Daniel Fisher – not otherwise known to me – writes for Forbes, covering “finance, the law, and how the two interact.” Naturally, given where he works, he hates plaintiffs’ lawyers, which is his right and privilege in this great and free country of ours. So his first reaction to the VW emissions-cheating scandal was to criticize – not VW – but a class-action law firm threatening to sue VW on behalf of consumers.
His point is that the buyers of the supposedly-clean-but-actually-filthy-dirty VW diesels weren’t in any direct sense harmed by VW’s fraud. By disabling pollution controls except when the car was being tested, VW managed to pack more performance and fuel economy into a car than it could have done while also actually meeting the emissions targets. So when VW issues a recall notice it will in effect be asking consumers to trade their existing car for one that performs worse and gets lower miles-per-gallon. So, he says, except for a few Marin County cranks, they’re mostly going to ignore the recall.
Therefore, the plaintiffs’ lawyers are being silly again.
Tort reform, tort reform, sis, boom, bah!
Now, I don’t know what it is you need to know to be a Certified Financial Analyst – that’s the credential Fisher claims – but apparently it isn’t logic or economics.
Of course an individual car buyer isn’t directly harmed by driving a car that pollutes a lot, unless that buyer is burdened with a conscience (problem that does not seem to afflict Mr. Fisher). That’s the reason we have pollution-control laws: to prevent the selfishly rational behavior of each of us from poisoning the air for all of us. So the direct victims of VW’s fraud weren’t the buyers, but the people breathing the air.
Now, the buyers may still wind up with a problem if they live in states that do smog checks, because their cars won’t pass. And of course if they do respond to the recall, they will wind up with worse-performing, lower-mileage cars than the ones they were sold. So in fact the law firm Mr. Fisher makes fun of has a perfectly good cause of action on behalf of the class it no doubt hopes to assemble.
But even if that weren’t true, it would still be true that VW managers had committed a rather horrible set of crimes. Since they apparently also don’t teach chemistry or biology in CFA school, Fisher offers an ignorant sneer about the health effects of what VW did: “The Volkswagen defeat software is hardly deadly, unless one thinks the marginal nitrogen oxide it allowed into the atmosphere was enough to kill innocent bystanders.”
Well, actually, “deadly” is precisely the correct word. Increasing NOx increases particulate emissions, and particulates kill. (As far as I know, innocent lungs react about as badly to PM10 as guilty lungs.)
It’s hard to say precisely how many people have died or will die as a result of VW’s crimes. You’d have to know where the excess emissions took place and what other pollutants were in the air. The environmental-epidemiology models have lots of non-linearities, so you can’t just multiply total excess deaths due to particulate (about 140,000 a year at the most recent estimate) by the contribution of the excess pollution from those half-million VWs to the overall particulate burden (probably some fraction of 1%) to estimate excess deaths. Still, according to one expert I talked to, somewhere between 50 and 150 deaths per year (times six years) seems like a good first approximation, well above any single mass-murder incident in the U.S. save 9/11. Even the much lower estimate Brad Plumer came up with (5-27 excess deaths per year) would dwarf the nine known deaths from samonella-infected peanuts for which the CEO of the Peanut Corporation of America just drew a 28-year sentence. Kevin Drum, using a different approach, guesstimates about a dozen deaths (over six years) in Southern California alone, roughly consistent with the Plumer figures.
But of course those are statistical deaths, which don’t feel as “real” as identified deaths. You can’t point to a specific case where someone died of COPD (which, let us note, is among the very bad ways to die) and say “George Jones died of VW’s illegal air pollution.”
By contrast, when GM let cars stay on the road with known-to-be-defective ignition switches, there were specific wrecks with specific corpses inside them. That may well matter in a courtroom. But it shouldn’t matter in conscience or in policy. Both at GM and at VW, executives decided to kill a bunch of anonymous strangers for money, just like Harry Lime in The Third Man.
That’s not as bad as an ordinary murder, where the killer picks out a specific victim, because being personally singled out to be killed is somehow worse than dying as a mere statistical side-effect of someone’s money-making efforts. But in both the GM case and the VW case, people wound up dead (or injured, or sick) because a company decided it was more advantageous to let them die. In the GM case, the company’s culpability was mostly passive: the company made a design or manufacturing mistake and then didn’t disclose it or act promptly or adequately to fix it. What VW did was much worse: the “defeat software” wasn’t a defect, but a deliberate decision to break the law with the predictable consequence of killing substantial numbers of people, probably twice as many as died of GM’s malfeasance. I don’t think you need to live in Marin County to find that objectionable.
I’ve seen some comparisons between VW’s actions in this case and the actions of food-company executives whose strategies promote bad eating habits. Those people, too, kill strangers for money, and their culpability shouldn’t be minimized. But there are two huge differences between the cases. First, people who eat at McDonald’s choose to eat at McDonald’s, while VW’s victims didn’t have the option of not breathing. Yes, tempting someone into self-damaging actions is very wicked, but it’s not on a par with damaging someone without that person’s consent. Second, it is – perhaps regrettably – the case that what McDonald’s does is legal, and it’s certainly open. By contrast, VW acted illegally and surreptitiously. That matters.
I’m still puzzled about how it came about that a bunch of well-educated, well-paid people at VW were able to live with themselves while engaging in what amounted to a conspiracy to commit mass murder. We know that GM and Toyota got caught playing similar games a few years ago, and apparently the buzz in the automotive world is that “everyone” was doing it; BMW has already been singled out for attention, and it seems that VW’s European operations were involved a well as its U.S. operations.
Reading the Fisher essay may provide some clues to the nature of the moral universe in which all these people live. And the essay itself helps constitute that moral universe. It calls VW’s decision to cheat “ethically questionable.” That’s a very nice way of saying “murderous.” And of course all the “Business Good! Government Bad!” chanting from Republicans and their tame media outlets and think tanks also contributes. As Paul Krugman points out, the scandal makes a nice counterpoint to Jeb Bush’s latest “anti-regulation” rant.
That’s why it’s so important that VW not be allowed to settle this case for civil penalties, even heavy ones. There need to be criminal charges, against the company as an entity and against the individuals involved: not just the people who made the decisions and did the design work but everyone who participated in keeping it quiet. (The technical term is “conspiracy.”)
It may well turn out that the higher-ups managed to protect their deniability. If so, relatively low-level folks will mostly wind up taking the fall. At some level, of course, that’s unjust. Still, it’s worth establishing the principle that when you break the law in a way that kills people you do time for it, even if you break the law in an office rather than on a street-corner, and even if there were other, more culpable, people who can’t be convicted because they didn’t leave a paper trail.
And of course it’s always possible that one or more of the lower-downs, facing hard time, will suddenly remember the actions of one or more of the higher-ups. In drug and organized crime enforcement, that’s called “working up the chain;” it’s how Archie Cox finally got to Richard Nixon.
If the result of the case is that VW disappears as a corporation, lots of innocent people will be hurt; those costs can’t be simply ignored. But lots of innocent people get hurt every time a bad business decision brings a firm down. At some point we need to convince managers that breaking the law in ways that kill people is a very bad business decision.
Update Tyler Cowen also feels compelled to demonstrate his contrarian cleverness by arguing that deliberately breaking the law, leading to predictable deaths, is really no biggie. He pretends that there’s no morally significant difference between corporate executives designing cars to fool emissions tests and a car owner slipping a smogging station $20 for a “pass” result.