The Squirrels Are Watching

Gun Manufacturer Liability

Posted in Fact and Law by andrewfong on October 29, 2009

In Torts yesterday, we started on strict products liability. At some point, we touched on the liability of gun manufacturers for the costs of crimes committed with guns. This naturally started up a shitstorm.

First, let’s assume that there is in fact a legitimate public interest in ordinary citizens being able to buy a gun (if there weren’t, then we would be discussing banning guns period, not strict products liability). Given that legitimate interest, my initial reaction was that holding gun manufacturers liable for gun crimes would be horribly unfair. It’d be the equivalent of holdng auto-manufacturers liable for hit and runs. After talking to my modmate Sam though, I think, from an economic efficiency and loss distribution perspective at least, it’s an interesting proposition.

Let’s assume gun manufacturers were liable for all crimes committed with guns — not criminally, but liable for the monetary costs of medical care, pain and suffering, and so forth. What might happen isn’t that gun manufacturers would simply close up shop but that they would simply buy insurance. Gun manufacturers would then pass on these costs to the end consumers. They might directly increase the price of a gun, but they could also do so indirectly by seeking indemnity from the distributors or end users and forcing them to buy insurance.

Basically, we’d be holding gun owners in general liable for harms caused by bad gun owners via insurance costs. That might seem unfair — basically it’s stealing form Peter to pay Paul’s shooting victim — but it’s not that different from auto insurance. While good drivers might pay lower premiums, part of that premium still goes off to pay off the victims of a bad driver’s accident. And there’s a certain sense of rough justice in asking that gun owners be responsible for the actions of other gun owners.

Since gun manufacturers (and their insurers) have an interest in keeping the costs of liability down, they’d probably end up implementing a lot of the gun control mechanisms proposed by liberals without any additional pressure from the government. It might be in their best interest, for instance, to maintain a registry of who owns what gun, so in the event someone gets shot, the company can track down the owner or distributor of that gun and seek imdemnity. If various companies combined their registries, they could be able to identify “problem sellers” — i.e. distributors who sell a relatively high proportion of their guns to people who then commit a subsequent gun-related crime — and then cut these folks out of the loop. You can make a good argument that gun manufacturers are in a better place to police the distribution of firearms than the government itself. I’d also bet that a national gun registry owned and maintained by say, Smith & Wesson, would be more politically palatable, if only marginally, to conservatives than one controlled by the the federal government.

That self-policing might make liberals think twice however. I’m not sure if gun control advocates actually want to encourage the gun industry to get into the public safety business. The industry’s notion of self-policing might be to increase the number of guns available to law-abiding citizens, the theory being that the criminal elements would be less likely to attack someone if the odds of that person shooting back were high. Still, it would at least hold gun companies responsible for the veracity of that claim. If it turns out that policy actually works, more power to them. If it doesn’t, they now have a very strong economic incentive to rethink it.

Note that I don’t actually endorse this position. First of all, I think this is such a ridiculously hard sell to conservatives that it’s not politically feasible. Second, I don’t have all the data. It may very well be that strict liability insurance would so expensive that it drives gun manufacturers into bankruptcy rather than reform them (some people would say that’s a good thing, but again, assume a legit public interest in a viable gun industry). Third, to the extent that I’m making a Coase Theorem argument, the transaction costs involved may be so high that this policy actually results in less economic efficiency.

Nevertheless, there are enough valid arguments for that I’m going to withhold judgment on making gun manufacturers liable. If political conditions change, the data becomes available, and I still care, I might even take a stance on it.

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