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Manufacturer's Duties and Social Costs

The document discusses the Social Costs View of the Manufacturer’s Duties, which asserts that manufacturers should bear the costs of injuries from product defects, regardless of due care taken. This theory, rooted in utilitarianism, aims to reflect the true cost of goods and promote greater manufacturer responsibility, though it faces criticism for potential unfairness and increased consumer carelessness. Additionally, it touches on the ethics of advertising, questioning its value to consumers despite the significant costs incurred by manufacturers.

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10 views2 pages

Manufacturer's Duties and Social Costs

The document discusses the Social Costs View of the Manufacturer’s Duties, which asserts that manufacturers should bear the costs of injuries from product defects, regardless of due care taken. This theory, rooted in utilitarianism, aims to reflect the true cost of goods and promote greater manufacturer responsibility, though it faces criticism for potential unfairness and increased consumer carelessness. Additionally, it touches on the ethics of advertising, questioning its value to consumers despite the significant costs incurred by manufacturers.

Uploaded by

mqasimalinoor
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

BUSINESS ETHICS

Handout

Lecture No, 37
The Social Costs View of the Manufacturer’s Duties

The third theory of the duties of the manufacturer extends beyond what the other
two theories impose. It maintains that a manufacturer must pay the costs of any
injuries sustained through any defects in the product, even when the
manufacturer exercised due care and took all reasonable precautions to warn
users of every foreseen danger.

This theory, which forms the basis of the legal doctrine of strict liability, is
utilitarian. It says that the external costs of injuries resulting even from
unavoidable defects constitute part of the cost society must pay for producing
and using a product. Having the manufacturer bear these costs is the most
efficient use of society's resources: that way, the price of the good will reflect its
real cost and it will not be overproduced. Additionally, manufacturers will take
even greater care since they will be responsible for paying for all of the costs of
injuries. When they include the cost of injuries in the price of the product, they
also will be distributing the real cost of the item among all users, which is more
fair than making just the unlucky injured parties bear the entire cost of the injury
themselves.

The major criticism of this theory is that it is unfair because it violates the basic
canons of compensatory justice: a person should not be forced to compensate
an injured party if he or she could not have foreseen and prevented the injury.
Critics also contend that the theory will not actually reduce the number of
accidents. Instead, it may have the unintended effect of encouraging
carelessness in consumers, which would cause even more accidents. Finally,
such critics argue that liability suits will increase and impose heavy losses on
insurance companies, forcing insurance rates to rise precipitously.

Social cost theorists counter by pointing out that, in reality, the costs of consumer
liability suits are not large. Less than 1% of product-related injuries result in suits,
and successful suits average only a few thousand dollars in any case. Moreover,
the insurance industry has remained quite profitable, despite the warnings of the
critics.

Advertising Ethics
Advertising is a huge industry, which imposes great expense on manufacturers
and service providers. Commercial advertising is sometimes defined as a form
of "information" and an advertiser as "one who gives information." The implication
is that the defining function of advertising is to provide information to consumers.
In the end, consumers must cover the costs of advertising, but what do they get
for this extra expenditure? Most consumers say that they get very little. So is
advertising a waste, or a benefit? Does it help or harm consumers

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