Q1. The Cartel That Makes Sure Airplane Tickets Never Get Cheaper

SKY HIGH

It’s been a windfall year for the industry, but you won’t be getting any better accommodations or more affordable fares. What gives?

Updated Apr. 14, 2017 10:33AM ET / Published Jun. 22, 2015 5:21AM ET

Jim Young/Reuters

Screw the passengers.

That appears all too often to be the governing philosophy of the airline business.

Take the case of a United Airlines flight from Chicago to London last weekend. A technical problem forced the plane to abort its trans-Atlantic route and divert to Goose Bay in Canada. The 176 passengers were marooned there for more than 20 hours, sleeping in unheated military barracks at near-freezing temperatures.

“There was nobody from United Airlines to be seen anywhere,” one passenger told NBC News. “No United representative ever reached out to anybody, no phone calls, no human beings, no nothing. Nobody had any idea what was going on.”

It so happened that this came at the end of a week in which the world’s airline chiefs, junketing in Miami, celebrated their most lucrative year ever. They are projecting profits totaling $29.3 billion in 2015—almost double what they made in 2014.

And you must have noticed if you’re flying anywhere in the U.S. this summer that seat prices are not falling. Indeed, if the owners of those seats are suddenly feeling fat and happy, they are in no mood to pass on their swell feelings to you. It’s hard to imagine any other service industry being run like the airline business—but then there is no other business like the airline business.

So now we have a novel opportunity to see how airlines behave when, suddenly and much to their surprise, they find themselves with a business model that is working. If making a profit is a new experience for them, what effect will that have on their behavior?

First, let us consider why the numbers have been transformed.

There has been a steep change in the efficiency of jets. Beginning with the Boeing 787 Dreamliner, the combination of lighter but stronger composite materials in structures and a quantum leap in engine efficiency, using far less fuel, has slashed operating costs per airplane by as much as 30 percent.

In the last year, this windfall has been boosted by the large decline in oil prices.

However, these dual benefits are not being evenly spread either among airlines or continents. Airlines stuck with fleets of older airplanes are not getting these benefits. Fleet age has become far more decisive in deciding an airline’s profitability, particularly true in the U.S.

The three major U.S. legacy carriers—American, United, and Delta—failed to get in early to order the new generation of airplanes—the 787, the Airbus A350, revamped versions of the Boeing 777, the Airbus A320, and the Boeing 737—and allowed European, Middle Eastern, and Asian competitors to become first adopters and, thereby, reap the benefits of lower fuel costs.

The average age of the jets in the American fleet is 12.3 years; for United 13 years; and for Delta 17.2 years. It won’t be until at least 2020 that they can finally dump the oldest of their airplanes. (American has actually been delaying the delivery of some new jets that it ordered.)

Age doesn’t mean that an airplane is unsafe. Properly maintained 20-year-old jets are not in danger of falling apart. The frequency of flights determines retirement age more than years and the smaller single-aisle jets used on domestic routes age the fastest because they are making up to seven flights a day.

Age may not be dangerous but it sure registers with passengers when it contrasts with the comforts they encounter in the new generation of jets with their better cabin climate and quieter engines. So it’s not surprising that when airlines show up with all-new fleets as well as gracious cabin crews people start wondering, Why can’t it always be like this?

It’s also not surprising that the major American carriers are now trying to stop those airlines from coming to an airport near you.

When it comes to price and the domestic U.S. routes, not only are prices not coming down but there is persuasive evidence of price-fixing. The veteran investigative reporter James B. Stewart described this market as a classic oligopoly in a penetrating piece in The New York Times .

However, this is far from being a new phenomenon. These tactics began long before the final round of consolidation mergers when US Airways was swallowed by American Airlines in 2013. They have merely been continually refined to the point now when the airlines, suddenly enjoying profits, have responded not by lowering fares but by tightening control over the number of seats available and cutting back on flight frequency and destinations.

The reality is that the airlines don’t need to expose themselves to charges of collusion on fares and the operation of a hidden cartel that mutually governs capacity. That’s so 20th century.

These days their key tool is “yield management”—being able to precisely calculate how many seats should be available on any given route at any time of the day or night and adjusting the price hour-by-hour according to demand. This algorithm has become so refined and the market so controlled that each of the major airlines ends up looking at the same numbers on their computer screen. No human intervention is needed. In all but name it is a cartel—but one run entirely by unaccountable robots.

So?

We live in the world’s most vigorously capitalist marketplace. What’s wrong with airlines trying to make a decent profit, for once? And what is the point of them flying empty seats around the skies?

But I come back to my earlier point: How do these airline executives behave when, joy of joys, they find their balance sheets deeply in the black? Like a lot of other corporate minders they think a lot more about their shareholders than their customers. Short-termism rules. Wall Street responds to quarterly earnings, not patient long-term strategy.

A good example is Jet Blue. This airline was a rare example of a successful startup based on a maverick idea: super-chummy cabin staff and generously spaced seating. A new CEO (previously schooled by the stingy bean-counters at British Airways) is undermining that spirit by jamming more seats into the cabin and raising baggage charges, all at the behest of shareholders.

The problem is that the people running airlines in the U.S. have one part of their brain missing, the part that provides the service ethic. As well as fare-gouging they’re space gouging in the cabins. Even with the newest jets like the Dreamliner they are packing more seats into coach than the airplane designers (or nature) intended.

Q1. Read the above article and answer the questions that follow.

a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly?

b. What is the meaning of yield management as described in the above article?

c. Why did the writer accuse people running airlines of missing service ethics?

Please fill in the blank tables below, given the following information.

Experiment 1: Measure the pH of Acids

1. Take seven small, clean test tubes from the Containers shelf and place them on the workbench.

2. Double-click on the test tubes and label them with numbers 1 – 7.

3. Take 0.1 M hydrochloric acid from the Materials shelf and add 5 mL to test tube 1.

4. Take water from the Materials shelf and add 5 mL to test tube 1.

5. Take water from the Materials shelf and add 9 mL to test tubes 2 – 7.

6. Create a series of successively diluted acidic solutions as follows:

   1. Pour 1 mL from 1 into 2.

   2. Pour 1 mL from 2 into 3.

   3. Pour 1 mL from 3 into 4.

   4. Pour 1 mL from 4 into 5.

   5. Pour 1 mL from 5 into 6.

   6. Pour 1 mL from 6 into 7.

7. Take bromothymol blue from the Materials shelf and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results to reference later.

8. Clear your station by dragging all of the test tubes to the recycling bin beneath the workbench.

9. Repeat steps 1 – 6.

10. Take methyl yellow from the Materials shelf and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results.

11. Clear your station by emptying the test tubes into the waste, then placing the test tubes in the sink.

12. Repeat steps 1 – 6.

13. Take bromocresol green from the Materials shelf and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results.

Experiment 2: Measure the pH of Bases

1. Take seven small, clean test tubes from the Containers shelf and place them on the workbench.

2. Double-click on the test tubes and label them with numbers 1 – 7.

3. Take 0.100 M sodium hydroxide from the Materials shelf and add 5 mL to test tube 1.

4. Take water from the Materials shelf and add 5 mL to test tube 1.

5. Take water from the Materials shelf and add 9 mL to test tubes 2 – 7.

6. Create a series of successively diluted basic solutions using the same dilution method you did in experiment 1:

   1. Pour 1 mL from 1 into 2.

   2. Pour 1 mL from 2 into 3.

   3. Pour 1 mL from 3 into 4.

   4. Pour 1 mL from 4 into 5.

   5. Pour 1 mL from 5 into 6.

   6. Pour 1 mL from 6 into 7.

7. Take bromothymol blue from the Materials shelf and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results.

8. Clear your station by emptying the test tubes into the waste, then placing the test tubes in the sink.

9. Repeat steps 1 – 6.

10. Take alizarin yellow from the materials shelf and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results.

11. Clear your station by emptying the test tubes into the waste, then placing the test tubes in the sink.

12. Repeat steps 1 – 6.

13. Take phenolphthalein and add 0.1 mL to each test tube. Observe the color of the solutions. Record your results.

Experiment 1 Data:

EXPERIMENT 1: For each test tube, calculate the concentration of H₃O⁺ and pH. You can use the following formula to determine the concentration of HCl. M1×V1=M2×V2 where M₁ and V₁ are the molarity and volume of the first solution, respectively, and M₂ and V₂ are the molarity and volume of the second solution, respectively. Given that HCl is a strong acid, the H₃O⁺ concentration is equal to the HCl concentration, except at very low concentrations (test tubes 6 and 7) where the H₃O⁺ from the dissociation of water (1.00×10−7) becomes significant.

Experiment 2 Data:

EXPERIMENT 2: For each test tube, calculate the concentration of NaOH, OH^–, H₃O⁺, and pH. You can use the following formula to determine the concentration of NaOH. M1×V1=M2×V2 where M₁ and V₁ are the molarity and volume of the first solution, respectively, and M₂ and V₂ are the molarity and volume of the second solution, respectively. Given that NaOH is a strong base, the HO^– concentration is equal to the NaOH concentration, except at very low concentrations (test tubes 6 and 7) where the HO^– from the dissociation of water (1.00×10−7) becomes significant.

84. ________ was the first to describe microorganisms, while ________ was the first person to see bacteria.

a. Antoni van Leeuwenhoek / Robert Hook

b. Antoni van Leeuwenhoek / Robert Koch

c. Robert Hooke / Antoni van Leeuwenhoek

d. Robert Koch / Antoni van Leeuwenhoek

85. Archaea and Bacteria are unified as prokaryotes in lacking ________ which Eukarya contain, such as golgi.

a. membranes

b. nuclei

c. membrane-enclosed organelles

d. nuclei and membrane-enclosed organelles

86. A bacterial species has a generation time of 20 minutes and is growing exponentially. If there are 10 cells initially how many cells are there after 80 minutes?

a. 30

b. 80

c. 160

d. 200

e. none of the above

87. The growth of almost all bacteria in the environment

a. is limited by cool temperatures

b. is limited by high pH

c. is limited by the availability of one or more nutrients

d. is unlimited because bacteria are metabolically versatile

88. According to Koch’s postulates a microorganism thought to cause a disease in one species of animal.

a. must be seen in samples of blood using a microscope

b. must be isolated in pure culture and then used to cause the same disease in healthy animals

c. must never be found in healthy individuals

d. answers (b) and (c) are correct

89. Antoni van Leeuwenhoek developed and used

a. the first compound microscope

b. the first vaccine to prevent an infectious disease

c. a microscope with a single lens

d. pasteurization to prevent the spoilage of food

90. Gram positive bacteria

a. have a thick cell wall, which retains the crystal violet dye when cells are Gram stained

b. contain teichoic acid in their cell walls

c. appear purple when Gram stained

d. all the above e. none of the above

91. The cell envelope of Gram negative bacteria

a. includes a thick cell wall

b. includes both an inner and outer membrane

c. includes a peptidoglycan layer

d. always includes a capsule made of polysaccharides

e. answers (b) and (c) are correct

92. The cell membrane of bacteria

a. is semi-permeable

b. is usually a lipid bilayer

c. prevents cell lysis due to high intracellular osmotic pressure

d. answers (a) and (b) are correct

e. answers (a) and (c) are correct

93. Regarding early life on Earth,

a. microbial life existed for hundreds of millions of years before plant and animal life

b. microbial life existed long before animals but has been around for about the same amount of time as plants

c. microbial life, plant life, and animal life all appeared at about the same time

d. it is impossible to determine which type of life first appeared.

94. The structure that confers structural strength on bacterial cells is known as the

a. cytoplasmic membrane

b. cell wall

c. ribosome

d. cytoplasm

95. Archaea and Bacteria are unified as prokaryotes in lacking ______________

a. membranes

b. nuclei

c. membrane-enclosed organelles

d. nuclei and membrane-enclosed organelles

96. When a bacterial culture contains only one type of organism, it is called a ______________.

a. mixed culture

b. liquid culture

c. environmental culture

d. pure culture

97. Prokaryotes and eukaryotes

a. have the same kinds of metabolic pathways, but little else in common

b. have nothing in common

c. have many things in common because they share a common ancestor

d. are identical to each other

98. Which of the following statements is true?

a. peptidoglycan is comprised of cross-linked fatty acids

b. the cell walls of most bacteria are composed of peptidoglycan

c. Gram-negative bacteria have a relatively thick layer of peptidoglycan

d. peptidoglycan is found mainly in the cell walls of fungi, algae and plants

e. answers (a) and (b) are both correct

99. The cell membrane of bacteria

a. is semi-permeable.

b. is usually a lipid bilayer

c. prevents cell lysis due to high intracellular osmotic pressure

d. answers (a) and (b) are correct

e. answers (a) and (c) are correct

100. A bacterial species has a generation time of 15 minutes and is growing exponentially. If there are 2 cells initially how many cells are there after 90 minutes?

a. 256

b. 128

c. 64

d. 32

e. none of the above

101. Most bacterial cells reproduce by

a. the budding of daughter cells from a mother cell

b. forming spores that later germinate

c. binary fission

d. production of gametes and sexual reproduction  

102. Which of these are routinely used to obtain a pure culture of bacteria?

a. swan necked flasks

b. agar streak plates

c. dilution plates

d. microscopes

103. The cells of all species of Bacteria and Archaea are very small, and:

a. must be stained before they can be seen using light microscopy

b. can only be seen using electron microscopy

c. can only be seen if they are first Gram stained

d. none of the above

104. Prokaryotes evolved early on in the history of the Earth:

a. so their physiology has little in common with Eukaryotes

b. so many aspects of their physiology also occur in Eukaryotes, which evolved much later in in the history of the Earth

c. and Eukaryotes evolved independently at a much later time in the history of the Earth

d. at about the same time that Eukaryotes first appeared on Earth

The cases involving the explosion of Ford Pinto's due to a defective fuel system design led to the debate of many issues, most centering around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system based on this analysis.Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change. This risk/benefit analysis was created out of the development of product liability, culminating at Judge Learned Hand's BPL formula, where if the expected harm exceeded the cost to take the precaution, then the company must take the precaution, whereas if the cost was liable, then it did not have to. However, the BPL formula focuses on a specific accident, while the risk/benefit analysis requires an examination of the costs, risks, and benefits through use of the product as a whole. Based on this analysis, Ford legally chose not to make the design changes which would have made the Pinto safer. However, just because it was legal doesn't necessarily mean that it was ethical. It is difficult to understand how a price can be put on saving a human life.

There are several reasons why such a strictly economic theory should not be used. First, it seems unethical to determine that people should be allowed to die or be seriously injured because it would cost too much to prevent it. Second, the analysis does not take into all the consequences, such as the negative publicity that Ford received and the judgments and settlements resulting from the lawsuits. Also, some things just can't be measured in terms of dollars, and that includes human life. However, there are arguments in favor of the risk/benefit analysis. First, it is well developed through existing case law. Second, it encourages companies to take precautions against creating risks that result in large accident costs. Next, it can be argued that all things must have some common measure. Finally, it provides a bright line which companies can follow.

I. IntroductioIn May of 1968, the Ford Motor Company, based upon a recommendation by then vice-president Lee Iacocca, decided to introduce a subcompact car and produce it domestically. In an effort to gain a large market share, the automobile was designed and developed on an accelerated schedule. During the first few years sales of the Pinto were excellent, but there was trouble on the horizon.

A. Grimshaw v. Ford Motor Company¹In May 1972, Lily Gray was traveling with thirteen year old Richard Grimshaw in a 1972 Pinto when their car was struck by another car traveling approximately thirty miles per hour. The impact ignited a fire in the Pinto which killed Lily Gray and left Richard Grimshaw with devastating injuries. A judgment was rendered against Ford and the jury awarded the Gray family $560,000 and Matthew Grimshaw $2.5 million in compensatory damages. The surprise came when the jury awarded $125 million in punitive damages as well. This was subsequently reduced to $3.5 million.²

B. The Criminal Case³Six month following the controversial Grirnshaw verdict, Ford was involved in yet another controversial case involving the Pinto. The automobile's fuel system design contributed (whether or not it was the sole cause is arguable) to the death of three women on August 10, 1918 when their car was hit by another vehicle traveling at a relatively low speed by a man driving with open beer bottles, marijuana, caffeine pills and capsules of "speed."⁴ The fact that Ford had chosen earlier not to upgrade the fuel system design became an issue of public debate as a result of this case. The debate was heightened because the prosecutor of Elkart County, Indiana chose to prosecute Ford for reckless homicide and criminal recklessness.Some felt the issues raised in the Ford Pinto cases were an example of the "deep pocket" company disregarding consumer safety in pursuit of the almighty dollar. Others feel they are an example of runaway media coverage blowing a story out of proportion.⁵ Regardless of opinion, the Ford Pinto case is a tangled web of many complex legal and ethical issues.

To determine if the proper result was achieved in this case, one has to evaluate and weigh these many issues. The central issue in deciding whether Ford should be liable for electing not to redesign a defective product in order to maximize its bottom line, one must analyze the so-called "cost/benefit" analysis Ford used to defend this decision. Within the scope of this paper, this cost/benefit issue (and associated sub-issues) will be the focus of discussion. Other issues, such as the ethics involved in Ford's decision, the choice of prosecuting Ford criminally, whistle-blowing, the assignment of punitive damages and the Court of Appeals decision reducing the damages are all important issues of this case that will not be the focus herein.

II. Facts

A. Incident FactsOn August 10, 1978, three teenage girls stopped to refuel the 1973 Ford Pinto sedan they were driving. After filling up, the driver loosely reapplied the gas cap which subsequently fell off as they headed down U. S. Highway 33. Trying to retrieve the cap, the girls stopped in the right lane of the highway shoulder since there was no space on the highway for cars to safely pull off the roadway. Shortly thereafter, a van weighing over 400 pounds and modified with a rigid plank for a front bumper was traveling at fifty five miles an hour and stuck the stopped Pinto. The two passengers died at the scene when the car burst into flames. The driver was ejected and died shortly thereafter in the hospital. Inspecting the van shortly after the accident, the police found open beer bottles, marijuana and caffeine pills inside.⁶The subsequent proceedings were rather surprising. Based on the facts of the case, it seemed that any one of a number of parties could be liable in a civil action or prosecuted criminally. The obvious target seemed to be the driver of the van. It seems he could have been prosecuted for criminal homicide or the families of the victims could have pursued a civil action, in light of the fact the driver possessed several controlled substances at the time of the accident.A second potential party open to a civil suit was the Indiana Highway department. It was their design which left no safe stopping place along Highway 33 where cars could pull over for emergencies. In fact, the road was so dangerous that the Elkart County Citizens' Safety Committee had previously written a letter to the department asking that the road design be modified to provide safe stopping place for emergencies.⁷ It is also conceivable, the driver of the Pinto could have been found negligent for stopping a car in the middle of the highway.

The first surprise of the resulting litigation carne when Indiana state prosecutor filed suit against Ford Motor Company for criminal recklessness and reckless homicide.⁸ The famous and highly publicized legal battle was underway. Some have argued the prosecution acted unethically from day one, gathering and hiding evidence from the defendant and concealing information about the condition of the van driver.⁹ Whether true or not, the following litigation caused damage that would take Ford years to recover from.

B. Questionable DesignThe controversy surrounding the Ford Pinto concerned the placement of the automobile's fuel tank. It was located behind the rear axle, instead of above it. This was initially done in an effort to create more trunk space. The problem with this design, which later became evident, was that it made the Pinto more vulnerable to a rear-end collision. This vulnerability was enhanced by other features of the car. The gas tank and the rear axle were separated by only nine inches. There were also bolts that were positioned in a manner that threatened the gas tank. Finally, the fuel filler pipe design resulted in a higher probability that it would to disconnect from the tank in the event of an accident than usual, causing gas spillage that could lead to dangerous fires. Because of these numerous design flaws, the Pinto became the center of public debate.

These design problems were first brought to the public's attention in an August 1977 article in Mother Jones magazine. This article condemned the Ford Motor Company and the author was later given a Pulitzer Prize.¹⁰ This article originated the public debate over the risk/benefit analysis used by the Ford Motor Company in their determination as to whether or, not the design of the Pinto fuel tank be altered to reduce the risk of fire as the result of a collision.The crux of the public debate about The Ford Motor Company was the decision not to make improvements to the gas tank of the Pinto after completion of the risk/benefit analysis. Internal Ford documents revealed Ford had developed the technology to make improvements to the design of the Pinto that would dramatically decrease the chance of a Pinto "igniting" after a rear-end collision.¹¹This technology would have greatly reduced the chances of burn injuries and deaths after a collision. Ford estimated the cost to make this production adjustment to the Pinto would have been $11 per vehicle.¹²   Most people found it reprehensible that Ford determined that the $11 cost per automobile was too high and opted not to make the production change to the Pinto model.

C. Risk/Benefit AnalysisIn determining whether or not to make the production change, the Ford Motor Company defended itself by contending that it used a risk/benefit analysis. Ford stated that its reason for using a risk/benefit analysis was that the National Highway Traffic Safety Administration (NHTSA) required them to do so.¹³   The risk/benefit approach excuses a defendant if the monetary costs of making a production change are greater than the "societal benefit" of that change. This analysis follows the same line of reasoning as the negligence standard developed by Judge Learned Hand in United States vs. Carroll Towing in 1947 (to be discussed later). The philosophy behind risk/benefit analysis promotes the goal of allocative efficiency. The problem that arose in the Ford Pinto and many other similar cases highlights the human and emotional circumstances behind the numbers which are not factored in the risk/benefit analysis.The Ford Motor Company contended that by strictly following the typical approach to risk,/benefit analysis, they were justified in not making the production change to the Pinto model. Assuming the numbers employed in their analysis were correct, Ford seemed to be justified. The estimated cost for the production change was $11 per vehicle. This $11 per unit cost applied to 11 million cars and 1.5 million trucks results in an overall cost of $137 million.

The controversial numbers were those Ford used for the "benefit" half of the equation. It was estimated that making the change would result in a total of 180 less burn deaths, 180 less serious burn injuries, and 2,100 less burned vehicles. These estimates were multiplied by the unit cost figured by the National Highway Traffic Safety Administration. These figures were $200,000 per death, $67,000 per injury, and $700 per vehicle equating to the total "societal benefit" is $49.5 million. Since the benefit of $49.5 million was much less than the cost of $137 million, Ford felt justified in its decision not to alter the product design. The risk,/benefit results indicate that it is acceptable for 180 people to die and 180 people to burn if it costs $11 per vehicle to prevent such casualty rates. On a case by case basis, the argument seems unjustifiable, but looking at the bigger picture complicates the issue and strengthens the risk/benefit analysis logic.

III. History and Development of Product Liability

A. IntroductionWhen defendants were found liable for only intentional harms, these harms fell under the category of absolute liability. Over time, courts added liability to some accidental harms. In order for a court to determine there was no liability in a conflict, it had to be ascertained whether or not the accident was "truly unavoidable."¹⁴    Technological advances created societal harms that were never before contemplated by courts. The truly unavoidable standard became a grayer area that was undefined and unreliable. Eventually, as industry rapidly advanced further, it became impossible and unreasonable to describe any accident as unavoidable.¹⁵   Still, courts seemed unwilling to shift to the theory of absolute liability, as it seemed to strict. However, with the courts finding fewer and fewer harms "unavoidable", another level had to be found between unavoidable accidents and strict liability.¹⁶

B. The Ordinary Care StandardIn the mid 1800s, courts began the evolution of moving away from what they once considered an important decision--whether a harm was a result of an action "on trespass" or a harm as a result of an action "on the case."¹⁷ The first landmark decision moving away from this distinction and thinking was Brown v. Kendall¹⁸ in 1850. In the decision, Chief Justice Shaw acknowledged moving away from this traditional distinction and to consideration of whether a harm was "willful, intentional, or careless."¹⁹ Not only did this decision move away from the strict "all or nothing" standard, it established the fluctuating standard of "ordinary care." Judge Shaw explained the use of this new standard:

"In using this term, ordinary care, it may be proper to state that what constitutes ordinary care will vary with the circumstances of cases. In general, it means that kind and degree of care, which prudent and cautious men would use, such as required by the exigency of the case, and such as is necessary to guard against probable danger."²⁰

In essence Judge Shaw had created a "moving" standard of negligence that varied from situation to situation depending on the extent of care used, rather than the inflexible extremes discussed above. This new standard was not just a flat decision of whether an actor used due care in a situation, but whether the actor should have recognized the danger before taking the risk. Courts also required a defendant's actions be related to the harm incurred. In Crain v. Petrie,²¹ the court stated that "damages must appear to be the legal and natural consequences arising from the tort.²² Courts also considered whether the defendant should have taken some kind of preventive measure in advance that could have foreseeable prevented the harm.²³

These many factors the court considered boiled down into one main question: Was the accident truly avoidable or the fault of the defendant?²⁴   The Brown court stated,

"If, then, in doing this act, using due care and all proper precautions necessary to the exigency of the case, to avoid the hurt to others, in raising his stick..., he accidentally hit the plaintiff in his eye and wounded him, this was the result of the pure accident, or was involuntary, and unavoidable, and therefore the action would not lie.²⁵

This thinking was followed in similar cases and decisions of the time.²⁶   As stated above, this thinking moved the court from cut-and-dried ideas of negligence to ones that fluctuated and had to be examined on a case by case basis. If an accident seemed to be unavoidable and part of every day life there would be no action for recovery.

As technology progressed, courts began to find less and less accidents "unavoidable." In Huntress v. Boston & Main R.R.,²⁷ the court found the defendant negligent even though it took all necessary precautions. When a pedestrian was killed walking across the railroad tracks and the locomotive engineer had used all possible precautions in conducting the train, the defendant was still found to be negligent. The court stated that the railroad company should have foreseen the plaintiff's poor appreciation of the risk and that whether more precautions were necessary was a question for the jury.²⁸ As the power of design and invention advanced, so did the courts' perception of the power to prevent accidents.²⁹   It seemed the courts had almost moved to the extreme of absolute liability.

With this evolution, the courts were faced with a new problem. Should defendants be found liable in almost every situation because of new technological 'advancements? This created a new theory of negligence, one of balancing risks and benefits. In the early 1900s the courts evolved from just determining if an accident were unavoidable (as most at this point were considered to be) to what the costs were to avoid this accident in some fashion. The first attempt to consider this question and create a new standard was in a 1919 case, Adams v. Bullock.³⁰

In Adams, a young boy was playing with a rod when it struck the defendant's trolley wires that had been strung under a railroad bridge where the boy was walking. The court reversed a judgment for the plaintiff, claiming that the company had taken all reasonable precautions to avoid the accident. Judge Cardozo's opinion made use of the traditional analysis and verbiage of the avoidable/unavoidable analysis. However, he discussed the "duty to adopt all reasonable precautions.³¹Furthermore, Judge Cardozo stated that the defendant had acted with the area of normal provision.³²

C. The Introduction of the Balancing ApproachAlthough Judge Cardozo concluded that the accident was not foreseeable and therefore unavoidable, the Adams case laid the groundwork for a "balancing" approach to negligence. The balancing approach assumes that if an accident has a very low probability, and there is a cost associated with preventing it, a defendant is not liable if he does not take precautionary measures. By stating that absent a "gift of prophecy the defendant could not have predicted the point upon the route where such an accident would occur," Judge Cardozo indicated that giving every possibility the ultimate amount of protection would be too costly compared to the risk of injury.³³   He further stated that guards everywhere would have prevented the injury but this would prove to be much too costly, and "guards here and there are of little value.³⁴   This decision was the harbinger of the balancing standard and cost/benefit analysis; a weighing of the risk of harm and the overall costs of avoiding it.

At the turn of the century, courts began focusing on this "balancing" method to determine liability. Costs, risks, and probability began to make their way into decisions. Courts began to compare degrees of risks and costs of harms with the benefits of activities on society. The trend moved toward placing the burden on society in instances where the benefit outweighed the risk or the risk was less than the cost to avoid it.³⁵   In cases such as this, the ``risk initiator" was assigned no liability. This balancing act seemed to be a tolerable middle ground between the old negligence liability standard and the extreme standard of absolute liability.

With courts struggling to define the middle ground during this time of technological advancement, they faced the same questions legal systems faced in similar times such as the industrial revolution and the growth of railroads. As the advancements created new products and the profits that went with them, courts had to decide what levels of risk society could tolerate and who should bear the costs when harms actually occurred.³⁶

F. Ford's Risk/Benefit AnalysisThe main controversy surrounding the Ford Pinto case was The Ford Motor Company's choices made during development to compromise safety for efficiency and profit maximization. More specifically, it was Ford's decision to use the cost/benefit analysis detailed in section 11 to make production decisions that translated into lost lives. During the initial production and testing phase, Ford set "limits for 2000" for the Pinto. That meant the car was not to exceed $2000 in cost or 2000 pounds in weight. This set tough limitations on the production team. After the basic design was complete, crash testing was begun. The results of crash testing revealed that when struck from the rear at speeds of 31 miles per hour or above, the Pinto's gas tank ruptured. The tank was positioned according to the industry standard at the time (between the rear bumper and the rear axle), but studs protruding from the rear axle would puncture the gas tank. Upon impact, the fuel filler neck would break, resulting in spilled gasoline. The Pinto basically turned into a death trap. Ford crash tested a total of eleven automobiles and eight resulted in potentially catastrophic situations. The only three that survived had their gas tanks modified prior to testing.⁵⁵

Ford was not in violation of the law in any way and had to make the decision whether to incur a cost to fix the obvious problem internally. There were several options for fuel system redesign. The option most seriously considered would have cost the Ford Motor Company and additional $11 per vehicle.⁵⁶   Under the strict $2000 budget restriction, even this nominal cost seemed large. In addition, Ford had earlier based an advertising campaign on safety which failed miserably. Therefore, there was a corporate belief, attributed to Lee Iacocca himself, of "safety doesn't sell."⁵⁷

Ultimately, the Ford Motor Company rejected the product design change. This was based on the cost-benefit analysis performed by Ford (see Exhibit One). Using the NHTSA provided figure of $200,000 for the "cost to society" for each estimated fatality, and $11 for the production cost per vehicle, the analysis seemed straightforward. The projected costs to the company for design production change were $137 million compared to the project benefits of making the design change which were approximately $49.5 million. Using the standard cost/benefit analysis, the answer was obvious--no production changes were to be made.

IV. The Negligence Efficiency Argument

A. Ford's DecisionThe Ford Motor Company's use of the risk/benefit analysis was the central issue of the suits filed against the company. Many pieces of evidence, including a number of internal Ford documents indicate the risk/benefit analysis was the main reason for Ford's decision not to make design changes to increase vehicle safety. However, before discussion of the risk/benefit analysis it should be noted there were secondary concerns which supported Ford's decision not to upgrade the fuel system design: (1) As stated above, Ford had based an earlier advertising campaign around safety, which failed. The company realized this was not a primary factor in car sales; (2) the bad publicity involved with a recall would be too much negative publicity to overcome. If this unquantifiable factor were included in the cost/benefit analysis the difference may have been overwhelming. Even though it was not a factor included in the analysis, Ford wanted to avoid it at any cost; (3) At the time of the product design and crash tests, the law did not require them to redesign the fuel system; and, (4) It was customary in the automotive industry to place the gas tank and between the rear axle and bumper.

Although case law has shown that business custom is not an excuse to escape liability, custom combined with the risk/benefit analysis would lead to the same result.⁵⁸   With these factors influencing the decision in the background, the primary factor was Ford's risk/benefit analysis of making the changes. The question is: Should a risk/benefit analysis be used in all circumstances, and was it the proper framework to use in this situation? If so, it seems that the correct decision was made. Examining this question after-the-fact, it certainly seems like a poor decision.

B. The NumbersThe Ford Motor Company's risk/benefit analysis indicated costs would be 2.5 times larger than the resulting benefits. It is apparent why Ford chose no to go ahead with the fuel tank adjustment. However, basing this decision on just the numbers with no consideration of any other factors falls short of a comprehensive analysis of the action. chose not to go ahead with the fuel tank adjustment. To do a complete job of analyzing Ford's decision, the variables inside the equation must be examined. On the cost side of the equation, the most questioned variable during the case was the cost per vehicle used by Ford. The manufacturer claimed making adequate changes to the fuel system would have cost $11 per vehicle. Some evidence indicated that these potential costs may have been much lower, maybe as low as $5 per vehicle.⁵⁹   Even with this lower cost and all other factors remaining the same, the costs still would have exceeded the benefits, although the difference would have been much less substantial (see Exhibit 2). In fact, will all other variables remaining the same, the cost per vehicle would have had to be as low as $3.96 to make the benefits "break even" with the costs (see Exhibit 3). However, if the costs were around $5 per vehicle, the Ford Motor Company would not have had as strong a risk/benefit argument as with the $11 figure provided.

The "benefit side" of the equation contains the most controversial number of the analysis--the value of a human life. Ford estimated no alterations to the gas tank design would result in 180 deaths, 180 burn victims and 2100 burned vehicles. In retrospect, these estimates are slightly low. It is hard to determine the exact number of victims because every victim did not file a claim, but these numbers were reasonable estimations at the time. Ford used $200,000 as the "cost" or "lost benefit" for each fatal burn injury, 567,000 for each burn injury and $700 for each burned vehicle. The number quantifying the price of a value life ($200,000) is what makes this problem so difficult. It is hard to decide what a life is worth, but most people feel the value of theirs is greater than $200,000. While this $200,000 figure was the most controversial of the equation, it was not determined by Ford. In 1972, the National Highway Traffic Safety Administration (NHTSA) provided the auto industry with the number $200,725 as the value to be utilized in risk/ benefit analysis such as was done by Ford (see Exhibit 4).⁶⁰Following the standard for negligence established by Judge Learned Hand in Carroll Towing, or the risk/utility standard established for manufacturer's liability, the decision was well founded. The costs to Ford to make this change, which would have been borne by the consumer, was 2.5 times higher (using the original numbers) than the benefit to society. Some negative publicity may have been expected, but certainly Ford did not anticipate being found criminally negligent. In fact, it would seem Ford had a strong argument against any liability whatsoever. The decision in the liability suit with the award of punitive damages was a surprise to the Ford Motor Company, much less the criminal prosecution. How could such a decision be rendered after Ford Motor Company had followed the standard set by the courts themselves? The answer lies in the fact that the "benefit" side of the equation included the benefit of saving lives, and putting a value on this variable is not as defensible as putting a value on the benefit of saving an inanimate object, such as a vehicle.

V. The Negligence-Efficiency Debate

A. IntroductionThe Ford Motor case has spurned the arguments for and against the use of risk/benefit analysis because of its foundation of economic efficiency. The Ford Motor Company case has spurred this argument. In 1972, Judge Richard Posner's article on the negligence-efficiency theory seemed to be the "starting point" for this argument and was both highly praised and highly criticized. The essence of this article is summarized in the following excerpt: "We lack a theory to explain the social function of the negligence concept ... This article attempts to formulate and test such a theory.... The essential clue, I believe, is provided by Judge Learned Hand's famous formulation of the negligence standard.... In a negligence case, Hand said, the judge (or jury) should attempt to measure three things: the magnitude of the loss if an accident occurs; the probability of the accident's occurring; and the burden of taking precautions that would avert it. If the product of the first two terms exceeds the burden of precautions, the failure to take those precautions is negligence. Hand was adumbrating, perhaps unwittingly, an economic meaning of negligence.... If the cost of safety measures.... exceeds the benefit in accident avoidance to be gained by incurring that cost, society would be better off, in economic terms, to forego accident prevention.... Furthermore, overall economic value or welfare would be diminished ... by incurring a higher accident-prevention cost to avoid a lower accident cost.''⁶¹

Thus, the economic efficiency of negligence argument was born. While many economists have agreed and praised this article, it has been equally criticized by those not taking the "economic point of view." I will first discuss some of the many arguments against this economic efficiency point of view in light of the Ford Pinto case. Following is a further elaboration of Posner's view and defense of his position.

B. Arguments Against Negligence-Efficiency

         1. EthicsTaking an ethical approach to the Ford Pinto case makes accepting the risk/benefit analysis performed by the Ford Motor Company difficult. In making what seems to be the correct decision based on numbers, Ford is essence adopted a policy of allowing a certain number of people to die or be injured even though they could have prevented it. When taken on a case-by-case basis the decision seems to be a blatant disregard for human life. From a human rights perspective, Ford disregarded the injured individual's rights and therefore, in making the decision not to make adjustments to the fuel system, acted unethicallv.⁶²

2. Act UtilitarianismA second problem with strictly applying the risk/benefit framework is that it does not seem to take into account all of the consequences of Ford's decision. This position is considered the "act utilitarian' point of view. The act utilitarian approach evaluates each action separately and the consequences that arise from it.⁶³   This analysis would include any "harms" or "benefits" incurred by any people involved in the case. In utilizing this approach, it seems there are many factors that the Ford Motor Company did not account for in its risk/benefit analysis. When taking the situation from this perspective, it seems like the harms of not changing the fuel system outweighed the benefits. Not included in the previous risk/benefit analysis was the millions of dollars in settlements in unreported cases that never saw the courtroom. It is almost a sure bet that the settlement numbers were more on a per-case basis than the average numbers used for lost life per accident. Also, the bad publicity and reputational damage suffered by Ford over the next few years for being the cause of these lawsuits is hard to quantify, but the harm was considerable.⁶⁴   >From the utilitarian point of view, the harms and the benefits are far closer together than Ford determined in its analysis. In addition, if this was figured after-the-fact the harms far outweighed the benefits. This would be due to the cost of having to recall the 1971­1976 Pintos after the fact and the extreme bad publicity (much worse than could have been expected) that the Ford Motor Company suffered through for years after all litigation was settled.

3. Health and Safety Regulation ExceptionCritics argue there are several other related, yet distinct reasons why the Ford Motor company, as well other companies finding themselves in similar positions, should be condemned for relying on a risk/benefit analysis to make decisions based on consumer safety. In the areas of safety and health regulation, there are instances where it may not be wise to undertake a certain decision even though the benefits do not outweigh the costs.⁶⁵ This idea is imbedded somewhere between the utilitarian point of view and ethical point of view, discussed above. That is, the issue of whether the benefits outweigh the costs should not govern our moral judgment. There are some cases where a company must "do the right thing." While this may seem an argument based on emotion, there seem to be certain instances where these kind of considerations must be made. For instance, when governmental officials decide what level of pollution is allowable they take into effect certain vulnerable people--such as asthmatics or the elderly--and set the standard higher although the average citizen would not be affected by a lower one. This decision escapes the risk/benefit analysis. The higher standard is set so that the rights of the minority are not sacrificed for the needs of the majority. This kind of decision, much like automobile safety, are in the realm of specially valued things. For these, many will argue, risk/benefit analysis should not apply.⁶⁶

4. Expressing Terms in Dollar ValuesIn order to perform a risk/benefit analysis, all costs and benefits must be expressed in some common measure. This measure is typically in dollars, as the Ford Motor Company used in its analysis. This can prove difficult for things that are not commonly bought and sold on the open market. This is mainly the case for environmental policy, such as permissible levels of air pollutants, as in the example above.⁶⁷ The Ford Pinto case provides an extreme example. It questions how to value human life.

Economists have attempted to quantify, non-quantifiable items using varying methods with varying success.⁶⁸   Since individuals have unique tastes and values they are willing to pay different amounts for products and resources. This valuation system often receives high criticism. People's willingness to pay for something can also vary widely depending upon other circumstances. Based on these reasons, attempts to quantify something such as a human life can be very difficult and is the most debated aspect of the Ford Pinto case.
There are numerous things which individuals consider "priceless." For instance, most people would claim that they would not sell their right to vote or their freedom of speech for any amount of money.⁶⁹ Therefore, to tell someone that there is a certain price for their life is a preposterous notion. Therefore when taken on a case-by-case basis it is impossible for an individual to grasp the concept. There are numerous things which individuals consider "priceless." For instance, most people would claim that they would not sell their right to vote or their freedom of speech for any amount of money. Moreover, would a parent be able to put a value on the life of a child? Obviously, the notion that, on an individual basis, a person would take a certain amount of money for their life is ludicrous. To tell someone that $200,725 is a sufficient trade-off for their life, as argued in the Ford Pinto case, illustrates this point.
Economists, however, do not agree with the "priceless" concept. To them, to trade one unit of anything, even a life, for an infinite quantity of all other goods is an equally preposterous notion. It can be argued that everything can be priced or have a value laid upon it. To take this theory down to an individual level reduces the strength of this notion.
In Ford's case, the $200,725 value of a human life was provided to the company by the National Highway Traffic Safety Administration. The criticism for the value can not be laid upon Ford. The criticism is in using a number, or in other words using the risk/benefit analysis, in this situation at all. To compound the problem, Ford seemed to blindly follow the dictated numbers without giving any extra consideration to the fact that it in fact was a human life they were quantifying.
5. No Wealth MaximizationRelated to the lack of "markets" or "prices" for a life is the idea of wealth maximization. The foundation of the risk/benefit analysis is the theory of economic efficiency and an underlying principle for efficiency is wealth maximization. If legal decisions are based on efficiency, then nothing will be wasted and the wealth of the country will be at its maximum.⁷⁰   However, in order to conduct an efficiency analysis, everything must have a price--returning to the reoccurring problem. Since the reliance on prices is necessary and not merely contingent, the system of wealth maximization cannot tell us anything about right conduct where no prices exist. Prices are, in part, the result of demand and demand is the result of prior entitlements. Consequently, wealth maximization cannot generate an initial set of entitlements." ⁷¹
Along the same lines, efficiency theory assumes that wealth maximization is the goal of law, which is not the case. The goal of law is the indefinable term. "justice."⁷²   Judges and juries do not attempt to make decisions based on wealth maximization, they base their decisions on justice. This difference can be seen in the special rules for rescue, handicapped citizens, and whether the insane are found liable for their torts.⁷³
6. ExternalitiesAnother potential problem with the risk,/benefit approach is the fact that it does not take externalities into effect. This is a topic with which the law of torts often has trouble. However, it cannot be ignored just because it is hard to compute.⁷⁴ Victims are permitted to recover for pain and suffering and the cost/benefit analysis seems to ignore this point. It is yet another one of the variables that is almost impossible to estimate, much less pinpoint. In addition, this is another area where the lack of a market is influential. Minimization of social costs differs from the minimization of private costs precisely because there is an absence of complete markets, and this absence is exactly what makes measurements so difficult.⁷⁵
7. Activity FrequencyIf a company or a court were to accurately analyze the costs and benefits of an activity, it must calculate the number of times the potential victim engages in the activity.⁷⁶   Taking out the number of times the activity is engaged in reduces the damages. This calculation is often unobtainable, especially in Ford's case in terms of automobile use. Professor Polinsky, in his book, An Introduction to Law and Economics explains, "In practice it is usually not feasible to include the level of participation in the activity has an aspect of the standard of care. For example, it would be virtually impossible for a court to determine bow many miles a particular person drives each. year since that person might drive a different car that is shared with other family members or he might drive different cars owned by the household. If the injurer's level of participation in the activity is omitted from the standard of care, than a negligence rule generally will lead him to participate in the activity to an excess degree. The reason for this is straightforward, if the care he exercises meets the standard of care, be will not be liable for any damages. In practice, the negligence rule is likely to be inefficient for this reason.⁷⁷

8. Negligence is Predictable: Victims Often LoseFinally, the cost/benefit analysis and economic efficiency reasoning is argued to be a skewed framework because it does not take into account the fact that injured parties are at a disadvantage. While the law attempts to place the plaintiff and defendant on equal ground, it is impossible to accomplish. The plaintiff must prove the negligence, a difficult task. The negligence-efficiency theory does not account for plaintiffs who cannot afford to bring a lawsuit to trial or those who cannot establish negligence although it exists. With the adoption of the negligence-efficiency theory, it is predictable that victims are going to lose more than. They are going to win.⁷⁸

        9. ConclusionObviously there are a number of arguments against the use of cost/benefit analysis and the negligence-efficiency theory. Most of these arguments are separate but related and .revolve around the fact that there are no markets or prices for human life. It will be forever debated whether it is possible to set a price or value on a life to use in these calculations and whether this leads to an economically efficient outcome In the case of Grimshaw, the jury was obviously appalled with Ford's attempt to apply the NHTSA's calculation to risk/benefit standard. Was this a sign of this standard's inefficiency or was it just a sign of an ineffective jury?
C. For Negligence-EfficiencyFor as many arguments as there are against risk/benefit analysis, there are as many claiming it is economically efficient and therefore the correct standard. In defense of the Ford Motor Company, this standard developed over many years of caselaw, as detailed earlier in this paper. This negligence standard and the use of risk/benefit analysis for product liability had been accepted by courts for years before the Pinto controversy. There was no reason for Ford to believe that this was not the standard that should be used in making its decision. Ford's automatic decision once it "ran the numbers" confirms the fact that they did not question the idea of using this analysis. In addition, there are many arguments in support of this sort of analysis other than just the fact that this was the standard at the time.
        1. Risk/benefit Analysis is "Instinctively Done"In 1972, Judge Richard Posner wrote an article entitled, "A Theory of Negligence," claiming all tort law furthers economic efficiency. He claims that while judges do not write opinions in terms of welfare economics, there has always been an effort to decide cases on this basis. "People can apply the principles of economics intuitively--and thus `do' economics without knowing they are doing it.''⁷⁹ Therefore, Posner claims that the Carroll Towing decision was not a novel concept, it just expressed in algebraic terms what court had long been applying.⁸⁰
        2. Maximization of Social ResourcesFor defendants, such as the Ford Motor Company, who create risks of harm that may be suffered by others, the risk-benefit standard for negligence provides incentives to take precautions to avoid or minimize risks that can be avoided more cheaply than the cost of the precautions. By holding a defendant liable for injuries that could have been avoided at less cost than the accident, a risk-benefit test acts as a deterrent to curb risks that are worth avoiding, while allowing a defendant to take actions or avoid precautions that are not worth deterring. Deterring conduct that results in greater accident costs than the benefits of the conduct minimizes the total costs of accidents and accident precaution. Therefore, it seems this tort "policy" serves the goal of maximizing societal resources.⁸¹
To understand the efficiency theory of the risk-benefits analysis, one other point must be explained. In a products liability design defects case, use of the discussed liability standard requires identification of an alternative design that would have prevented the accident. One must be able to compare the additional costs created by the alternative design, in relation to the existing design, with the costs of the injuries that the alternative design could prevent.⁸²   In the Pinto case, Ford obviously undertook this analysis, examining the additional $11 cost per unit of changing the fuel system design.
        3. Economic Feasibility of Valuing Non-Economic ItemsThe decision to use a risk/benefit analysis does not necessarily result in the strict utilitarianism as suggested by some critics.⁸³   Most all detractors of cost/benefit analysis center their argument around the idea that placing a value on "non-economic" items, such as a human life, does not lead to economic efficiency. Proponents of the system claim their risk/benefit analysis is nothing more than what it claims to be--an effort to find some common measure for things that are not easily comparable, yet must be compared. While this may seem crass--comparing lives to dollars--some comparison must be made and all the factors in the equation must be brought down to a common denominator for the comparison to take place. Other instances arise where lives are traded against lives, just not brought down to the dollar amount that took place in the Ford Pinto case. In the choice between hospital beds and preventive treatment, lives are traded against lives.⁸⁴   It is when the analysis is taken down to an individual level that it becomes problematic.Economists dispel the related argument just as easily. The idea that if one can quantify "non-economic" items, there are certain "specially valued" things that cannot be priced. It is true that different individuals value certain things differently, but simply because an individual deems something has "special value" does not mean that they are unaffected by economic factors. One may specially value a personal relationship, but how often he calls this person is influenced by long-distance rates. One may specially value music or watching sporting events, but still can be affected by the price of records and tickets to the Kennedy Center or the price for watching events on cable or a ticket to the ball game. ⁸⁵
        4. Efficiency Does Not Equal ImmoralCritics look at risk/benefit analysis in cases such as the Ford Pinto case as a depravity of morality. The idea is that everyone has the "right" to a safe and healthy workplace, or the "right" to expect product they purchase to be safe.⁸⁶   Those who subscribe to this philosophy feel there are some "moral" decisions that must be made no matter what the fiscal impacts may be or what the risk,/benefit relationship dictates. Proponents of the risk/benefit analysis counter this "ethical" argument with the idea that these are not either/or decisions being made, but rather gradations of risk.⁸⁷   That is, Ford is not sacrificing all safety features of the Pinto, it is a question of to what degree Ford feels safety features are necessary. It could be argued that the safety question was answered for them prior to the risk/benefit analysis when Ford's earlier advertising campaign based on safety failed. Decisions involving gradation of risks are made every day, just not under such strict scrutiny. Obviously, highways would be safer if the speed were restricted to 25 miles per hour on all roads. However, this must be balanced with the "price" of slower traffic. in choosing 55 or 65 as the speed limit, we are sacrificing lives to make travel quicker and less costly. Therefore, the Ford Motor Company is not morally void for choosing between levels of safety. Auto manufacturers do this every dav.
        5. No Standard for Using an "Ethical Balancing"All of the arguments against the use of risk/benefit analysis seem to center around the "ethical argument." Instead of a monetary system, sire should adopt an ethical system that balances conflicts between certain unspecified duties and rights according to "deliberate reflection.⁸⁸   While placing dollar amounts on these items is admittedly arbitrary, the "ethical" method would open a much larger debate. Who would be in charge of this ethical reflecting and on whose behalf would these decisions be made? There would be no clear limits for the actions of regulatory agencies. What public values would rise above these vague guidelines? Finding or arriving at a consensus for this ethical standard is virtually impossible.

USING ABOVE CASE PLEASE

Please use this strategy when you analyze a case:

Identify and write the main issues found discussed in the case (who, what, how, where and when (the critical facts in a case).

List all indicators (including stated "problems") that something is not as expected or as desired.

Briefly analyze the issue with theories found in your textbook or other academic materials. Decide which ideas, models, and theories seem useful. Apply these conceptual tools to the situation. As new information is revealed, cycle back to sub steps a and b.

Identify the areas that need improvement (use theories from your textbook)

Specify and prioritize the criteria used to choose action alternatives.

Discover or invent feasible action alternatives.

Examine the probable consequences of action alternatives.

Select a course of action.

Design and implementation plan/schedule.

Create a plan for assessing the action to be implemented.

Conclusion ( should end with a strong conclusion or summary)

Writing Requirements

3–5 pages in length (excluding cover page, abstract, and reference list)

APA format,

Perform Head To Toe assessment

Admission Date June 10, 2020

Name: S.B.

MR# 80590278364

D.O.B 01/20/1960

Allergies: codeine, shellfish

Diet: Low sodium, Renal Diet

Diagnosis: CHF

Anxious, well groomed 60-year-old male is a retiree and was admitted to the hospital via stretcher accompanied by his daughter. He is 100kg at a height of 180cm so his calculated body mass index (BMI) was 30.9 indicating that he was overweight. When admitted, patient was complained of shortness of breath for 2 weeks and was worsening on the day of admission. Besides, he also experienced orthopnea, fatigue, paroxysmal nocturnal dyspnea and 2 plus pitting leg edema up to his thigh. Mr. SB was admitted to the hospital for to the same problem last year.

Mr. SB had known case of heart failure since 3 years ago and he had also diagnosed with hypertension for 5 years. Before admitted to the hospital, patient was taking fursosemide 40mg, aspirin 150mg, metoprolol 50mg, amlodipine 10mg, and simvastatin 40mg for his hypertension and heart failure. Patient does have allergies to medication and he does not take any traditional medicines at home. His family history revealed that his father had died of ischemic heart disease 4 years ago while his brother has hypertension. As for his social history, he smokes 2-3 cigarettes a day for 35 years and the calculated smoking pack years was 5 pack years. Besides, Mr. SB also drinks occasionally.

On examination, Mr. SB was found to be alert and conscious but he was having pedal edema 2plus pitting up to his knee. Besides, the patient was noted with bibasilar crackles with no rhonchi. His body temperature was 97.9. However, his blood pressure was found to be elevated upon admission with a record of 159/100 mmHg with an irregular pulse rate at 85beats/min. His echocardiogram showed that he had left ventricle hypertrophy while chest X-ray was conducted and revealed that the patient had cardiomegaly.

Lab investigations such as full blood count, liver function test, urea and electrolyte test and cardiac enzyme were done upon admission. His creatinine concentration was found to be 143µmol/L. Therefore, the calculated creatinine clearance was 68.8ml/min. Besides, there was also trace blood found in the urine and foul smelling and the echocardiography showed that the patient has sinus tachycardia. In addition, ECG test was performed on day 1 and the result indicated that there was a T-wave inversion. The patient’s INR was 1.04 which was lower than normal while APTT was found to be slightly higher (59.4 seconds). Mr. SB’s random blood glucose was found to be 68mg/dl during his hospitalization.

Mr. SB was diagnosed with congestive cardiac failure (CCF) with fluid overload. The patient also suffered from hypertension. The management plan included intraveneous furosemide 40mg twice

daily, aspirin 150mg once daily, simvastatin 40mg once at night and ramipril 2.5mg once a day, Augmentin 250mg BID PO and Digoxin 0.125mg PO daily. Besides, patient was asked to restrict his fluid intake to 500ml per day and oxygen therapy was given to patient at high flow using nasal cannula 2L/min. O2 saturation level 98% when patient experiencing shortness of breath.

As for his clinical progression, today Echocardiogram showed that he had cardiomegaly. CT scan of chest with iodine ordered to be done at 8pm tonight. Lab results showed, Bun 25, CR2.0, WBC 6000, Hemoglobin/Hematocrit15/36, potassium 4.0.

Assessment Day 1: Pt Awake, alert and oriented x3, well groomed. PERRLA. Head round, scalp intact and nontender. Mucous membranes moist and pink. Trachea midline. No swelling or goiter noted. Gag reflex intact. No difficulty swallowing. Carotid pulse palpable x2. No bruit noted.

Rales to bilateral lung base noted. Dyspnea on exertion. O2 sat at 95% via 2.5L of N/C. Pt in orthopneic position. Apical pulse rate 85bpm. Irregular. Bowel sounds in all four quadrant active and present. Abdomen soft and non tender and round. Last BM 2 days ago. Foley catheter patent, draining cloudy yellow urine. Redness to sacral area noted. No palpable lymph nodes noted.

During Assessment patient C/o Pain in bilateral legs 6/10, new onset. States, “my legs ache so much”, “it just started hurting 5mins ago.” Difficulty standing and walking. Gait unsteady. Bilateral lower extremities weak. Bilateral hand grasp strong. CMS <3secs. Legs pale in color. 3 plus pitting edema to bilateral legs noted. Pedal pulse weak bilaterally. Skin warm and dry. Ecchymosis to bilateral legs noted. Pt able to move all extremeties. Temperature 97.9, Apical Pulse 88, R24. Intake 700ml, output 500ml.

**Complete clinical packet using the information above including SBAR and nursing notes, careplan using the nursing process

Read the case study entitled ‘PremiumSoft: Managing creative people’ at the end of this assignment and answer all the questions below:

Question 1

Examine and identify any problems found in the current staff hiring and retention practices adopted by PremiumSoft. What would you propose to tackle the problems identified, particularly in a context of company expansion?

Question 2

Critically examine the approaches to organisation and job design used in PremiumSoft’s software product development. Would you recommend making any changes to the existing design? Justify your answers.

Question 3

Ken Lin, the co-founder of PremiumSoft, said that ‘we provide a relaxed culture and learning culture.’ Critically evaluate the learning and development practices implemented in the company. How could the practices be improved?

PREMIUMSOFT: MANAGING CREATIVE 0PEOPLE

“These are all clever people and we don Y want them to feel that they are being held back. ”—Ken Lin, co-founder, PremiumSoft

PremiumSoft was a player in the Structured Query Language (SQL) software market for 10 years. Regularly rated number one in database.com ratings in the database category, PremiumSoft’s database programs were downloaded over 45,000 times per week. In 2010, with a revenue of over HK$10 million, it had over 2,000,000 database users and 50,000 registered customers in 138 countries worldwide. These customers ranged from individual users, small businesses, enterprises, non-profit and community organisations, to over 100 Fortune 500 companies including FedEx, Apple, Boeing, Hewlett-Packard and General Electric. With few competitors in the marketplace (only one major competitor in the Windows environment and no significant competitors in the Mac environment), PremiumSoft was dominant in its market. PremiumSoft was staffed by 24 employees.

PremiumSoft’s continued success depended on its ability to continuously evolve its successful product lines through research and development. Key to this process were its creative people: Ken Lin, PremiumSoft’s co-founder, believed that they were the company’s most important asset. In the decade since PremiumSoft’s establishment, Lin had created a team-centric, informal work environment that promoted creativity and innovation, This included a mix of formal and informal controls when dealing with recruiting, retention, roles and responsibilities. In 2010, Lin and his co-founder Roy Choi were looking to grow PremiumSoft through the development of new software. Lin realised that this additional product line would require an expansion of his staff by 25%.

How can Lin manage the growing human resources needs of PremiumSoft—recruiting and retaining the right people and maintaining the proper levels of quality, production and creativity—while expanding their staff?   

Company Background

PremiumSoft was founded in 1999 by Lin and Choi as a web design company. Lin started his career as a computer programmer for a large bank but found the job “too boring and not creative”. He had to spend months reading a user manual before he was able to begin programming, and frustrated with the prospect of an inefficient use of his time for a year-long contract and with only being able to complete a small project, he approached his friend Roy about launching an independent web design business. Lin and Choi quickly found the web design market to be too competitive and the profit margin to be too slim. The web design business, however, provided Lin with the initial capital to turn PremiumSoft into a software development company without having to rely on borrowing and external investors.

PremiumSoft developed products that accelerated the development of applications and facilitated the management of databases. These software products aimed to “enhance productivity” and “maximize the results”^[1] of their customers. The company had two main software solutions: Navicat and NaviCoder.

PremiumSoft launched its database tool, Navicat, in 2001. Navicat was built as a tool to manage and administer multiple databases across different operating systems using a graphical user interface (GUI). The GUI automated and simplified programming tasks that were previously done by hand, allowing users to “create, organize, access and share information in a secure and easy way”.^[2] Users ranged from individuals managing a website to system administratrators and programmers managing tens of millions of pieces of data in multiple databases.

In October 2009, PremiumSoft launched its second product, NaviCoder, which was a powerful Integrated Development Environment for Windows. It was a professional source code editor for PHP, HTML, C/C++, Perl and Java; this program targeted individuals who worked in various programming environments, supporting multiple programming languages and script files.

PremiumSoft was awarded a number of accolades,^[3] and Navicat was recognised as the “Most Popular MySQL front end GUI”.^[4]

In 2010, PremiumSoft continued to work towards updating its popular NaviCoder and Navicat software, but was also on the cusp of expanding its product line to include a webware development team, and was changing its marketing and sales model.

“Our uniqueness is that our product is one software that can support different database software; we will be supporting more databases—this is where we can see the growth [of our company]. ”—Ken Lin, co-founder, PremiumSoft

Company Structure

In 2010, PremiumSoft employed 24 staff, divided into three departments: software development, marketing, and customer service (Exhibit 1). The software development department, composed of 13 staff, was further divided into three smaller work teams composed of junior and senior programmers and lead by a supervisor. Supervisors had high autonomy in managing their teams and were responsible for project management as well as team member evaluation. Programmers worked independently to build both major software features (which would take up to six months) and minor software features (with an expected development time of one month). The customer service and marketing teams, with nine staff in total, were led by one supervisor. These teams were responsible for front-line relationships with potential customers and current users, as well as market research and development of marketing material to promote the software products.

Lin was the director of software development and oversaw the software development department. His role included discussing and setting strategic goals with supervisors, solving problems, and identifying key features to be modified or developed by programmers. He also managed the larger strategic direction and management of the company. He did not do any programming. Lin spent 80% of his time on product development (managing development on both new and existing products) and 20% on management tasks (dealing with partners, human resources matters, etc). Choi had the role of finance and marketing director. He managed the customer service and marketing departments and was also responsible for the financial management of the company.

Knowledge Management Tools

PremiumSoft implemented what they termed “knowledge management” tools. Lin described the interdepartmental collaboration on knowledge management: “[the] customer service department will help the development team to record down [customer] feedback; we have a centralized database to record this kind of feedback ... an internal system for knowledge management ... [D]uring meetings we will follow up on the case ... this can give us targets on how to improve our product.”

These centralised databases (wikis) were set up across the marketing, customer service and programming teams. The customer service team collected information from clients through a web-based survey (approximately 10 surveys per month), feedback from users who had uninstalled the software, one-on-one relationships with customers, the PremiumSoft Lacebook page (with over 200 fans), Twitter, and a live online help chat. The team posted the up-to-date feedback from customers on the wiki, and the software development teams would use this information as the basis for their continued product development. The software development team also used the wiki to record discussions about features that were being developed and the outcomes of problem-solving meetings. Milestones were clearly listed to allow employees to monitor their own progress and the progress of others. Specific questions from customers were posted: developers could see the problems in the products or features they were responsible for and would solve them. Solutions were also recorded so that when similar issues appeared, employees had access to previous outcomes. PremiumSoft also built software that allowed them to track and analyse sales growth, generate sales reports and allowed them to compare month- to-month sales figures using different parameters.

While directors at PremiumSoft had integrated a number of management control mechanisms, they were also wary of the additional work load that would result from reporting or process requirements. Lin was concerned that too many controls would detract from their focus on innovation and development as was the experience of a friend: “she said the paper work [in her job] was terrible. Now most of the time she is stuck filling out forms and writing reports, she has no time to do her work. We don’t want our staff to be left in a situation like this.”

Company Communication

PremiumSoft prioritised the development of innovative, timely, relevant software for its customers by establishing feedback loops with its customers that drove product development:

“We have a dedicated R&D Team helping us to remain competitive in the products we release. We also run a trained customer support team devoted to communicate regularly with our customers and continually gather feedback to make our products better. Whether a suggestion comes in through the Support Center, via our partners, or by some other means, our development team knows how to turn customer requirements into winning products that address real business needs. ”

—www.navicat.com

To manage this product development, the leadership at PremiumSoft focused on developing strategic milestones and product portfolio plans. Quarterly meetings were set up, during which directors met with staff to discuss their goals, the feature improvements they wanted and the required output for the next quarter: products were mapped as much as one and a half years in advance. Weekly meetings were held to discuss ongoing feature improvement ideas. These ideas were driven by the constant stream of customer feedback or research on competitors’ features, and Lin and the programming teams decided which features would be appropriate and beneficial to develop. Lin noted that “we have regular meetings because every day many customers they will give us feedback and we will get the feedback and decide whether we will provide features for these customers and we will summarize what kind of features we will include in our product.” Afterwards, the team met without Lin to discuss the technical issues involved with development.

Individuals on work teams would then spend several months working on features towards a product launch date of one year from the start of work, a point Lin stated was important: “Timeline is critical when launching a new product ... we have to finish [products] within one year because we are worried about competitors.” Lin pointed out that frequent feature updates were important due to the nature of the product cycles of the databases that PremiumSoft’s products support. “In order to attract customers to buy upgrades or continue using our product, we have to provide a major release once every year. Basically, MySQL, PostgreSQL, Oracle, MS SQL, SQLite, [database software supported by PremiumSoft] vendors frequently release new versions. Their database users always hope Navicat will be able to help them to manage the latest version of the database. We also wanted to develop features that would speed up the user’s daily operations.” In addition to major product releases every year, PremiumSoft would have minor releases several times a year to provide fixes for minor bugs in the program. Employees worked independently on their product development tasks without direct involvement from the senior staff: Lin emphasised that “these are all clever people and we don’t want them to feel that they are being held back.” PremiumSoft relied on the creativity and innovation of its staff to drive its product development.

The leadership at PremiumSoft had set up a number of avenues for communication to support the independent work of the staff. Supervisors held regular meetings with employees to deal with any programming obstacles. Employees were also given the opportunity to speak directly with the directors to discuss emerging problems that might delay the release, or new features that they thought would be valuable additions. This communication was bottom-up driven directors would not “get in their way” by forcing programmers to report on their progress or bypass the supervisors to interfere directly.

Company Culture

Lin prioritised making PremiumSoft’s work environment one that cultivated innovation and loyalty from its young employees: “Because we are doing research and development, coming to our office is just like when they went to university.” Lin noted that “the company culture is relaxed, we make sure everybody is concentrating on the task and we will be able to finish on time and our job is to provide to them the best circumstance in order for [them] to carry out the task efficiently and effectively.” These young employees—the average age of PremiumSoft’s staff was 26 or 27 years old—were supported through daily communication and mentoring. PremiumSoft prioritised establishing a high level of trust and belonging between its team members across all levels and departments.

Lin challenged his employees to work at a high level by displaying his confidence in their abilities and providing them with positive feedback from customers:

“I will let them know after each new version our sales are improving, and show them positive customer feedback. From this they will understand if they trust me and finish new features, even if they are difficult, sales and growth will come. For example, Stanford University requested 60 licences to use in their classroom ... I shared this news to the team and we were all proud. This is how I try to motivate them—I show them that the company is growing. ”—Ken Lin, co-founder, PremiumSoft

Lin was aware that this culture brought an advantage to his company: “I hear that it is different from other IT companies ... in our office we don’t have pressure, we give you a time frame and we will not monitor you every day.”

Strategic Human Resources

“The software development team is the most important, because software is a creative product. If the developer sits the whole day and doesn ’t do anything, or he works very hard, but the throughput is very poor it will affect your business ... [the software developers] will try to get something from our company and we also want to use their talent to make a creative product for all our customers. It is a mutual benefit for the two parties. ”

—Ken Lin, co-founder, PremiumSoft

PremiumSoft believed that its biggest asset was its people. Because its business was centred on the timely development of software with innovative features, it depended on individuals who possessed both the creativity to develop new features and the skill and discipline to do so efficiently and under tight schedules. Recruiting and retaining high quality staff was always a priority of the leadership of the organisation, however they did not have a human resources department or a systematic approach towards their human resource management. Lin noted that “To hire the best people is our biggest challenge.”

Recruitment

The majority of PremiumSoft employees started with the company as recent university graduates. To recruit staff, advertisements were placed on online recruitment websites.

PremiumSoft would receive, on average, 100 applicants per job posting. They preferred candidates with a computer science degree (14 out of 15 software development staff were computer science graduates), a final year project in a related subject, proficiency in the programming languages uesd in PremiumSoft products, and graduation with a high academic standing. It was also preferred that they were a graduate of one of three particular universities in Hong Kong with the reputation of having the best computer science programs. Students who fulfilled these criteria were interviewed: normally, only 20% of applicants had sufficiently high grades to warrant an interview. Through in-person interviews, a director and supervisor assessed candidates’ communication skills and ability to fit into the culture of the organisation. Lin noted that “we look for the people who are friendly and also willing to communicate because we divide our company into different teams and team communication is very important.” PremiumSoft did not hire people they considered to be shy. The final decision on hiring was “just by our feeling, not a systematic approach”.

Retention of Valuable Staff

PremiumSoft’s employee retention strategy revolved around two main factors: offering competitive compensation to their staff and maintaining a desirable work environment. According to Lin, PremiumSoft offered “a competitive salary package”. In addition, PremiumSoft provided an automatic one month bonus after one year of employment. Promotions in the form of salary increases were normally granted after two years of service by programmers as a method to retain staff, but due to the small size and scope of the organisation, roles and responsibilities rarely changed.

PremiumSoft’s working environment included flexible working hours (employees could start their day between 9:30 and 10:00 and could leave between 6:30 and 7:00 depending on when they started), long lunch breaks, Xbox and virtual tennis games, and social activities outside of the workplace. “Programming can be stressful and depressing from time to time and we want our employees to have something to ease their feelings.”

PremiumSoft also differentiated itself from other IT companies in Hong Kong with its human resources policies; Lin noted “In Hong Kong the working pressure is very high so we try to give freedom and not be very strict.” PremiumSoft did not make unpaid overtime work a requirement (a norm in Hong Kong), gave employees independence in their time management and emphasised team building. He was critical of a restrictive work environment: “Personally, I don’t think that it is very good for staff, because the staff spend most of their time working in the office. Maybe the time is longer than the time they spend at home.” Lin would often eat lunch with his employees and participated in all of the activities. He felt that it built trust and said, “We are like a family.”

According to Lin, PremiumSoft had an extremely low turnover rate: less than 10% over 5 years. “There is one supervisor who has been in the company for 10 years, since its establishment.” He attributed this retention to the work environment at PremiumSoft: “We provide a relaxed culture and learning culture. Staff are happy and they feel both challenged and fulfilled.”

Staff Evaluation and Compensation

PremiumSoft did not have a formal evaluation system in place. Lin attributed this to the small size of the company and the knowledge if its founders: “We have no [formal] performance evaluations—we have no experience, no knowledge and we did not study this.”

PremiumSoft had informal evaluations of its employees. These evaluations did not take place at regularly scheduled intervals, with the exception of a three-month probation period for all newly hired staff. Supervisors played a major role in assessing the performance of their group members. Lin noted that “supervisors knew the performance of individuals more than anybody else in Premiumsoft, for me, all I can see is whether the team has successfully accomplished their assignment. Yes, as we are still a small business and headcounts are limited, I do get some information about individual performance from daily communication and observation. But performance is about the quality of the task rather than the time a person [is] spending working in [the] office.” Supervisors would speak with employees if they fell behind schedule or if the quality of their work was low, as evidenced by a large number of bugs found in their software. Lin would also speak to employees who were underperforming: “I try to talk to them in person and I give [them] some guidance on how to improve, for example you have to speak out in the meeting and you have to give more ideas, because this is research and development.”

Lin’s evaluations of supervisors were not systematic: “We always communicate and T will give them suggestions and advice on how to manage the team better. In my point of view they have done the job. [My evaluation is] by observation only.”

According to Lin, innovation—demonstrated by an employee’s ability to provide new ideas and problem solve—and intelligence—demonstrated by the creativity of ideas and the speed and efficiency at which he functioned—were highly valued at PremiumSoft. With the absence of a formal evaluation and compensation system, employees were not rewarded for exhibiting these qualities above and beyond their peers.

“I give no different rewards for him—there is currently no system. My concern is that if I only provide the best to him, it will cause other employees to see it as an issue. I treat all [employees] the same. In person, I will give him positive feedback. His salary is almost the same. ”—Ken Lin, co-founder, PremiumSoft

Lin believed that the lack of differentiation was not a problem, and that his employees were very happy. Lin believed that employees could not easily compare their performance because their work was independent and different.

He recognised that if the discrepancy of performance was high, and the other employees were perceived as “very lazy” while still receiving the same compensation that individuals may want to leave but said “we won’t let this happen—we will also encourage other employees to be better, so the difference is not very obvious.”

When the difference was obvious, and individuals were falling behind in their schedules as the result of a bad work ethic, PremiumSoft showed little tolerance: “For some staff we have had discipline issues; we will give them a warning and then a warning letter.” Lin noted that after issuing a warning letter to two employees who were chatting excessively, they stated that they felt the workplace “was not suitable” for them and left the company. One employee was let go after she disobeyed company rules for personal communication during work hours: “She spent half [her] day on MSN. We are only concerned if you play like this for half day, it is not acceptable. If you just send one message it is ok.”

Challenges for the Future

PremiumSoft was an award-winning software company with thousands of users around the world. It had achieved 10 years of success through the regular release of innovative products and had built a small and loyal team of software development, marketing and customer service employees. Looking forward, co-founder Lin believed his biggest challenge was in the growth of the company: recruiting and retaining high quality staff. He wanted to do this without sacrificing the independent work environment that he felt was important for cultivating creativity and innovation, but wanted to maintain the high quality of work that emerged. With the imminent growth of PremiumSoft in both employee size and product scope, how can this small company attract and keep the best talent in a competitive environment? And how can Lin continue to manage this environment with a growing number of staff?