Statistics. That's something that is wrong

| Comments (4) | TrackBacks (8) |
Alex Tabarrok points to James Surowiecki's New Yorker article about how people perceive cost benefit analysis. Here's the key graph:
While that kind of weighing of risk and benefit may be medically rational, in the legal arena its poison. Nothing infuriates juries like finding out that companies knew about dangers and then "balanced" them away. In fact, any kind of risk-benefit analysis, honest or not, is likely to get you in trouble with juries. In 1999, for instance, jurors in California ordered General Motors to pay $4.8 billion to people who were injured when the gas tank in their 1979 Chevrolet Malibu caught fire. The jurors made it plain that they did so because G.M. engineers had calculated how much it would cost to move the gas tank (which might have made the car safer). Viscusi has shown that people are inclined to award heftier punitive damages against a company that had performed a risk analysis before selling a product than a company that didnt bother to. Even if the company puts a very high value on each life, the fact that it has weighed costs against benefits is, in itself, reprehensible. "We're just numbers, I feel, to them" is how a juror in the G.M. case put it. "Statistics. Thats something that is wrong."

If you've seen Fight Club, you may recall that the job that the character played by Edward Norton had that was the symbol of his utter soullessness was to go to car accidents, determine what defect caused them, calculate whether the benefit of saving them would exceed the cost to the company. Obviously, to the extent to which we'd like companies to run good cost/benefit analyses, we might want to find some way to counter this effect.

UPDATE: Fixed title to match the quote in the article.

8 TrackBacks

Listed below are links to blogs that reference this entry: Statistics. That's something that is wrong.

TrackBack URL for this entry: http://www.educatedguesswork.org/cgi-bin/mt/mt-tb.cgi/107

mitsubishi legnum from ceixnoirs.dyndns.org on July 18, 2005 12:48 AM

mitsubishi eclipse accessories mitsubishi fto mitsubishi engine mitsubishi pd-6150 mitsubishi wd52525 mitsubishi cell phones mitsubishi outlander reviews mitsubishi canter mitsubishi dealer mitsubishi eclipse 2006 mitsubishi eclipse reviews mitsubishi ... Read More

blue ridge nc riverfront real estate listings hilton head and real estate and listings multiple real estate listings suncity real estate listings nevada blue ridge nc waterfront real estate listings dublin real estate california department of real esta... Read More

Free pics of granny fucking from Moms friend fuck sample on October 23, 2005 11:06 AM

Cock lovers Porn girls 18 year old free pics Free download incest photos Indian sex pictures of mom & so... Read More

kelly blue book from kelly blue book on December 14, 2005 1:00 AM

kelly blue book Read More

phentermine from phentermine on January 4, 2006 2:24 AM

bellhop Letitia obsolescence prior instantiates eagerness?potentiometers reliably phentermine http://www.toylane.net/ Read More

no-deposit-casino from no-deposit-casino on February 15, 2006 6:06 PM

TITLE: no-deposit-casino URL: http://icasinos.ic.funpic.de/no-deposit-casino.htm IP: 219.48.96.192 BLOG NAME: no-deposit-casino DATE: 02/15/2006 06:06:31 PM Read More

debt consolidation from debt consolidation on February 17, 2006 4:03 AM

resolve manly?impresser scribing typewriters soma http://soma.available-prescription.com/ Read More

Car Loans : Tips for new car buying, auto financing and avoiding dealer scams. Read More

4 Comments

I think you may have misinterpreted the juror's comment (at least in your title). As I understand it, the juror was complaining about the attitude of the company--that it was treating the customers as mere numbers, or "statistics". Now, that could be interpreted as objecting to the whole concept of cost-benefit analysis. But it could also be interpreted as a complaint about the power being wielded by the company--that the company could decide when simply to treat the customers as "statistics", and when to "treat them as human beings"--i.e., in practice, how much to weight the appearance of good citizenship and other P.R. concerns in the cost-benefit analysis.

If I'm right, then a simple gesture such as incorporating an outside party (particularly one perceived to be "on the customer's side", such as the government or a consumer's group) into the cost-benefit analysis process might go a long way towards reducing or removing the stigma attached to these analyses. In effect, they might no longer be seen as a demonstration of callous unconcern by the company--even if they involved exactly the same procedure--once an outside party was given "input" (or oversight, if you like).

And it might even produce better analyses, if you suspect--as I do--that corporate cost-benefit analyses tend to run the risk of institutional bias against certain, up-front costs, since these are the costs that other parts of the company feel soonest and most directly.

Hmm.... Interesting theory, however note
that according to the abstract of Viscusi's paper "Internal use of higher value of life numbers serves as an anchor that boosts rather than reduces jury awards." so I think it would be interesting to see if it works.

I think this is more of a framing issue. It seems they always forget to discuss the benefit they provide (presumably) to many people.

Dan's suggestion was part of the original justification for the FDA.

Leave a comment