Chapter 6
1- (a) "Due care," (b) "caveat emptor."
2- Legal paternalism: the idea that the law may justifiably be used to restrict the freedom of individuals for their own good.
3- 6-point steps in consumer safety (pp. 514, 515): 1- Business should give safety the priority wanted by the product. 2- Business should abandon the misconception that accidents occur exclusively as a result of product misuse and that it is thereby absolved of all responsibilities. 3- Business should monitor the manufacturing process itself. 4- When a product is ready to be marketed, companies should have their product safety staff review their market strategy and advertising for potential safety problems.5- When a product reaches the marketplace, firms should make available to consumers written information about the product's performance. 6- Companies should investigate consumer complaints and do so quickly.
4- Express warranty: claims that sellers explicitly state (i.e, a product is shrink-proof, or require no maintenance for two years). Implied warranty: It includes the claim, implicit in any sale that a product is fit for its ordinary, intended use (this is also called merchantability).
5- Price fixing: There are 2 types: Horizontal price fixing: When competitors agree to adhere to a set price schedule, not to curt prices below a certain minimum (Mercedes Benz dealers in several states who conspired not to undercut one another with discounts). Vertical Price Fixing: When manufacturers and retailers -as opposed to direct competitors- agree to set prices.
6- Price gouging: A seller's exploiting a short-term situation in which buyers have fewer purchase options for a much-needed product by raising prices substantially.
7-Ambiguity: Use of weasel words, i.e, "help" (as in help prevents, helps fight, helps overcome, helps you feel, etc).
8- Concealment of facts: Advertisers suppress information that is unflattering to the products (i.e., prepaid phone cards with hidden costs, or the Bayer aspirin case, which for years advertised that it contained "the ingredient that doctors recommend most", or Cream cheese having "half the calories of butter" but hiding the fact that it's as high in fat as butter.
9- Exaggeration: Making hyperbolic claims unsupported by evidence, i.e., "extra pain relief," "50% stronger than aspirin," "anti-aging." There is also puffery: "King of beers, "breakfast of champions," "ultimate driving machine," etc. 10- Psychological appeals: A persuasive effort aimed primarily at emotion, not reason.
11- Ads directed at children: A typical child sees 20,000 TV commercials a year. (p. 321)
Chapter 7
1- (a) Ecology: It refers to the science of interrelationships among organisms and their environments. The operative term is "interrelationships," implying the interdependence between all entities within the environment. (b) ecosystem: refers to the total ecological community, both living and non-living. Webs of interdependency structure ecosystems. Predators and prey, producers and consumers, hosts and parasites are linked together, as mechanisms of check and balance that stabilize the system. A change in one element can have ripple effects throughout the system.
2- Environment as "instrument" (traditional view of business). Traditionally, business has considered the environment to be a free, nearly unlimited good. Air, water, land, and other natural resources from coal to beavers (trapped for their pelts in the 19th century) were seen as available for business to use indiscriminately. The view that nature is just "out there" to be used up and dominated promotes the wasteful consumption of viable natural resources.
3- Externality or spillover: Is the disparity between private (industrial) costs and social costs. Take paper, for example. The price of paper doesn't reflect the cost of producing it. Paper is under-priced and overproduced, thus leading to a misallocation of resources. This is also a moral problem, because the purchasers of paper are not paying its full cost. Instead, part of the cost of producing paper is unfairly imposed on other people. Facts: IT takes 100,000 gallons of water to make one automobile. Who pays for this damage? We suck 75 gallons of underground water for every 60 that nature puts back in.
4- Cost-benefit analysis: Is a device used to determine whether it's worthwhile to incur a particular cost. i.e., the cost of employing a particular pollution control device. Example: Imagine the estimated environmental damage of $1 million per year, and that the only technique that permits the plant to operate costs $6 million per year. Is that is the case, the cost-benefit analysis would rule against requiring the plant to introduce the new technique. It gets complicated. We must examine pros and cons. PROS: 1- reduction in air-borne pollution leading to bronchitis, lung cancer, and other respiratory diseases, 2-increase in life expectancy, 3- less environmental damage, which saves money. CONS: 1- lower corporate profits, 2- higher prices for consumers (say, the price of organic food), 3- adverse consequence for the nation's balance of payments. Ecological economics is the sicience dealing with the boundaries between environmental cost-benefit abnalysis.
Pros and cons of:
5- Regulations (take a look at p. 376, 377)
It makes use of direct public regulation and control in determining how the pollutyion bill is paid. State and federal legislation formulated by agencies such as EPA set environmental standards, which are then applied and enforced by those agencies, other bodies and the courts. ADVANTAGE: The standards are legally enforceable. Firms not meeting the standards could be fined or even shut down. DISADVANTAGES: 1- Pollution control requires a detailed investigation of pollution control technologies by the EPA, which is not easy. As a result, it may demand more from companies that they can achieve while letting others too slightly. 2- Although universal environmental standards are fair, they, by this very reason can become ineffectual. If the environment is clear, should companies be allowed to pollute up to the maximum of the standard? Which brings the problem of the particularity of each industry. On the other hand, is it reasonable to force companies that cause different amounts of environmental damage to spend the same amount of pollution abatement? 3- regulation can also take away the industry incentive to do more than the minimum required by law. No polluter has the incentive to discharge much less than the regulations allow.
6- Incentives (377, 378):
A widely supported approach to the problem of cost allocation for environmental improvement is government investment, subsidy and general economic incentive. Governments can give firms tax breaks for purchasing and using pollution control equipment, or matching grants to companies that install such devices. ADVANTAGES: 1- It minimizes government interference in business and encourages voluntary action rather than coercing compliance (as it happens with regulation). 2- By allowing firms to move at their own pace, it avoids the unfairness to firms that cannot meet the regularoty standards. 3- Incentives provide an economic reason for going beyond mere compliance.
DISADVANTAGES: 1- A voluntary program is likely to go very slow (while environmental problems are generally pressing for immediate attention). 2- The program amounts in many cases as a subsidy for polluters, with polluting firms being paid not to pollute. 3- Does the approach benefits the victims of pollution or the polluters? (the USA spends billions subsidizing the conversion of corn to ethanol, the program benefits the big business and corporations while its positive environmental impact is negligible. Worse, by reducing the amount of food produced, the subsidy has helped drive up the price of food and pay for more corporate lobbyists in Washington.
7- Price mechanisms & pollution controls (p.378, 379)
The program is designed to charge firms for the amount of pollution they produce. Also called effluent charges, it spells out the cost of a specific kind of pollution in a specific area at an specific time. Prices depend of the damage caused and so it vary from place to place. ADVANTAGES: 1- It places the cost of pollution control squarely on the polluters. The pricing mechanism penalizes, rather than compensates the polluters. For many this is fairer than incentive programs that subsidize companies to pollute. The government could charge companies for pollution permits. Another market strategy is to discharge a limited amount of pollutants and allow them to sell the right to emit pollutants. So companies with low pollution levels can make money by selling their pollution permits to companies with poorer controls. DISADVANTAGES: Pollution permits don't work in all situations. 2- The price tag for polluting seems arbitrary. What's a fair price?
In summary, although each one of these approaches -regulations, incentives, pricing mechanisms, and pollution permits- has its advantages, none is without its weak points. And becuse there appears to be no single ideal approach, a combination of all those methods is probable the best alternative.
6- Obligations to future generations: A broader view of environmental ethics considers obligations to those in other societies as well as to future generations. The point is that they deserve an environment that we don't wish for ourselves. One way to look at it is with a utilitarian perspective to enhance human happiness through time. (See more in page 382, 3839.
7- Environment as "intrinsic." See under The Value of Nature, (p. 383, 384).
