5 ms·

Just like sports, even stiffer fine and ruined reputation on being caught cheating.

nitrogen 11y ago
Just like sports, even stiffer fine and ruined reputation on being caught cheating. Just like sports, companies will still cheat. When punishment doesn't work, the answer is rarely more punishment.
- sbov 11y ago
  Caveat: if the punishment does not exceed the profit from cheating, it's not a punishment it's a cost of doing business.
  - swang 11y ago
    See: Johnson & Johnson w/ their drug risperdal: $2 billion in penalties... $30 billion in sales. http://www.nytimes.com/2015/09/17/opinion/nicholas-kristof-when-crime-pays-jjs-drug-risperdal.html http://www.nytimes.com/2015/09/17/opinion/nicholas-kristof-w...
    - refurb 11y ago
      That's a poor comparison. Not all of the $30B in sales were fraudulent. Actually, in order to come up with the $2B penalty, the gov't determines the number of fraudulent Rxs, then hits the manufacturer with triple damages (this is typical). J&J would have been better off financially had they never committed the fraud they did.
      - emn13 11y ago
        You need to account for the probability of being caught. It's quite likely to be significantly lower than 1/3, so they might still have come out ahead. Even if they're just breaking even, it's a kind of loan - they had the gain a long time ago, and pay the costs much later. If you're a risky business, that's potentially worth a lot, since investors might be hard to find. And if you account for that you need to account for the asymmetry of risk due to bankruptcy protections - even if the average payout is negative, fines are effectively capped at what the firm can pay, so the effective expected payout may still be positive. (Assuming those making this decision escape personal liability).
  - Lawtonfogle 11y ago
    You forgot to multiply the cost if caught by the chance to be caught.
- deleted 11y ago
  [deleted]
- mikeash 11y ago
  Of course it is. Companies usually behave rationally with regards to regulation and punishment. If the cost of breaking the rules is lower than the cost of following them, companies will break the rules. If you increase the cost of breaking the rules such that the situation is reversed, then companies will follow the rules.
izacus 11y ago
How about a temporarily sales ban? Not a fine, just telling them "No new VW are going to be accepted into traffic for the next 12 months." Cruel, but I bet it's effective.
- fauigerzigerk 11y ago
  That's not a good idea. If you ban a large auto maker, you might create a shortage of vehicles, driving prices up for consumers. Also, the affected auto maker would surely try to mitigate the damage by cutting costs, closing down factories, firing workers. Dealerships would have to close as well. In other words, you would cause a lot of collateral damage instead of taking it directly from shareholders via a large fine.
  - Lawtonfogle 11y ago
    Every time you arrest a parent for committing a crime, you destroy a part of their child's life. Using collateral as justification to avoid punishment results in a system where entities can become to important to punish at all.
    - fauigerzigerk 11y ago
      We're talking about how to punish not if. If you can punish a parent in a way that does not affect the child, surely that has to be preferred way of doing it.
      - Lawtonfogle 11y ago
        So we accept differential treatment based on one's having kids? What happens if the better punishment from the kid's perspective is actually worse for the parent?
        fauigerzigerk 11y ago
        I think that courts do take individual circumstances into account and must be allowed to do so. I don't deny at all that it can be unfair, but I don't think inflexible rules like three-strikes sort of laws or draconian minimum sentences that take away the judge's wiggle room are any fairer. A prison sentence for a parent is not just hurting the kid more, it's also much harsher on the parent. You're not only taking away their freedom, you're also taking away their kid. In effect, that is differential treatment as well. But I will admit that I'm not comfortable with this line of argument either. The case of auto makers breaching environmental rules is much simpler though as a large fine that does not cause factory and dealership closures or price hikes is better in every imaginable way.

Just like sports, even stiffer fine and ruined reputation on being caught cheating. Just like sports, companies will still cheat. When punishment doesn't work, the answer is rarely more punishment.

sbov 11y ago
Caveat: if the punishment does not exceed the profit from cheating, it's not a punishment it's a cost of doing business.
- swang 11y ago
  See: Johnson & Johnson w/ their drug risperdal: $2 billion in penalties... $30 billion in sales. http://www.nytimes.com/2015/09/17/opinion/nicholas-kristof-when-crime-pays-jjs-drug-risperdal.html http://www.nytimes.com/2015/09/17/opinion/nicholas-kristof-w...
  - refurb 11y ago
    That's a poor comparison. Not all of the $30B in sales were fraudulent. Actually, in order to come up with the $2B penalty, the gov't determines the number of fraudulent Rxs, then hits the manufacturer with triple damages (this is typical). J&J would have been better off financially had they never committed the fraud they did.
    - emn13 11y ago
      You need to account for the probability of being caught. It's quite likely to be significantly lower than 1/3, so they might still have come out ahead. Even if they're just breaking even, it's a kind of loan - they had the gain a long time ago, and pay the costs much later. If you're a risky business, that's potentially worth a lot, since investors might be hard to find. And if you account for that you need to account for the asymmetry of risk due to bankruptcy protections - even if the average payout is negative, fines are effectively capped at what the firm can pay, so the effective expected payout may still be positive. (Assuming those making this decision escape personal liability).
- Lawtonfogle 11y ago
  You forgot to multiply the cost if caught by the chance to be caught.
deleted 11y ago
[deleted]
mikeash 11y ago
Of course it is. Companies usually behave rationally with regards to regulation and punishment. If the cost of breaking the rules is lower than the cost of following them, companies will break the rules. If you increase the cost of breaking the rules such that the situation is reversed, then companies will follow the rules.

izacus 11y ago

How about a temporarily sales ban? Not a fine, just telling them "No new VW are going to be accepted into traffic for the next 12 months." Cruel, but I bet it's effective.

fauigerzigerk 11y ago
That's not a good idea. If you ban a large auto maker, you might create a shortage of vehicles, driving prices up for consumers. Also, the affected auto maker would surely try to mitigate the damage by cutting costs, closing down factories, firing workers. Dealerships would have to close as well. In other words, you would cause a lot of collateral damage instead of taking it directly from shareholders via a large fine.
- Lawtonfogle 11y ago
  Every time you arrest a parent for committing a crime, you destroy a part of their child's life. Using collateral as justification to avoid punishment results in a system where entities can become to important to punish at all.
  - fauigerzigerk 11y ago
    We're talking about how to punish not if. If you can punish a parent in a way that does not affect the child, surely that has to be preferred way of doing it.
    - Lawtonfogle 11y ago
      So we accept differential treatment based on one's having kids? What happens if the better punishment from the kid's perspective is actually worse for the parent?
      - fauigerzigerk 11y ago
        I think that courts do take individual circumstances into account and must be allowed to do so. I don't deny at all that it can be unfair, but I don't think inflexible rules like three-strikes sort of laws or draconian minimum sentences that take away the judge's wiggle room are any fairer. A prison sentence for a parent is not just hurting the kid more, it's also much harsher on the parent. You're not only taking away their freedom, you're also taking away their kid. In effect, that is differential treatment as well. But I will admit that I'm not comfortable with this line of argument either. The case of auto makers breaching environmental rules is much simpler though as a large fine that does not cause factory and dealership closures or price hikes is better in every imaginable way.