Originally Posted by Koyote

And yet, virtually all government regulation, by law, must go through cost-benefit analysis before implementation -- which is essentially what Ford Motor Co did with the Pinto. As Lombard notes, they calculated that it was cheaper to pay off the lawsuits (for injuries and deaths) than to fix the vehicles. Given that such legal settlements are generally based upon the economic values of the lives lost (or injuries sustained), and such numbers are easily calculated for generic individuals and for specific individuals, one could argue that it was indeed more sensible to sell the Pinto as-is. I mean, we could have a society in which no one -- not one single person -- would ever be killed in an auto mishap. But none of us is willing to bear the enormous costs of that policy. We make these decisions - as individuals and as societies - all the time.

Ford's inefficient decision was in concealing what they knew about the Pinto from their potential buyers. Information asymmetry is a well-understood market failure that leads to inefficient outcomes."