What in the world makes you think BP does or did? Would you be satisfied with BP escaping all punitive damages because if it could just show that avoiding this disaster would have cost it a few thousand dollars extra in precautions? if so, I’d be surprised.

You assume that there is some defined line somewhere between the “necessary” risks which are ok and the “unnecessary” risks. If there is a disaster like the recent spill, there must have been somebody somewhere who had evil in their heart and stepped across that line for no reason whatsoever.

But in the real world, there is no line. All there is are costs and benefits, risks and trade-offs.

Nobody in the world wanted this to happen, employees and management of BP least of all. That does not mean that BP must or should escape payment of compensation. But it does mean that trying to punish BP for deciding to spill all that oil is a fool’s errand.

I think, and hope you agree, that people and firms (i.e. all of us) can and do act with a reckless disregard to the lives of others. We all also engage in harmful conduct that is not necessary, serves no purpose and is easily avoidable.

I also think, and hope you agree, that we all would be better off if we all didn’t.

Thus, the question is what to do? You think compensatory damages is enough. I think an award of punitive damages in amount minimally sufficient to stop us is necessary.

I do not and haven’t proposed that we all should do nothing. My use of the word “necessary” is to exempt certain conduct from the reach of punitive damages. Thus, if a corporation could show that the conduct was necessary (even if it involved risk) it could not be liable for punitive damages.

But lets not get distracted from the real issue,

Unfortunately, the new word “unnecessary” will not help your proposed legal rule any more than the words “knowing” or “reckless” did before.

That is because almost nothing is necessary. Almost everything is a question of cost and efficiency.

For example, it is entirely unnecessary for UPS to use trucks. They could just use their drivers as walkers to carry packages door to door. That would definitely avoid any of the predictable carnage that UPS’ trucks cause every day and year.

So by your standard, every time a UPS truck has an accident, courts should fine the company enough to force it to switch from the unnecessarily risky “driver” business model to the safer, not to mention eco-friendly, “walker” business model.

You may respond, but that would make UPS (and all the other delivery services) more expensive!

That’s true. But that is equally true of whatever you wanted BP (or anybody else on today’s menu for politicians) to do to avoid the spill. If a safety measure would not increase costs, any company would already have done it without needing any encouragement from the legal system.

That is why I–following many other smarter people–argue that the current legal system’s general practice of just making the tortfeasor pay compensatory damages and letting it decide, based on its bottom line, whether an activity is still worthwhile, even including compensation payments.

Your proposed legal rules demanding exorbitant punitive damages for any conduct which is “knowing” or “reckless” (as in your previous iteration) or “unnecessary” (in the current iteration), doubtless reflect popular sentiment.

But if your rules, rather than those developed in the common law system over the centuries, were applied logically and consistently, the result would be a near-instant shutdown of large parts of society and the economy.

I think, and hope that we both can agree, that the legal system should act to remove all conduct which poses a risk of injury or death to innocent third parties which is unnecessary to the activities of business. Thus, since it is necessary for UPS to employ drivers and accident happen, I would (to answer your question) say UPS should not be shut down. However, if UPS had a policy of allowing its drivers to work without sleep and they absolutely refused to change that policy, I think they should be shut down.

But compensatory damages already create such a disincentive.

The question which divides us is whether the legal system should increase this incentive so far beyond compensatory damages that all conduct which poses a risk (or even certainty of) injury or death to innocent third parties is suppressed.

I–along with probably a majority of economists and legal scholars who have thought about the issue seriously–think not. You think so.

So should UPS, as it is operating today, be shut down? Surely its management–being familiar with their own recent statistics–know perfectly well that continuing to operate UPS create a certainty of damage and death to third parties.

Nor is your “reckless” qualification going to do your argument any good. Employing tens of thousands of drivers, it is a certainty that some of them will at some point behave recklessly. And UPS, as their employer, will be held responsible.

So, as based on these undisputed facts and your reasoning, UPS should be shut down, right now, today. Do you accept that consequence of your reasoning? And, if not, why not?

And don’t evade the question by suggesting that UPS should just take more security precautions, such as training. Perhaps they should, perhaps they shouldn’t. But no matter what, no precaution, no training, no extra equipment, can completely avoid the certainty of injury and death to third parties. Hence, this would do nothing to avoid your conclusion that UPS (as well as pretty much everything else) ought to be shut down immediately.

Perhaps, but I think the tort system could also be better used to to preserve life and create a disincentive for knowingly and/or recklessly destructive conduct.

Contrary to your point, I think everyone will lie in bed with the sheets drawn if going “outside” involves the risk of getting run over by a UPS truck because UPS decided to mandate that its drivers make twice the deliveries in half the time.