Don Norman writes about accidents,
and lays them at the feet of a profit-driven culture. I take him to
task and he replies.
Esther Dyson chimed in via private email to suggest that Don was
talking about a short-term focus. Note that Don was not talking
specifically about workplace accidents, but I am, just to keep
focus.
Workplace safety is a more complicated topic than it first seems.
Anyone might say "What could be wrong with increasing safety?" An
economist would reply that it might be too expensive. I want to
address this in three directions. First, that some safety is free,
and some is not. Second, that there are four sources of money to pay
for safety. And third, that it should be workers who demand safe
workplaces, or not.
The cost of safety
Increasing the safety of the workplace might or might not cost
money. For example, locking down a circuit breaker when you're
working on the circuit it controls costs almost nothing. You had to
touch it to turn it off anyway. Putting safety instructions on a
device is the cost of a label. Other types of safety are going to be
more expensive. For example, turning off a circuit breaker when
you're working on a piece of equipment that has its own power switch
is going to be more expensive. You'll have to stop what you're doing,
go to the circuit breaker, turn it off, and go back. Or insisting
that someone not use the top step of a ladder (the not-a-step) means
that they need to locate a taller ladder.
Providing extra safety might be a capital cost (e.g. adding a
railing), or it might be an operational cost (e.g. going the long way
around, avoiding the place where a railing is needed). These costs
are accounted for differently. Capital might not be available for
increased safety. The cost of production might not bear the lessened
productivity.
Just as safety is rarely free, so will accidents rarely be free.
There is always a cost involved in accidents. Perhaps a trained
worker is lost, or idled. Perhaps equipment is broken. Perhaps
equipment is idled while the worker's corpse is removed from the
equipment. Nobody worries about the accidents that are more expensive
than the safety needed to prevent them. The profit motive will cause
employers to eliminate those types of accidents. The kind that gets
peoples panties tied in a knot are the ones where safety is more
expensive than the accident.
For the remainder of this article, I will only speak of the latter
kind. The former is boring.
Paying for safety
In the short run a company can pay for safety by raising prices,
reducing entrepreneurial profits, by reducing dividends, or by
reducing wages. A product doesn't change just because it's been made
more safely. Entrepreneurs may have a personal desire to not hurt
their employees, in which case the safety becomes cheaper than the
accident. Boring! Same thing for the capitalists. Boring! Same
thing for the workers, particularly since it's them who get hurt in
the accident. If they're willing to do this, then the problem again
becomes boring, because the cost of the accident exceeds the
safety.
The problem with any of these four sources of safety funding is
that they're limited. Customers will not put up with unlimited
increases in price with no improvement in the product. Once a (not
otherwise productive) capital expenditure on safety has been made, no
further source of capital is available unless capitalists want even
more safety. Once a worker's wages have been cut because they're less
productive because they're being safe, further gains are impossible
without further cuts. No worker is interested in working at a
perfectly safe job for no pay.
I must note here that it's possible to force all employers to adopt
safety measures, through the coercive power of government. That
doesn't create money from nothing. What it does is force all
employers to pay for safety using the same mix of the same four
funding sources listed above. Competition will select the most
efficient mix. I think that workers have deluded themselves into
thinking that only entrepreneurial and capitalist profits are reduced.
That's possible, but not likely. Entrepreneurial activity will move
to a less regulated (e.g. a more intrinsically safe) business.
Capitalists will make further investments in less regulated
businesses. Workers who prefer safety will not. And customers are
just "workers" the day after payday.
Workers must demand safety
Coercing safety measures on employers is probably not the right
idea, for several reasons. A worker might prefer wages to safety. A
worker has a direct interest in maintaining a safe workplace, whereas
the government's interest is indirect. Workers can detect unsafe
practices and eliminate them. Other workers in the same workplace who
are not at the same risk will subvert the safety measures, because
they don't want their wages to go down.
The best protection of workplace safety is a robust economy with
low costs and high wages. Ironically, this may mean less safety...or
more safety. Workers will be able to avoid unsafe workplaces unless
they pay well enough to cover the
risks. Workers who prefer money over safety will seek out those jobs,
e.g. explosives deliveryman.
What is money, anyway? Like fish and water, we deal with money
every day, but we have so little understanding of its nature. To
understand money, let's start without it. Some people don't like
money, because they think it's the root of all evil. (Note: that is
NOT a quote from the Bible. It's a MISquote. It's actually "the love
of money".) Let's say that they got their way, and money was
abolished.
No money, so how do we get the things we need for daily life?
Food, clothing, shelter, not to mention water and sanitary facilities.
We could all be experts at providing all of them -- jack of all
trades, master of none. That is the problem with trying to do
everything. You don't have the time to become an expert at any one of
them, so everyone ends up having to spend a lot of effort learning to
do the things that are needed to keep themselves. A world of Robinson
Crusoes. Doesn't sound like fun, but that's why people trade.
In tribes, or bands, people tended not to use money, but instead
relied on each other. Call it a primitive communism. From each
according to their abilities, to each according to their needs. It
worked, but only because the tribe was small enough for a person's
reputation to be known. In essence, everyone kept a balance sheet in
their heads for who owed whom what.
As societies grew, and people started to trade between tribes, they
would barter. Barter is a perfectly fine way to trade except for one
thing: the transaction cost. Barter markets are terribly inefficient,
because for everything you want to sell, you have to find someone who
has something you want to buy. This is not easy to do, because you
have to find the perfect match. In essence, marriage is a barter
market -- you have to find someone you love, and they have to love you
back. Every lonely person can attest to the difficulty of making a
good match.
Money is a human invention to get around the inefficiency of barter
markets. Money is any kind of thing that people agree it is. Money
is the universal commodity. Money is that thing which anyone wants,
because they know they can barter it for anything else. Money is a
half barter. Most often people don't want money because of the
qualities of the commodity which serves as money (although it
will have its own qualities). They want money because they
know they can trade it for other things they *really* want.
Even if we were to abolish money, as those non-economists would
have us do, we would eventually reinvent money. It might not be
dollars, pounds, or lire, but it would have the same characteristics
of money: something that nearly everybody will give or accept in
trade. In wartime and in prison, it has often been cigarettes. Money
is not a particular thing. It is an idea.
The Value of Money
Everybody wants more money, right? WRONG! People always want more
wealth, but they don't necessarily always want more money. Imagine,
if you would, that you could hold all of your wealth in something that
you could easily sell. That is, you could barter it for money. That
would mean that you need never hold any money, because you could
always have your wealth in the form of money.
People hold money because they value its characteristic as the
universal commodity (or because, in the case of numismatists, they
value it for its intrinsic characteristics). They hold money because
they fear that they won't be able to trade goods or services for
money. It follows, then, that people's desire for money will rise
and fall as the circumstances of their lives change.
If people want more or less money in their lives, it follows that
there will be a demand for money, and a supply of money. Similarly,
there will be a price of money. If people want less money, the price
of money will fall. If people want more, the price will rise. If
there comes to be more money, the price of money will fall. If there
comes to be less, the price of money will rise. The term for the
former is inflation, and the latter deflation. Yes, I realize that in
popular language, inflation means rising prices, but there's a reason
why the Economist is Angry. When the people fail to understand that
inflation is directly related to the supply of money, those who have
the power to create money have the power to steal from the people.
If you have trouble understanding the previous paragraph, imagine
that dollars are not money, but are instead simply collectible
presidents' portraits. Money is ... instead, eggs. You can see that
if there are more chickens laying more eggs, then the supply of eggs
increases. Eggs will be less dear. Greater egg availability means
you want more eggs to sell your dollars.
Fungible
One of the desirable characteristics of money is that it should be
fungible: Anyone holding a pieces of money will trade it for any other
equally-valued piece of money. Most money that people handle these
days truly is fungible. It didn't used to be the case. Coinage,
being made from a precious metal, might be debased. That is, the
coins themselves might be modified so as to reduce their value. The
classical method of doing this is to shave them so they are slightly
smaller in diameter. That's why the US quarter has milled edges -- to
make shaving harder. Of course, they're not currently made of a
precious metal, but their predecessors were, and they needed milled
edges.
What if money is in fact not fungible, and yet is forced to be so
by legal tender laws? Now you see the action of Gresham's Law:
bad money drives out good. If not all money is of equal value, people
prefer to hold onto the money which is worth more, and spend the money
which is worth less. Since it still has the function of money, people
will do better by spending the money which has the least value. In
this manner, good money gets quickly driven out of circulation.
To see an example of this, consider what happens when you have a
group of people, all of whom want to do laundry. Suddenly, quarters
(to put into the washers and dryers) become more valuable than bills.
People will tend to pull quarters out of circulation, preferring
instead to pay with bills or dimes.
