Cost-Benefit Analysis in Lifeboat Situations (Literally)
Mark Kleiman has a brilliant post in which he applies cost-benefit analysis to explain why it might have been sensible for the Titanic not to have enough lifeboats for everyone. Among other things, he points out the likely unintended consequence of a hypothetical law requiring one lifeboat seat per passenger: that ship lines would have shifted toward carrying more cargo and fewer steerage passengers, thus curtailing opportunities for the poor and desperate to immigrate to the New World. Overall, a beautiful little gem of economic thinking. I may expose my law-and-econ students to it next semester. Still, I do have to wonder: were the steerage passengers *aware* of the limited quantity of lifeboat seating? It's one thing for people to rationally accept a higher risk in return for a lower price. It's quite another for them to be misled about the service they're getting, thereby inducing them to accept prices that reflect lower risks while being exposed to higher risks.