Steve Reads

The [newspaper: New York Times] returns to the famous McDonald’s coffee case, and explains why it’s been massively misunderstood. The trouble is that, as a self-contained argument, I don’t find this [newspaper: Times] redux all that convincing, either. Let me put a few words of preface here:

1. As a general matter, I will almost always defer to juries. I will *certainly* defer to them when it’s a choice between deferring to them and deferring to the public rumor mill. Whom do you trust more: a group of people who have sat before the evidence for seven days, then spent four hours arguing over the verdict, or people like you or me who only know what we read in the papers?

So it says a lot to me that the McDonald’s jury ruled unanimously in Ms. Liebeck’s favor. On that basis alone, I would defer to them and question my own ability to infer that this was “a runaway jury” or what have you.
2. This case seems to have turned into a shibboleth for liberals, just as much as for conservatives. If you suggest that *as an argument*, you’re not convinced that McDonald’s did anything wrong, you are immediately put in the bucket with *those* people — the people who believe that corporations are people, say. The same thing has happened with abortion: claim for a moment that you have any ethical troubles with it, but that *even still* it must remain legal, and you’re immediately in a bucket with the bad guys over there who probably want women to go back to coat-hanger abortions in back alleys. It happens all over the place in American culture. I don’t know if that’s at all new, but in any case: we’re dichotomized even when there is obvious territory for agreement.

Let me be clear, then, about my ideological priors. When it comes to a choice between a corporation and an individual, I err on the side of the individual — just as, when it comes to a fight between labor and management, I err on the side of labor.

My claim here is simply that, *on the basis of that video*, viewed on its own as an argument, I am not convinced that Ms. Liebeck deserved a large monetary reward. Maybe the way to approach this is to abstract away from the issue of McDonald’s; that company’s presence in the argument is going to pull in all kinds of other heated beliefs. So suppose you come over to my house and I make you a cup of coffee. [1] I heat up the water in my Cuisinart kettle. Here’s what the kettle’s temperature-control panel says:

I make all my coffee these days in a French press, so I follow Cuisinart’s instructions –helpfully laid out on the button — and use 200-degree Fahrenheit water. Or maybe I follow George Orwell’s advice — consistent with the black-tea button on the Cuisinart kettle — and I ensure that “The water should be actually boiling at the moment of impact, which means that one should keep it on the flame while one pours”. So the first thing to note, in contrast to the video: it’s not at all clear that very hot water — indeed, water even hotter than what McDonald’s used — is uncommon. [2]

So suppose I make you a cup of coffee using very hot water, you accidentally spill it in your lap, you get third-degree burns, you go to the hospital, they charge you $10,000, you’re there for a week, and I offer you an insultingly low amount of money to cover your costs. Am I now liable for your injuries?

I can see a good argument that abstracting away from McDonald’s actually loses a valuable piece of information here. If *I* pay a lot of money to make you whole, the court will not have made life better for a large number of people; it will have made life better only for the small number of people for whom I make coffee. Whereas if McDonald’s lowers the temperature of its coffee, the evidence laid out in the video says that that would save hundreds of people pain and suffering.

So instead, perhaps you should be suing Cuisinart: if they lower their recommended water temperature for coffee and tea, perhaps thousands of people will be made better off. Do you think that Cuisinart deserves to be sued here? Do I deserve to be sued?

Or maybe the callousness of my response is more the issue than the coffee as such. Had I offered you the full $10,000 to pay off your medical bill, along with money to compensate you for the time you spent away from work and so forth, maybe that would have solved it. Is it mostly the callousness of the response that inspired such a large award from the McDonald’s jury?

On a society-wide level, I wonder if this would be handled better or worse by insurers. McDonald’s would carry liability insurance, and everyone would carry health insurance. If people spilled coffee on themselves and incurred medical expenses, the health insurer would try to make itself whole for the hundreds of burn cases it had paid for; to do so, it might raise premiums on everyone, or it might choose to sue McDonald’s liability insurer. I’m really not sure whether this would be better or worse: would the health insurer not do enough to inflict punitive damages, or damages for pain and suffering, on McDonald’s? Or would the damages it chose to pursue be in some sense optimal?

Gentle reader: am I missing any obvious parts of this case? Am I giving short shrift to any important parts of the argument from the video? If I am, I’d love to hear it.

__P.S.__: I recall reading somewhere that Milton Friedman believed tort law, and tort lawyers, were the saviors of capitalism. As a general rule, my sense is that libertarians and anarcho-capitalists are fans of the common law over statutory law, because the former is much “closer to the action” than the latter. And in particular, an idealized anarcho-capitalist — one who isn’t just working for the czar — is going to allow the distributed intelligence of the market economy work its magic: if we’re going to neuter the regulators, we’re going to empower the juries. So it makes a lot of sense to me that a self-consistent libertarian will fight for an unlimited right to sue companies when they do something that harms the public. That is, sure, we’ll eliminate the FDA, but people will then be able to sue food companies whenever they put dangerous chemicals in their products.

I think this suffers from some realism issues, however. First, “weaken the regulators and strengthen the juries” might be sensible as a matter of theory, but it’s hard to envision that the society in which regulation is gutted is the same society in which juries are empowered. I’m curious if those two conditions have ever existed alongside one another. Second, this is of course an iterated game. First I sue you for putting chemicals in your food; next, you fight like hell to hide the ingredients in your food so that no one can know that they should sue you. And by stipulation, there’s no regulation left to step in here, so you’re not required to put ingredients on your packages, and I can’t sue you when you fail to advertise the presence of horse meat; what’s my cause of action?

So as a matter of practical living within an actual society, it’s hard to picture this libertarian paradise existing. Nonetheless: can anyone point me to a place where Friedman argues this? … Ah: here (via Krugman, via Marginal Revolution).

> ROBINSON So your view is abolish the FDA..
>
> FRIEDMAN Absolutely [ROBINSON And what comes up in its place?] what comes up? It’s in the self-interest of pharmaceutical companies not to have these bad things. Do you think the manufacturer of Thalidomide made a profit out of Thalidomide or lost? [ROBINSON I see, ok.] And you have to have..people should be responsible for harm that they do. It should’ve been possible…[ROBINSON So tort law takes care of a lot of this.] Absolutely, absolutely..

I would like to see Friedman expand more on the lawsuit side of this. I understand as a matter of theory that he’s arguing “self-interest guarantees that the right outcome will obtain.” But one needs to unpack that. “Self-interest” could mean many things. In an iterated game, perhaps you’ll produce clean food because you want me to come back tomorrow. And “self-interest encourages you to do x” means specifically that more good than harm will come from your doing x. But that’s an empirical claim, and it depends upon the structure of tort law. The fundamental theorems of welfare economics only hold if all externalities are internalized — that is, if I pay the full costs of everything bad I do, and obtain all the benefits of everything good I do. Ensuring that all externalities are internalized requires an awful lot of institutions. We can’t just tap-dance over this problem; exactly how externalities will be internalized is essential to justifying the libertarian state.

[1] – It will likely be made, these days, with Equal Exchange Mind, Body and Soul beans. I actually get it by subscription, in the mail, every month from Amazon. That’s pretty convenient, you guys.

[2] – I’m leaving out a bit of technical detail here. After you pour water on the leaves or grounds, you usually leave them to steep for a few minutes. So even if the water was boiling at the moment of contact with the leaves, it wouldn’t be when steeping was done. I don’t know whether that means, in particular, that the water is in the safe zone by the time the coffee’s done steeping. That may be relevant here.