Should bad outcomes always be prevented?

Almost every single day, I seem to encounter at least one article that I find highly annoying.  In many cases, it involves a bad government policy.  And most of those bad policies are aimed at addressing very real problems, but the cost of the policy ends up exceeding the benefit.

Consider the sport of snow skiing.  If I had my way, I’d make it impossible for skiers to sue ski slopes when they injured themselves while skiing.

I don’t expect my idea to be adopted.  If I proposed it to the legislature, someone would point out that it would even ban lawsuits when the injury was 100% the fault of the ski slope operator—say when they accidentally left a metal rake on the slope, and a skier tripped over it and broke a leg.

I agree that it would be unfortunate if skiers were not allowed to sue ski slopes over rakes accidentally being left on the slope.  Nonetheless, I don’t wish to allow skiers to sue the ski slope for any injury incurred while skiing.  My rationale is that the harm done by preventing justified lawsuits for ski injuries is trivial compared to the benefit derived from preventing frivolous lawsuits over ski injuries.

More generally, I’d prefer to radically reduce the amount of lawsuits in most other areas, even though it would prevent some valid lawsuits from occurring.  Thus the legislature may wish to ban lawsuits for “pain and suffering” after an auto accident, unless there is clearly identifiable physical damage to the body.  Yes, that would prevent some valid claims.  But frivolous lawsuits resulting from auto accidents have recently increased dramatically in California, and insurance rates are soaring.

A recent article in Reason points to a good example of the perfect being the enemy of the good:

The idea was that concerned citizens with easy access to the courts would be the ultimate check on bureaucrats casually greenlighting environmentally ruinous projects.

An unintended consequence of CEQA is that anyone can file a lawsuit to wring concessions out of project sponsors, including concessions that have nothing to do with protecting the environment.

Because California’s strict zoning laws frequently require developers to seek some sort of discretionary government approval, this opens up a lot of opportunities for cynical actors to use CEQA to shake down builders.

Indeed, this practice is common enough to have a nickname: “greenmailing.” . . .

For the past decade, the developer Relevant Group has been building hotels in the Hollywood neighborhood of Los Angeles. Time and again, after the city approved the company’s projects, another neighborhood developer filed petitions arguing that the city’s approval violated CEQA by studying traffic, noise, and other impacts enough.

The litigious developer in this case is Stephan Nourmand, principal of Sunset Landmark Development, which owns and operates the Hollywood Athletic Club near Relevant’s projects.

Nourmand’s company dropped its lawsuits challenging the approval of two of Relevant’s hotel projects after the developer agreed to pay $5.5 million.

When Nourmand sued over the approval of another of Relevant’s hotel projects in 2018, Relevant’s lawyer met with him to try and convince him to drop the lawsuit. According to court filings, Nourmand told the lawyer “You know the drill. It’s going to take a check to make this go away.”

This seems like a classic example of creating a worse situation by attempting to create a perfect situation.

I very much doubt that California’s CEQA law would pass any sort of reasonable cost-benefit test.  In the real world, governments often end up banning many projects where the benefits greatly exceed the costs.  Regulators almost always err on the side of too much regulation.

Let’s say that you convinced me that I was wrong, and that the CEQA is actually a great policy.  Assume that in the majority of cases where local governments reject projects on CEQA grounds, the total social costs of the projects exceeds the benefits.  Even in that case, I’d oppose allowing people to sue over CEQA approved projects.  When lawsuits occur in cases where the project has already been approved by regulators, the vast majority of the objections will be without merit.

Most lawsuits over CEQA decisions probably end up hurting the environment.  Many of the lawsuits are fought over issues like “density” and “congestion”.  But adding density to cities like Los Angeles is actually good for the environment.

Our society seems very averse to ever allowing a situation where someone is not allowed to sue even though a lawsuit would be justified.  But it’s almost never optimal to ask for perfection in any area.  Imagine if new highways were never approved until the highway engineers guaranteed there would be no fatal accidents.  If our tort law policy is to insure that there are zero cases where justified lawsuits are not allowed, then we will end up with far too many lawsuits by any reasonable cost-benefit standard.