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Cost benefit analysis

This is NOT a defence of  GM but it does try to raise an issue that I have not heard discussed. Simply put: Life is uncertain and we all live with that fact. All kinds of things can happen to us when we walk out the door, including catching an airborne disease from someone else on the street. We could protect ourselves from all these risks  by wearing a hazmat suit and surrounding ourselves with a big rubber band. We choose not to because each of us does a cost-benefit analysis on an ongoing basis. Yes, we might catch flu and die but we offset that possibility with the inconvenience of wearing a mask. We figure that the benefits are not worth the costs. In short, there is nothing that is 100% safe — or, more correctly put, nothing is 100% safe unless we are willing to spend an awful lot of money.

Putting this in the context of GM. We could presumably all drive tanks that would keep us close to 100% safe. That would make cars/tanks too expensive for almost all of us so we go along with cars that we know are just 90% safe or less. I drive a small car that if hit by a large SUV will almost certainly crumple and lead to my death. Its a car that I can afford and I live with that risk. I suspect that the cheaper the car, the less safe it is. Expensive cars have airbags built into their sides; inexpensive cars don’t.

So, the question that I think needs to put to GM is not whether they were at fault for not making their cars an impossible 100% safe. They do need to be asked whether their cost-benefit analysis matched that which their customers would have made. And, of course, they do need to be asked what cost-benefit analysis they did at all. Early indications are that the cost of a fix would have been very small and the benefits would have been large.

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