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Mesothelioma, Asbestos and Corporate Cover Ups: A Case Study in Market Failure

Updated on April 30, 2014

Asbestos and American corporations

Mesothelioma, asbestosis and other asbestos-related diseases have been at the center of the largest tort and personal injury cases in American history. The reason for this is four-fold:

  1. Asbestos was used widely in a variety of industries
  2. Asbestos was used by or played a role in the jobs of millions workers
  3. The ill effects of asbestos on human health are long term in nature, continuing to affect a person long after their exposure to the material has ended
  4. Many businesses covered up research proving the detrimental effects of asbestos for decades, and kept their workers exposed to the material rather than try to protect them or limit their exposure.

Asbestos was recognized as a health hazard as early as the 1920s. Yet major companies involved in asbestos production, as well as in various fields that made use of asbestos, intentionally downplayed the hazards of the material. Corporate decision-makers, with access to research on the nature of asbestos and its medical effects, often chose to keep their employees working in unsafe conditions. It was cheaper and more profitable that way.

Asbestos, mesothelioma and economics

Aside from the obvious moral failings caused by this narrow-minded quest for profit, this all amounts to a textbook case in market failure. Many conservative and libertarian thinkers argue that the market is the best tool for efficiently allocating goods and services, and should therefore receive minimal interference from government.

To be sure, there are some cases where the market allocates a good or service less efficiently than another system. But more importantly, this position causes a narrow emphasis on monetary gain and material wealth at the expense of other things that we value, such as human life itself.

In the case of asbestos, the short-term, self-interested decision making of the management of these companies led to horrendous outcomes and significant human suffering that is ongoing. Libertarians argue that in time, all information will ultimately come out to all market participants–consumers, businesses, workers, investors, etc. Thus, with all pertinent information available, everyone will make reasonable, rational decisions that benefit themselves. The problem is that this information may take a very long time, and by the time the market reacts, many problems may have arisen. As John Maynard Keynes said, “in the long run, we’re all dead.”

In this case, the theory would predict that construction workers, shipbuilders, miners and others would be fully aware of the dangers of asbestos before applying for a job. All information would be available, and they would factor it into their employment decisions. (As a result, a worker may choose to take the risk and work in an asbestos-related job for a period of time, fully aware of the dangers, or pursue a completely different job altogether.) However, the reality was that the information itself was often controlled by market participants (managers of these companies) that had a vested interest in a certain outcome.

In addition, it took time for the medical community to realize the extent of the danger. For years, nobody knew just how bad asbestos was for human health. This was a period in American history (late 19th and early 20th century) when safe working conditions and public health were barely addressed by the government, if at all. Without the government taking an interest in the health and well being of workers, massive health problems resulted. And they are still resulting.

The notion that the market can adequately police itself through the independent, rationally self-interested behaviors of its actors has been proven wrong many times over. It is currently politically popular to complain about “government overreach.” But the lessons of asbestos in the 20th century are quite clear that the state plays an important role in the economy.


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    • secularist10 profile image

      secularist10 5 years ago from New York City

      I think John Adams said that the political system he and his contemporaries created was ill-suited for any type of community except a moral one. They understood morality through the prism of Protestant Christianity, of course, but I think there is truth in the notion that a basic sense of morality and ethics is necessary for a well-functioning society.

      A market system certainly cannot function without common standards. Not just equally-applied laws on property rights or the protection of person, but also a common sense of fairness and justice and basic decency among people.

      It would be impossible for trade to occur if workers, businesses and consumers could not have the confidence that the guy on the other side of the table more or less meant what he said. Laws enforcing contracts only go so far, and it is not reasonable to bring police, courts and judges to bear on every single violation of these understandings.

      We see the effects of a society where people cannot trust each other at this fundamental level all over the world, in developing countries where strong civil society and common standards that the average person can rely upon are not present.

      So I absolutely do think there is something to that.

    • dorado profile image

      dorado 5 years ago from Flagstaff, Arizona

      There is something so profound here being said. I've thought of it often yet am not sure if I've understood deeply enough. I recently realized, in addition or in compliment to what is being said here, that, "free market capitalism" won't work without a moral public. But then, I wonder if I'm overreaching with such a statement.

      I think back to the recent market failure and the interviewees on television, and that perplexed look they seemed to have, as if trying to figure out for themselves why they did what they did. There is so much here in this article.

      Sorry if this comment seems gurbled but there are some ideas I haven't fully shaped, somewhat difficult to articulate. Thanks.

      Thanks for postin