Wednesday, July 27, 2016

Was the Ford Pinto a Market Failure?

Here's wikipedia on the Ford Pinto, the car that inspired the book Unsafe at Any Speed by Ralph Nadar. Since then it has become a popular example of why a lack of how an unregulated market leads to horrible consequences.

The recall was included in Time magazine's 2009 top ten product recalls, Popular Mechanics magazine's 2010 five most notorious recalls of all time, and NBC News' 2013 twelve famous recalls.[124][125][126] Time said "The Ford Pinto was a famously bad automobile, but worse still might be Ford's handling of the safety concerns."[125] According to the Los Angeles Times in 2010, the award "signaled to the auto industry that it would be harshly sanctioned for ignoring known defects."[107]

Schwartz studied the fatality rates of the Pinto and several other small cars of the time period. He noted that fires, and rear-end fires in particular, are very small portion of overall auto fatalities. At the time only 1% of automobile crashes would result in fire and only 4% of fatal accidents involved fire, and only 15% of fatal fire crashes are the result of rear-end collisions.[6] When considering the overall safety of the Pinto Schwartz notes that subcompact cars as a class have generally higher fatality risk. Pintos represented 1.9% of all cars on the road in the 1975-76 period. During that time the car represented 1.9% of all “fatal accidents accompanied by some fire.” Implying the car was average for all cars and slightly above average for its class.[127] When all types of fatalities are considered the Pinto was approximately even with the AMC Gremlin, Chevrolet Vega, and Datsun 510. It was significantly better than the Datsun 1200/210, Toyota Corolla and VW Beetle.[6] The safety record of the car in terms of fire was average or slightly below average for compacts and all cars respectively. This was considered respectable for a subcompact car. Only when considering the narrow subset of rear-impact, fire fatalities is the car somewhat worse than the average for subcompact cars. While acknowledging this is an important legal point, Schwartz rejects the portrayal of the car as a firetrap.[128]

No car is perfectly safe and it seems the Ford Pinto was not even especially unsafe. Normal economic analysis of risk says that safety is a spectrum, and informed consumers will pay more for extra safety, giving producers plenty of incentive to not kill their consumers.

The Ford Pinto isn't an example of how the normal economic analysis of safety doesn't work. It looks more like an example of people looking for any story that confirms their theory without researching it properly.