The economic benefits associated with the reduction of mortality risks constitute the largest component of all regulatory benefits for federal regulations.” The main framework used in assessing the value of mortality risk reduction is based on the risk-money trade-off for very small risks, or what has become known as the risk-money trade-off. 34;value of a statistical life,” or the VSL.” The values currently used by many government agencies to value each preventable fatality are in the neighborhood of $9 million or more.” Although the VSL sets a substantial price for expected fatalities from various risks, this price relates to the risks that are assessed prospectively by regulatory authorities.10 In situations where companies violate regulations in a manner that results in employee deaths or consumers, the price associated with lives is often quite low." In this article, the VSL serves as the appropriate deterrence-based estimate of the value to place on fatalities in agencies' enforcement efforts.
AGENCY PENALTIES FOR FATALITIES
FDA), "motor vehicle safety violation penalties imposed by the Department of Transportation (DOT),16 and environmental violation penalties imposed by the Environmental Protection Agency (EPA)." As this review will show, the fine amounts are well below what would be appropriate from the point of view of generating incentives for optimal levels of deterrence."
Occupational Safety and Health Administration
Taking into account the largest penalties ever imposed in the agency's history, it reflects the low level of penalties associated with any violations found at companies where workers died. If we combine the value of the fines paid by BP for enforcement actions in 2005 and 2009, which rank among the two highest fines imposed in the agency's history, and assume that the corresponding VSL is approximately $10 million, then the total fine amount of $85 million is far below the amount of economically effective deterrence based on the magnitude of adverse health risks and ignores the role of penalties for hundreds of willful and repeated violations.
Food and Drug Administration: Food Safety
This incident resulted in the death of a sixteen-month-old child and the illness of at least sixty-six other people." to what was at the time the largest penalty ever imposed by the FDA in a criminal case involving food injury." The total amount of the penalty was $1.5 million, of which
Department of Transportation: Motor-Vehicle Safety
Leaving aside the costs of accidents other than deaths, the penalty amount that NHTSA imposed had an average value of. 2018] THE FATAL FAILURE OF THE REGULATORY STATE 607 the degree of punishment adequate to deter the conduct which led to the number of victims, which he could then have multiplied by the value assigned to each fatality.
Environmental Protection Agency: Air Pollution
Four Texas companies were fined a total of $3.5 million under the Clean Air Act for criminal violations that caused an explosion at two Texas oil and chemical processing facilities.'8 Of this amount, $3.3 million came from criminal penalties exist, and $200,000 was a community service payment.'"' In this incident, one worker died and two others. Dep't of Justice, Four Texas companies agree to pay $3.5 million for criminal violations of the Clean Air Act at Two Oil and Chemical Processing Facilities (Oct. https://www.justice.gov/opalpr/four-texas-companies-agree-pay-35- million-criminal-violations-clean-air-act-two- oil-and [https:// perma.
Implications for Assessment of the Adequacy of
ESTABLISHING THE OPTIMAL DETERRENCE REFERENCE
The ultimate goal of risk and environmental regulation is to have an impact on health, safety and environmental outcomes.'a' If these policies were public spending efforts, the things are different. However, if the government mechanism is through regulatory policy, these Regulations would need to change the behavior of other economic actors to have an effect, such as businesses, consumers and workers.186 Influencing behavior in a way that creates efficient levels of safety will correspond to what this article will identify the optimal deterrence reference point. ."' Establishing penalty levels per death will create the incentives to promote efficient levels of safety.
Promoting Optimal Levels of Deterrence
While tort liability addresses both insurance and deterrence objectives, risk and environmental regulation has a narrower focus.'' These government efforts do not transfer money to injured parties or their survivors and are therefore not involved in any insurance-related functions. Instead, they create incentives to create sufficient protective levels of security that could theoretically fulfill the optimal deterrent function.200 Other social institutions such as tort liability, workers' compensation, social insurance policies, and private insurance could serve the interests of the population. insurance role.20'. From the standpoint of creating economically efficient levels of risk deterrence, how should regulators value risk reduction, and what is the magnitude of these figures?
Empirical Evidence and Policy Practices
Bush, I was asked to settle the dispute between the two agencies.2 1 8 Monetizing the mortality risk benefits using the VSL resulted in an increase in the assessed benefits of the regulation by an order of magnitude, and led to the issuance of the regulation .2 19 Although some agencies were slow to adapt the. Kip Viscusi, The Role of Publication Selection Bias in Estimates of the Value of a Statistical Life, 1:00 AM.
How the Values Influence Regulatory Criteria
For this reason, the Executive Branch Guidelines include a provision that exempts agencies from being bound by a cost-benefit requirement when this approach conflicts with their legal mandate.2 39 The result is that in some situations the regulations would be stricter than would result based on a trade-off between benefits and costs using the VSL, resulting in regulations with higher costs per life saved than the VSL.2 40. The fact that such a difference could exist reinforces the implicit price that regulators impose on the risk of fatalities.2 4 1 The VSL therefore serves as a lower limit, not an upper limit, for the value assigned to fatal risks by the regulations promulgated by the agency.2 4 2 As a result, the VSL is a lower limit on the amount that regulators award The risk of fatal accidents is important for the analysis of regulatory sanctions for regulatory violations that result in deaths.24 3 This article's assessment of regulatory sanctions related to product-related deaths and work-related deaths in Part I has shown that these sanctions are far below the magnitude of the VSL.2" As a result, these regulatory sanctions are even further below the implicit price that agencies place on the expected lives saved when setting rules that are even stricter than is justified on the basis of benefit-cost criteria.
Setting the Price for Corporate Decisions
Assume that there is some probability (p) that the regulatory violation leading to the death is known to the regulatory agency. Then, if the penalty for a death associated with a regulatory violation is set to a value equal to the VSL/p, this will create the appropriate incentives for safety for the firm.2 69 The reasoning behind this formula is that if the firm multiplies this fine amount by the chance that the fine will be levied, the expected fine amount associated with each death will be the VSL.2 7 0 The analytical rationale for this approach is identical to that for determining punitive damages in situations in which the probability of detection is below 1.0.271.
The Role of Other Financial Incentives
Wrongful death awards can provide financial compensation to the estate of the deceased.2 73 If the company is self-insured, then the company will pay the costs directly. While such an approach would create effective incentives for safety through penalties equivalent to the.
Implications for Setting the Deterrence-Based
RECTIFYING THE PENALTY STRUCTURE
666(d) (`Any employer who fails to correct a violation for which a citation has been issued under section 658(a) of this title within the period allowed for its correction (which period shall not begin until the of the Commission's final order in the case of any review proceeding under section 659 of this title initiated by the employer in good faith and not solely for delay or avoidance of penalties), a civil penalty of not more than $7,000 for each day may be assessed during which such failure or violation continues."). or regulations prescribed pursuant to this chapter may be assessed a civil penalty of not more than $70,000 for each violation but not less than $5,000 for each willful infringement.").
Food and Drug Administration
As with OSHA, there are legislative limits on penalty amounts, but the levels specified are greater than for OSHA, with limits sometimes as large as. This proposed text is identical to that in the statute except for the addition regarding the $10 million.
Department of Transportation
Furthermore, because the statutory penalties also include additional penalties for certain circumstances (eg, doubling penalties for each 30-day period, or part thereof, that the party is in violation of), the penalties are not tied to the adverse health outcomes alone. 3 54 1 would favor the fine ceiling of 10 million dollars per death and also propose to remove any upper limit on the total civil penalty.5 5 Thus, this article's proposed statute would include the following addition to If the violation results in a death, the person will be fined not more than per death without a cap on the amount of the civil fine." Because the penalties do not only relate to fatal accidents, but also matters such as failure to report the defect to NHTSA in a timely manner, the total penalty cap is not limited to the death-related amounts alone, but may exceed the 10 million dollars per .fatal accident.
Environmental Protection Agency
Under the Toxic Substances Control Act, fines are limited to an upper limit of $250,000 per person. Recognition of the VSL and allowing penalties to include the total number of deaths will correct the main shortcomings of the current penalty structure.
Implications for Regulatory Enforcement
PENALTIES AND CORPORATE RISK ANALYSES
The ultimate goal of imposing penalties is not simply to shift money from business to government, but to create incentives that will encourage compliance and lead to higher levels of health, safety and environmental quality.” In risk-taking decisions, companies should consider the various financial incentives for security created by regulations, liability and the market.3 8 6 The review of corporate risk analyzes presented below shows that the amounts of compensation that companies pay in liability often plays a key role in determining the financial incentives that companies take into account.” However, the incentives created by tort liability, based primarily on the financial loss suffered by decedents and their families, rather than on VSL, fall short of what is needed. For a discussion of the ways in which a regulatory agency might incorporate the impact of other financial incentives, see generally above, Part I.E.
The Ford Pinto Experience
Changing the penalty structure for regulatory violations by removing the current penalty caps and having government agencies base their penalties on VSLs, as described in the previous section, would change the valuations companies place on preventing fatalities through their product safety decisions. oo However, the risk analysis of safety-related matters is not harmless, as it may have negative consequences for the company's liability and whether the normal criteria for awarding punitive damages are met.'' legal protections for companies assuming responsible risks and Ford Motor Co.,399 the plaintiffs attributed the injury to defective product design for the fuel filler tube and gas tank installation. for the rear axle, leading the jury to award punitive damages of $125 million, compensatory damages of $2.5 million to Grimshaw, and $560,000 to the driver's estate.4 00 Although the rationale for the specific amount of punitive damages is unknown, relatively small costs design changes of $11 per vehicle may not have been significant in relation to fatalities and serious injuries.401 The starting point for the jury's retrospective assessment was a comparison of the cost per unit of the design change and the value of the damage caused by the accident.402 Punitive damages it was later reduced to $3.5 million.4 03 In addition to the very high fines, the media also criticized Ford for his analysis of the financial costs and benefits of the design change.404.
GM's Risk Analysis Efforts
To the extent that punitive damages serve a deterrent function, constructing the value of punitive damages based on the VSL would have provided an appropriate benchmark based on deterrence, as opposed to the multibillion-dollar award level.4 18 If one uses the VSL -in as the maximum value for preventing the risk of non-fatal injuries, then adopting the VSL as the value of the upper limit of each individual's loss, since the regulatory sanction would provide adequate deformation, without additional punitive damages necessary to establish efficient level of care. .4 19 Thus, in cases such as these in which juries may impose unusually large awards, the VSL can play a deterrent role in addition to aligning sentences with appropriate deterrent amounts.
Controversial Risk Analyses by Ford and Chrysler
34; Chrysler officials at the highest levels coolly calculated that admitting the problem and fixing it would be more expensive, in terms of bad publicity and lost sales, than covering up the defect and litigating the wrongful death suits that would inevitably result . Once again, corporate analysis focused on compensation payments in litigation rather than on legal sanctions or on the use of measures such as the VSL to monetize the risk of fatalities.
The Decline in Corporate Risk Analysis Efforts
In light of the controversial history of corporate risk analysis, it is not surprising that companies have not, on their own initiative, adopted VSL as the technique to monetize the fatalities prevented by safer design.4 3 9 If companies were to adopt the use of damage values based on VSL in their corporate risk analyses, there may be a problem with jurors working in hindsight and comparing the identified victim's loss to the modest price per product unit to increase safety.4 4 0 Instead of considering the company's future decision where the company assesses the costs and benefits across an entire product line, there is a tendency for jurors to compare the incremental costs of the safety improvement with. Although witnesses may speak of them, they are spectral figures, insignificant compared to the wounded plaintiff who appears in the flesh.4".
Establishing a Supportive Legal Environment for
Nevertheless, there may be risks that the companies face if they have formalized their assessments of the benefits and costs of the security measure. If given additional legal protection, firms can also undertake explicit assessments of the benefits and costs of safety improvements in their corporate risk assessments of alternative safety-related measures.
