist has no practical limit. In matters of employment, it embraces the production of each and every good or service not only presently produced but that might be produced in the future, and each and every differing method or combination of methods by means of which it is or might be produced.

Because of these facts, it is not only impossible to write all the regulations that would need to be written for the government actually to decree what is and is not safe, but any attempt to do so must prove arbitrary and can easily serve to paralyze rational judgment by means of imposing the need to obey bureaucratic regulations in conditions that the authors of the regulations did not and could not foresee or did not adequately comprehend.

What is essential for safety is not bureaucratic regulation, but free, motivated human intelligence and judgment, which includes a consideration of the costs of achieving greater degrees of safety. Ironically, the imposition of excessive costs of achieving a higher degree of safety in an individual instance can result in sharply lower degrees of safety elsewhere, as the result of the lesser availability of means. As an extreme example, the cost of a computer-radar-controlled automatic braking system is probably still so high that if anyone who was not extremely wealthy had one installed today, he would deprive himself of the means to preserve his very life in all other areas, such as the purchase of food, clothing, and shelter. The purchase of such a technologically advanced braking system in these circumstances could thus turn out to have positively deadly indirect consequences.

To whatever extent additional safety comes at a higher cost, it restricts the ability to make provision for other needs and wants, including safety, in other areas of life. And this remains true even when the higher costs of safety are initially imposed on business firms rather than directly on consumers. This is because higher costs do not lastingly come out of profits but must be covered by higher prices of products or, alternatively, lower wage rates of workers. 

The great run-up in business costs over the last 30 years or so, on account of so-called safety and environmental legislation, has played an enormous role in worsening economic conditions for large numbers of wage earners and ordinary people in general. Those seeking an explanation of such things as the growing need for two breadwinners in a family need look no further.

In contrast to counter-productive government intervention and bureaucratic bungling, a free market achieves greater safety in the individual instance in a way that is consistent with the satisfaction of needs and wants in all other areas, including overall safety. This is because a free market operates on the basis of a proper consideration of costs. In so doing, it also makes due allowance for the differences among individuals in evaluating safety and danger.

Every improvement in workplace safety serves to reduce costs to some extent, simply by reducing the loss and damage caused by accidents. Wherever such reduction in cost outweighs the additional cost that must be incurred to install and maintain what is required to achieve the improvement in safety, the improvement is installed and maintained by business firms in the same way and with the same enthusiasm as any other improvement in efficiency.

Very importantly, a free market also serves to bring about improvements in safety even in cases in which they do not pay for themselves through improvements in efficiency, that is, even in cases in which they result in the incurrence of additional costs. This is the case when the improvements in safety are desired by wage earners strongly enough to induce them to accept lower wage rates to an extent that exceeds what would otherwise be the cost of the improvements in safety. When this is so, the improvement in safety once again turns out to reduce costs and to be the profitable thing to do. .FM

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George Reisman, author of Capitalism, teaches economics at Pepperdine University (greisman@pepperdine.edu).

 

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