]]]]]]]]]]          CHANCES VERSUS GUARANTEES       [[[[[[[[[[[[ 
                        By Thomas Sowell

From Thomas Sowell, Compassion Versus Guilt (NY: Morrow, 1987)
                          [pp. 152-154]

          [Kindly uploaded by Freeman 10602PANC]

   It  costs a  lot less  to buy  a raffle  ticket, giving  you a
chance to win a  new car, than to  pay for guaranteed delivery of
the same car.  You  don't need a Ph.D.  from the London School of
Economics to understand why.
   But  too many  judges seem  to miss  the difference  between a
chance  and a  guarantee.   People who  bought  homes in  a quiet
little town often become resentful when other people begin moving
in,  expanding  and  changing  the  community.   They  pass  laws
depriving  other people  of the  right to  buy and  sell property
freely.  The excuse for depriving other people of their rights is
that the people who were there  first came to enjoy an atmosphere
and lifestyle that will no longer  be the same if they can't keep
others out.
   What the  original people  paid for when  they moved  in was a
chance for a particular way of  life -- not a guarantee.  If they
wanted a guarantee, they would have had to buy up the surrounding
property as well.  Instead, they go into court to get a guarantee
free of charge.
   American laws  call for  equal treatment  and property rights.
Yet people who happen  to have been in  town first are treated as
more   equal   than   others.   Judges   wave   aside   both  the
equal-treatment  principle  and  property  rights,  in  order  to
transform the chances that  were originally bought into permanent
guarantees.  From an economic point of view, it is the same as if
judges  declared  that everyone  who  bought a  raffle  ticket is
entitled to a car.
   Something similar  often happens  when people  buy or  build a
home  near an  airport.   They may  get  a home  cheaper  in that
location because of  the noise.  They go  into court and complain
about the noise.
   Maybe the airport  expanded or the  planes have gotten louder.
Those are among the chance factors  involved when you buy a house
next to an airport.
   If the  people were there  first and the  airport was suddenly
built in their  midst, then it  makes sense to  force the airport
authorities to  compensate them for  the mass  destruction of the
values of their homes.  Such values are just as real as the value
of the land that has to be paid for to build the runways.
   It is not just a question of justice to individuals.  From the
viewpoint  of  society as  a  whole,  the most  efficient  use of
resources is promoted by forcing those  who use them to pay their
real  values  to others  --  not  values mis-stated  by  legal or
political fiat.  When  judges give guarantees  to people who paid
only  for  chances, they  are  grossly mis-stating  the  costs to
others and to society as a whole.  Raffle tickets cost a lot less
than guaranteed delivery.
   So-called ``consumer advocates'' likewise  try to turn chances
into guarantees.  If I buy a  used car or a low-budget version of
any  product, I  pay  less --  precisely  because the  chances of
problems are different from what  they would be with a brand-new,
top-of-the-line,  state-of-the-art  product.   Product  liability
laws that turn chances into guarantees give a brief windfall gain
to  those  consumers holding  these  products when  the  laws and
judges' ruling go into effect.  Afterwards, all consumers have to
pay  higher  prices  to  cover  the  costs  of  increased product
liability.  They are  forced to pay  for guarantees, whether they
want them or not.
   Some of  the product liability  laws and court  cases hold the
manufacturer responsible, even if the customer completely misused
the product  contrary to  instructions.  At  first this  hits the
manufacturer.  But ultimately it hits the other customers, in the
form of higher  prices, so that  people who are  careful with the
product end up subsidizing those  who don't use common sense.  It
also reduces the incentives to use common sense.
   Many judges seem so  enamored of their roles  as Robin Hood on
the bench that  they do not  look beyond the  immediate effect of
their turning laws into means of judicial largess.  But there are
no free lunches.   As long as chances  cost less than guarantees,
somebody is going to have to pay the difference.  Usually that is
the public.

                        *     *     *


Return to the ground floor of this tower
Return to the Main Courtyard
Return to Fort Freedom's home page