The firms profit should be irrelevant in my opinion. But make these firms believe that they will have to cover the true costs of their behavior!
This is - bluntly put - a shite fucking idea. I am not trying to "maximize total welfare" where one way to accomplish that is to allow a bad actor to get ridiculously wealthy at the expense of everyone else (even if the total paid by everyone else is less than the bad actor makes).
We have a term for this: Privatized profits and socialized losses. We're witnessing that this mindset is completely dysfunctional.
It allows bad actors to accumulate immense wealth through behaviors that are net negatives for all other participants - further, those bad actors can then use that wealth to avoid or offset the share of their social costs that should be paid (ex: lobbying politicians, paying off regulators, bribing judges, etc)
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There is a reason most people don't accept a deal where both parties gain, but one gains at a heavy advantage over the other: We know that allowing this behavior is bad for long term social stability, and we have all sorts of ideas about "Fair" that we apply to stop it: https://www.sciencedirect.com/topics/neuroscience/ultimatum-...
> The firms profit should be irrelevant in my opinion. But make these firms believe that they will have to cover the true costs of their behavior!
The profit is the ONLY FUCKING THING that is relevant. The firms don't care about "true costs" (which, as an aside are often impossible to reasonably calculate). All the firms cares about is "Does bad behavior A lead to more net money, or less net money?" As long as the answer is "More net money" The firm is going to engage in bad behavior.
The answer ALWAYS needs to be: Fine the bad behavior until it is not profitable. Full fucking stop.
Trying to penalize companies never works in practice, regulators CANT let large companies going bankrupt, cascading defaults of creditors, creating unemployment, etc. It never happens. Also, this penalizes the workers the most.
Once psychopaths have certainty of personal consequences they will want to stay away from executive positions.
I'd maybe be in favor of a law that demanded that fines be paid in equity of the company (starting with equity held by the C-level officers and board) at a steep discount on market price (say... 50% valuation).
Engage in enough bad behavior and you become nationalized over time, and then the public can decide what to do with the result.
They’d seize 100% of the stock and cancel any exit packages, then fire the board, and CEO, and claw back any remaining fines from the personal accounts and garnished wages of the executives responsible for the problem.
This would protect the employees, customers and creditors of the company.
Of course, it wouldn’t protect the people that own congress and the supreme court, so it will never happen.
I don't love it personally, but it's decidedly not "Privatized profits and socialized losses". It's explicitly a system to make sure that the profits are shared from the damaging-corporation, to the government of the people damaged. In theory, I think they have a great point, which might be workable to inform future fine frameworks (we will always need fines in addition to anything else, and this isn't the worst way to set the fines). In reality, I suspect that captive government officials will set some of the variables far too "in-favor" of the corporations in exchange for backroom deals or cronyism.
But it's far from the worst idea I've seen.
It's "Who's been doing some serious illegal dumping?".
In almost all of these cases - the issue is NOT that the company simply didn't know what was going to happen (although in many cases this is where they started).
It's that the company hid facts, lied, manipulated the public, and in general attempted to squash any and all evidence that might hurt their profits.
The first is acceptable. The second should be met with termination (as in - the companies that do this should have leadership removed: anything from jail time to nationalization).
We have an even older term for that: The tragedy of the commons [1]
Look at different products to get an idea of what I’m talking about. For instance, prescription medicine often has side effects. People are aware of the side effects, typically, and make an assessment of whether the benefits outweigh the costs. When we discover that companies did not correctly assess the side effects, we react accordingly, and fine them, ban them from selling the product, etc. But some of those drugs, despite unknown side effects, do a lot of good in the world.
So go back to the first point where the company is acting in bad faith: Covering up data that shows a danger. Take EVERY fucking cent since then.
If they don't have it? Nationalize them.
You're still entirely focused on the "Recover the commons" side of this, and what I'm saying is that punishment is used to establish the set of accepted social rules we play by. Right now, we're saying
"Lie all you want, obfuscate all you want, Literally kill people to make money - don't worry, we'll only fine you 5% of the profit you make doing it. (in reality: the fine here was less than 2% of the revenue made)"
My attitude is that this is unacceptable. I am not a fool - the world is incredibly complex and I know full well there is a LOT of nuance around this topic.
I still find it utterly galling that we're issuing fines that are literally chump change compared to the profits these companies are making.
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So given that we've been trying the whole "fine them but not too hard" strategy, and we have clear evidence that companies treat these fines as simple costs of business...
At what point do you admit that maybe a slap on the wrist is no longer the right answer?
What confuses me is why you seemingly do not believe companies’ fines should correlate with the damage they’ve done. Your stance seems to be a boolean “company did bad”, which invalidates their right to any profit they ever made. That doesn’t seem very fair.
An example: I went to a full-service gas station once, and asked the attendant for a full tank of 87 octane. I watched him select 93 octane (for an additional 70 cents per gallon), so my full tank came out $10 more expensive than it would have otherwise been. Clearly he was operating his business in bad faith. My remediation was to dispute the charge with my credit card company, and I paid the price of the 87 octane fuel after all. Correct me if I’m wrong, but the remediation you’re proposing seems to be that all profit that gas station made from that point on was invalid and ought to be taken from them, since they were operating in bad faith. You are of course entitled to your own opinion, but that seems a huge overreaction to me.
There is a whole world of shady and fraudulent businesses between “pumped the wrong octane gas” and “multi-generation coverup of externalities that will irreparably damage our health or ecosystem”. I believe the worst offenders should be punished, and harshly, because the damage they’ve done is so great (and often understated in these types of cases, IMO), but I don’t think we should indiscriminately nullify entire businesses over more mild issues.
Because a LARGE part of the damage they've done IS the bad behavior. It's the lying, hiding of evidence that things are harmful, manipulation of the public and regulators.
Those are ALL damage. They damage our social construct. That's in addition to the actual damage the product they're selling is doing to our environment and bodies.
I understand that it is basically impossible to bring a product to market without causing some sort of harm. At a minimum you are likely burning oil/coal product and consuming resources. You might also be creating products that we know and understand are dangerous - and we apply rules to those companies to limit and offset those costs.
THAT'S ALL FINE! If we can have a discussion about the harms and decide "we the people" are ok with it...
It's absolutely fucking unnacceptable when one greedy party KNOWS they are doing harm, and is hiding it from the public, because they know having to deal with additional taxes/regulation/monitoring will hurt their bottom line.
The literal harm here is the lying. If the company published the documents as soon as they knew... or were transparent from the start... then sure, lets have a small fine to help clean it up and address it moving forward.
If the company instead goes "Fuck that - I'm going to hide this to make as much money as possible and bank on being fined like I didn't know and was playing ball"... then fuck em, nationalize that fucker.
I don't know if parents suggestion leads to this or not, but I don't understand why we should have a problem with "maximizing total welfare" just because some entity would become ridiculously wealthy. Don't we want to incentivise that sort of behavior? Whether they're "bad" or not?
My problem with this is the same as my problem with using the average instead of the median.
Imagine two situations with a small group of 10 people:
In situation #1: All ten people have 10 dollars to their name. Net across the group is 100 bucks.
In situation #2: 1 person (we'll call him Bob) has 1000 dollars, and every other person is 100 dollars in debt. Net across the group is 100 bucks.
Which one of those do you want to live in? According to our "Money is literally all we care about because we're morally bankrupt" maximization strategy, these situations are identical, and everyone should be thrilled.
In reality... Bob is living the high life and everyone else is too poor to matter. Great for Bob in the short term, terrible for social stability, because those 9 other folks are starting to think he looks mighty tasty right about now.
In this case, it’d be a 10B fine, which is 33% of their current market cap. That seems about right. They make other stuff, so letting the company survive (but barely) probably maximizes societal utility moving forward.