Companies that produce asbestos have been in court for years fighting wrongful d

Question

Companies that produce asbestos have been in court for years fighting wrongful death lawsuits because asbestos is now known to cause cancer. It does not cause problems immediately, but cancer cases start to appear 20 years after a significant exposure. For a while the companies were not held liable because they successfully argued that all parties to the employment relationship were acting on the information that was available when the workers were exposed. They started to lose the suits once it was revealed that they had concealed information about harmful effects of asbestos. Explain, as an expert witness economist would, why this revelation is crucial to an economic argument that the exposed workers should be compensated. Illustrate your argument with an appropriate graph.

Explanation / Answer

This is an important revelation from an economic point of view because the concealed information raises the opportunity cost for the workers. Their health is negatively impacted pulling up the cost of labour provided for them. Hence at the equilibrium when a worker equates the opportunity cost to the remuneration for the job he would either provide lesser labour hours or he would work only at a higher pay. Hence these workers are underpaid from an economic point of view by keeping some information hidden. From the ethical point of view there is a cost in terms of the long term impact on a human life, a production spreading cancer in long run is not ethical.

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