If Lawsuits Are a Key Replacement to Regulation, Why Tort Reform?

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Milton Friedman said that there's no need for product safety regulation, because corporations know that if they do harm they'll be sued.

Interviewer: So tort law takes care of a lot of this ..

Friedman: Absolutely, absolutely.

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(excerpt from a 1999 interview)

ROBINSON

The typical definition of libertarianism in my mind is that a libertarian wants the smallest, least intrusive government consistent with...

FRIEDMAN

Consistent with the maximum freedom for each individual to follow his own ways, his own values, as long as he doesn't interfere with anybody else who's doing the same.

ROBINSON

Ok, consistent with the maximum freedom of each individual as long as he doesn't interfere with other individuals pursuing their own freedom.

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ROBINSON

... let me take you through a series questions that are floating around in the modern mind and ask how a libertarian addresses them. Question number one, the environment. Now, it would strike a lot of people living in Manhattan that Central Park is very important to their lives and that if Milton Friedman had his way, it would be turned over to the market and buried under skyscrapers and parking lots within 18 months or however long it takes Donald Trump to put the structures up.

FRIEDMAN

It doesn't take a governmental agency to maintain the theaters in New York. It doesn't take a government agency to maintain the museums, the art museums in New York, the Museum of Modern Art is not a government museum, it's a private. It happens to be there two kinds, there are private-for-profit enterprises and not-for-profit enterprises like the museum, like the opera house and so on. In the same way, if Central Park were not owned by the government, it never would've become the filthy place it became. You forget, what happened to Central Park. We for years, for some years, a long long time ago, lived on Central Park West when we were in New York.

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ROBINSON

...one of the things I'm trying to distinguish here is the extent to which your libertarianism is effectively a moral position, you do it because it's right and just, it creates the greatest conditions of justice and the extent to which you do it because it works. And it sounds to me as though you have both reasons pretty well wrapped up.

FRIEDMAN

Absolutely, if it didn't work...the main thing is, if it didn't work, it would be an impossible goal. The only reason there's any chance of keeping government limited is because government is so inefficient and does so poorly.

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ROBINSON

Again and again you will hear that we've tried, the Western world has already tried laissez-faire, let her rip economics and it ended up with the London that Charles Dickens portrayed "dirty, filthy, child-labor" just a terrible mess. What do you do..how did that come to be?

FRIEDMAN

It was a terrible mess but what cleaned it up?

ROBINSON

Disraeli and his social...the child labor laws...

FRIEDMAN

No, no what cleaned it up was the progress of private enterprise because you had a...the reason it was so messy was because you had to burn coal and the kind of coal that was available in Britain was very smokey and messy. And once you were able to use oil, natural gas, better furnaces, all of those things is what it made it possible to clean London up...

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ROBINSON

So what you're saying then is that this mental image that drives even to this day so much of the environmental debate is simply, it may be true as far it goes, but you'd advise greater historical understanding.

FRIEDMAN

But not only historical, present. Where are the most polluted areas in the world?

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ROBINSON

I want to push you one more time on the environment- air. Here in California it turns out there are 30 million people who like to breath. And we have, particularly in the L.A. basin, smog beginning in the 1970's that the environmental movement begins to...

FRIEDMAN

Oh no, the smog went back 200 years. There are stories of the Indians describing that as a smoggy area.

ROBINSON

So part of what's going on is it's natural.

FRIEDMAN

But no doubt, the thing about that is there is an argument for government requiring those who impose costs on third parties to pay for them. And the point is with respect to smog, the efficient way to do it is to use the market.

ROBINSON

How do you create property rights in the air, say?

FRIEDMAN

When you do it now, by selling the right to emit a certain amount of pollutants into the air. You now have a market in effluent rights.

ROBINSON

For large manufacturing concerns..

FRIEDMAN

For manufacturing concerns, which is where most of it comes from. And you do the same by charging essentially making it requirement that automobiles have to have (catalytic convertors). ...that's effectively making individuals be responsible for costs they impose others. Remember what I said is- the key feature of a libertarian view is that you should be free to do what you want provided you don't prevent other people from doing the same thing. And so the only case for government is when it is not feasible for market arrangements to make individuals pay, to compensate others for any harm they impose on them. If you and I enter into an agreement to buy or sell something, well that's our business. You may lose, I may lose , or more likely we're both going to win. We're not going to enter into it unless both of us think it's better for us. But there are cases like the power plant that emits smoke that dirties my shirt in which the company is imposing a cost on me for which I'm not being compensated. Those are the only cases, but you have to qualify that by noting that when government enters in, it also is emitting smoke, it's also imposing cost on third parties because it's always a very imperfect arrangement and moreover it always has to collect taxes and the process of collecting taxes is, as I always say, there's a smokestack on the back of every government program.

ROBINSON

A smoke stack on the back of every government program- by that you mean, a distortion in the marketplace..

FRIEDMAN

Right, imposing a cost on third parties for which the third parties are not compensated.

ROBINSON

And so the key characteristic in which you find a circumstance where it's legitimate for the government to intervene would typically be where property rights are vague or diffuse, is that correct?

FRIEDMAN

And where it's almost impossible to make them precise. That is a problem in the case of the power plant is that there is no way in which you can say you have to get the agreement of each of the persons whose shirt your going to dirty and pay him for the privilege of dirtying their shirt before you can do it.

ROBINSON

So on the environment, the greens actually do have a point, that is one area where there is a strong case...

FRIEDMAN

But in most cases in practice, ... there are many many cases in which market arrangements are far more effective than command and control arrangements.

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http://www.hoover.or...uk/3411401.html

Edited May 15, 2010 by El Buscador