Department of Public Health Sciences

The social costs of dangerous products: An empirical investigation

Shapiro S, Ruttenberg R, Leigh JP

Cornell Journal of Law and Public Policy. 2009. 18(3):775-830.

From an economic perspective, dangerous products that remain on the market impose costs on consumers and third parties when they cause fatalities and injuries. Available data either overestimate or underestimate these costs. Our study attempts to improve on existing methods of analysis by directly estimating the cost of injuries and fatalities attributable to three dangerous products: Ford SUV's with Firestone tires, the pharmaceutical drug Baycol, and All Terrain Vehicles (ATVs) with three wheels. In each case study, we identify the adverse consequences caused by the product defect and then estimate the costs associated with each consequence using published data. We arrive at these estimates by employing the cost-of-injury (COI) approach commonly used in the economic literature, but we also broaden our cost estimates to include costs that are traditionally excluded from the COI methodology. This extension is necessary to present a more comprehensive estimate of the costs to society of dangerous products. Our results indicate that the three products we studied created nearly $4.7 billion dollars in external costs, excluding extended costs; that extended costs can be greater than costs measured by a traditional COI methodology; and that families and taxpayers may end up paying for significant extended costs.

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