Lpx Anticrash

[Vikki Nagindas]

Duncanan accountant, uses a loaded gun as a paperweight in his messy office. While his client, Petra, is meeting with him to go over her taxes, she accidentally dislodges the gun from its resting place and it falls on her foot, breaking two of her toes. The gun does not discharge. A legal rule in this jurisdiction makes it negligent to have a loaded gun lying out in the open in a place of business.[1] There is every indication that this rule was meant to address the risk of a shooting, not to protect toes from falling objects. Should Duncan be liable to Petra?

These critics argue that limiting liability in these ways arbitrarily cuts some factors out of the negligence equation that may in fact have contributed to the cost-effectiveness of the precaution the defendant omitted, or to the wrongfulness of her omitting it. Unable to identify any reasoned basis for a harm-within-the-risk rule to truncate an all-inclusive consideration of costs and benefits, Hurd and Moore urge abandonment of the approach.[17] Cooter and Porat maintain that liability should follow, contra the common law and negligence per se limits, as long as the negligent act foreseeably increased the risk of the type of harm that actually occurred.[18]

Products have fixed costs like factories and machinery that are incurred once and for all, as well as variable costs that vary by the amount of the particular good or service produced. For any given product, it is possible to calculate the extent to which each unit generates revenue in excess of the variable costs associated with making that unit. This figure is the contribution margin, so called because it measures how much a given product can contribute to covering the fixed costs of the operation.[25]

The second kind of error that a contribution margin analysis flags seems almost too obvious to state: we cannot conclude from the fact that a product generates some revenue and is part of a product line that is profitable overall, that it is worth making. If the product is generating less revenue per unit than its marginal costs of production, it has a negative contribution margin and should not be made. Although the product still brings in some money, it is actually eroding the profits of the product line, even if the product line remains profitable as a whole.

The stowing effort itself, which has a fixed-cost quality, clearly falls into the common cost category. So too, however, do the variable costs associated with storing the gun for whatever length of time it is put away. Moment by moment, the gun is taking up real estate in a drawer that might otherwise be occupied by something else that Duncan would like to stow, such as a fifth of whiskey or a personal journal. These variable costs are common to both of the products in the line; the drawer is like a piece of shared machinery that jointly produces anticrush and antishoot for so long as the gun is stowed.

There are also variable costs uniquely attributable to each of these risk control products. Because antishoot and anticrush are provided over time, we can conceptualize them as doses of risk control that roll continually off the assembly line for each interval that the gun remains stowed, leaving a string of opportunity costs in their wake. Each dose of antishoot comes at the price of making it harder for Duncan to fire the gun for legitimate purposes. And each dose of anticrush costs something as well: the forgone convenience of having a heavy object around to weigh down papers. Because heaviness has positive utility (as evidenced by the existence of paperweights) each moment that the gun is put away generates a stream of inconvenience in the form of flyaway papers.

There is another possibility. Maybe putting away heavy objects does generate benefits in excess of the variable costs of inconvenience, but the contribution margin is very small, so that without the huge boost from antishoot, the fixed cost of putting away the gun would not be worth incurring. Indeed, it could even be the case that the shooting risk is not significant enough on its own to justify the putting-away effort without the heaviness mitigation to help make the case.[33] But if it were actually true that the benefits of putting away heavy objects exceed the variable costs by even a thin margin, eventually we would reach the break-even point where an object has been off the desk long enough to cover the fixed cost of putting it away (or, perhaps, the cost of never acquiring it in the first place). That paperweights on desks are not generally considered negligent, even when left there interminably, is telling.[34] And shooting risks are large enough to plausibly constitute the whole reason that the loaded gun on the desk is negligent, without any need for help from other quarters.

If it is true that heaviness mitigation is an unwanted and costly aspect of the bundled precaution of putting the gun away, so what? One answer is that we would want to encourage efforts to find better precautions, ones that surgically mitigate the risks that can be cost effectively reduced without touching other risks that are better left in place (given the costs of reducing them).[35] Here, the shooting risk can be successfully addressed on its own through a likely less costly precaution: unloading the gun. But even if such an option were unavailable or too expensive to pursue, it would still make little sense to view an actor as negligent for not controlling a risk that society would be better off leaving uncontrolled. Risk reduction services that have a negative contribution margin are societal disservices, even when they are part of precautionary bundles that are cost justified overall.

We could make the same definitional point about contribution margins for products. Perhaps the assembly line jams and a group of widgets costs a bit more at the margin to produce, or a given run of widgets exhibits an imperfection and must be marked down. Just as a contribution margin for a product is calculated on average rather than unit by unit, the designations of contributor or eroder reference some relatively discrete risk category that is tractable for courts and parties to recognize. The question we are attempting to answer is similar to the one to which break-even analysis is directed in the product realm: is it a good idea to keep making this product?

Ultimately, product definition for risk control services should be driven by the demands of the tort system, including concerns about informational burdens and the effects of uncertainty and ambiguity on incentives. On these scores, we are likely to do best if we stick with broad product definitions (like anticrush and antishoot) that are easy for actors to tell apart ex ante and for fact-finders to tell apart ex post.

A few uncontroversial cases will help to illustrate this point.[40] As we will see, all of them gain normative force from the fact that the countervailing detriments in question are (1) in a currency other than money, such as risk or discomfort, that seems at least roughly commensurate with the currency in which the risk service itself would be delivered; and (2) fall, in expectation, upon the same people putatively benefiting from the risk control service. While these criteria are not part of the standard efficiency analysis for assessing whether the defendant was negligent in omitting a risk control service, they help to further justify limits on the scope of liability.[41]

Pollution offers another intuitive example of a disservice that no one has any obligation to produce, even if it might have a protective character in some instances, and even if it is an inseparable by-product of something that one does have a duty to provide.

Suppose that drug X is the best one to use for condition Y, and that failing to prescribe it when a patient exhibits condition Y is negligent. This drug has an unwanted side effect of sedation. A doctor fails to prescribe drug X to a patient with condition Y. This mistake does not harm the patient through the channel of her condition; somehow, luckily, she does not suffer as a result of not receiving the therapeutic effects of the drug. Unluckily, though, she hurts herself while doing calisthenics in her hospital room. She would not have been out of bed and doing calisthenics had she received the drug that she should have received, because its sedative effect would have knocked her out.

There may be difficult empirical questions about whether controlling risk for the not-X population has a positive (but low) contribution margin, as opposed to being an eroder. Again, we can look to the law for clues. If a durable precaution like a rail works like a public good, such that each person who encounters it benefits from it on net, then why should not it be legally compelled whenever there are enough people to make it worth the threshold cost, regardless of their status as having or not having a disability? If the contribution margin is positive as each person is added, then the precaution eventually becomes worth it for larger groups of people without disabilities.

Of course, it becomes worth it sooner as the number of people with disabilities rises. So it makes sense that the employer should have liability for a smaller group that contains people with disabilities (that is, the break-even point is reached earlier). But if the contribution margin is really positive, the railing eventually pays for itself even if the population includes few or no people with disabilities, if sufficient numbers of such people interact with the stairwell over a long enough period of time (people-stairwell hours). If we do not observe liability in that context, it suggests something different: either a negative contribution margin, a wash, or a contribution margin that is so thin that it would require more people-stairwell hours than would likely occur in any real-world situation.

Carving up populations for different liability treatment raises the concern that tort law will fail to account for the cumulative benefits of a given precaution. Suppose that the stairway railing rule was actually justified in part by the benefits to people without disabilities.[56] If so, an injurer who is held liable only for the lack of a railing when it injures people with disabilities might not put in the railing at all, because these injuries, on their own, equate to less than the cost of the railing precaution.[57] This point is well taken. However, its force depends on the implicit assumption that the contribution margin is positive for the risk control product that the rail would supply to people without disabilities. If we alter that assumption, the concern disappears and the normative prescription flips.

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