[tynpeddler]

A securities fraud lawsuit against a company because the work environment is toxic reminds me of the movie Unforgiven. For those unaware, the movie starts with a cowboy disfiguring a prostitute with a knife because she laughed at him. After the incident, the guy who manages the brothel is financially compensated since he had invested money in bringing the prostitute to his place of business, money which he will presumably be unable to recover now that the woman has been disfigured. No compensation is ordered for the disfigured woman (another cowboy does try to compensate her out of guilt), instead, the perpetrator is flogged, and that's supposed to be enough for the woman.

There's a real gap in our understanding of capitalism and crime if it's easier to compensate shareholders of a toxic company than it is to compensate the direct victims of that toxic behavior. If a toxic culture would suppress stock prices, it seems that the same culture would suppress career advancement, physical health and general mental well being. The problem seems to be that an employee must not only prove criminality but also particularized harm, whereas the standard for a successful securities fraud lawsuit seems to be lower.

[tomxor]

Given this type of scenario, it feels like the opposite should happen: Investors should be blocked from recovering losses and victims should be compensated.

That's a far better preventative measure.. to incentivise investors to be responsible in what they invest in rather than "just letting shit happen" and reclaiming money if necessary because it's easier. If harm comes to people due to their investment, they only get whatever is left over after victims are compensated.

[nemothekid]

>Investors should be blocked from recovering losses and victims should be compensated.

I think Levine's take is a bit more nuanced. It's not like shareholders are taking up the case for some altruistic reasons, it's just that for lawyers it's an easier case to litigate. To paraphrase Matt, if you had to sue the CEO, on behalf of victims, for sexual harassment, as a lawyer you would have to prove the damages by showing that maybe the CEO had a pattern, that the victim was actually traumatized and not just "regretting it" and any other of mountain of historically charged counter claims of sexual harassment. But securities fraud, all the lawyer has to do is point to a newspaper article about how the news came out and the stock went down.

In other words, investors being blocked from being compensated wouldn't solve the issue - it would just remove a possible disincentive for actors to act improperly.

[dmix]

Yeah this isn’t some textbook or ideological economics “what’s better for everyone” scenario where we can just push a button to choose the better one. It’s far more complicated.

It’s just a product of better lawyering but also critically access to information, not some easily controllable incentives system where regulators or some sort of centralized agency can effectively tip the balance back towards some abstract group of victims, in only a subset of cases (which cases do they help with? Proactively looking for ones they deem need the victims help the most? Etc it’s a hard solution to build and probably an unrealistic one).

The other option of arbitrarily downplaying investors power in the courts in general sounds like it could be full of unexpected downsides and false positives IRL. Consumer class action suits are already seedy and full of unfair ‘captain retrospect’ sort of policing and the lawyer groups again also make most of the money anyway (and often are the biggest motivator and resource backer too). Which at the end of the day doesn’t make the ‘bad’ companies operate any better in a realistic world.

The courts may be flawed but they tend to be way better than almost anything else available.

Any new ‘system’ or balancing act would have to deal with counter balancing certain parties having better motivation/resources/positioning/information. Which historically in other systems has been even more ripe for abuse by power holders who end up being pushed and prodded by the same groups with above said advantages.

A far better solution IMO is more and better organizations advocating for victims groups in such cases. An adaptation to the reality of the courts and the markets, rather than a rejection of them.

Otherwise we’re just pointing the overlaid lawyers in a new direction and nothing in the consumer world actually gets better through the process.

[JumpCrisscross]

> it feels like the opposite should happen: Investors should be blocked from recovering losses and victims should be compensated

This kneecaps the investor-lawsuit mechanism by removing the incentive to discover and pursue problems.

Do we have precedent for employee lawsuits citing shareholder litigation to burnish their case?

[jandrese]

Economists like to talk about "utility" and the common good with their theories, but they tend to only measure money so unless you can put a price tag on it it is invisible to economists. The wellbeing of a prostitute is one of those things that has no market. The same is largely true of toxic workplace behavior. There is a tertiary effect from potential lawsuits, but those are almost impossible to price into a business model.

If your bro culture allows you to succeed over your competitors at the cost of a million dollar lawsuit a decade down the road then it probably doesn't make economic sense to change the culture. Wall Street banks and trading houses were (are) notoriously hostile workplaces, but if your profit margins are in the billions and you're getting good returns then a million dollar suit in the future is basically not a concern.

[dcolkitt]

> The wellbeing of a prostitute is one of those things that has no market.

Sure it can. Everyday institutions make calculations that assign a standard monetary value to a human life.[1] And it's not just the market, the government and policymakers do it all the time as well.[2]

Heck, you even put a value on your own life. Do you drive the latest car model and live in a house that was built in the last two years? If not, you're trading off money against mortality, by increasing your risk of dying in a car accident or house fire.

[1] https://en.wikipedia.org/wiki/Value_of_life [2] https://www.bloomberg.com/graphics/2017-value-of-life/

[jandrese]

That's not a measure of your wellbeing though. Usually they just assume that if you have more money you'll be happier.

Maybe a fancy car will increase your happiness, but there is no unit of measure you can divide the purchase price of that mid-life crisis car by.

The value of a life is roughly how much money they would have made if they had lived until some arbitrary end date. Happiness doesn't figure into it at all. It's calculated so life insurance companies know how to price their product, which is ultimately just paying off some fraction of the remainder of someone's theoretical lifetime income if they die early.

[gjm11]

That isn't how the various things called "value of a life" are calculated.

The Wikipedia article linked above describes some ways to do it, and if you look at them you will see that with one exception they are not estimating, nor trying to estimate, expected future earning power or anything like it. (Though that might affect the answer.)

The first approach they describe: take N people and ask each of them how much they would pay to reduce their chance of dying in the next year by 1/M. Then the average of M times this figure is the group's estimate of the value of their lives. (The description in the article simplifies the calculation by taking N=M, but there is no need to.)

The second approach: look at what people are willing to forgo in order to reduce their chance of dying a bit, or willing to increase their chance of dying a bit in order to have. If you're willing to increase your chance of dying by X in order to get Y, that suggests you value your life at no more than (the value to you of Y) / X. Look at lots of different X and take some sort of average of the resulting estimates.

The third approach is looking at future earnings. The page adds this caveat: "Another potential issue when using wages to value life is that the calculation does not take into account the value of time that is not spent working, such as vacation or leisure."

The fourth approach is more or less the same as the first.

It's obvious that aside from the second these are not the same as a person's future earnings. And we shouldn't expect them to be; people generally value other things about their future lives besides the money they may earn.

(A kinda-artificial example that I think makes the point. Suppose the following things happen: 1. Economic growth stops or slows sufficiently that no one expects investments to grow appreciably an more. 2. You get rich. 3. You retire, intending to supply your needs and wants simply by spending some of your mountain of cash. In this situation your expected future income is zero. But I bet you would still be willing to pay something to reduce your chance of early death.)

Also, though this is a less important point: Life insurance is not only for paying off some fraction of your theoretical lifetime income. E.g., you can buy life insurance policies even after you have retired, even if you have no income. Obviously one reason why you would buy life insurance is to make up for loss of future income; but it could be e.g. that one thing you do is to care for other family members, and that if you died they would need someone else to do that who would need paying, and if you were buying life insurance that would be something you would take into account.

[jandrese]

All of those are still just asking "how much is your life worth in dollar terms?" Not "how happy are you". The assumption is the more money you're willing to spend to stay alive the happier you must be.

> Also, though this is a less important point: Life insurance is not only for paying off some fraction of your theoretical lifetime income. E.g., you can buy life insurance policies even after you have retired, even if you have no income. Obviously one reason why you would buy life insurance is to make up for loss of future income; but it could be e.g. that one thing you do is to care for other family members, and that if you died they would need someone else to do that who would need paying, and if you were buying life insurance that would be something you would take into account.

If you have no income you can't buy life insurance. How would you pay for it?

Retirement income is still income. You're still buying insurance to provide that income in the event you die before your dependents. It should be noted however that those polices tend to be very expensive as the insurance company calculates that you may not be paying into it for very long before they have to start paying out.

[gjm11]

I agree that "what is the monetary value of your life?" is not the same question as "how happy are you?", and so far as I can tell no one was saying otherwise.

Presumably the two are related; if you are miserable and expect to remain so, you will probably be less willing to pay for more life. Clearly the two are not the same; if you have no money, your ability to pay will be greatly constrained.

You can deal with that latter problem to some extent by asking hypothetical questions: suppose your net wealth were exactly $1M, then how much would you pay for a 0.1% reduction in your chance of dying this year? But of course people don't necessarily have that much insight into what they would do in hypothetical situations. Or by asking people what they would pay for other people's lives, which is kinda what e.g. national healthcare institutions like the NHS in the UK or Medicare in the US have to do to decide what treatments they are willing to pay for. But of course that also isn't measuring happiness, nor even other people's estimates of it.

Or, of course, you could use the same techniques as you use for calculating a "statistical value of a life" to put a value on things other than merely being alive or not. Ask people about things that trade off money against some probability of disfigurement, depression, being abandoned by their spouse, etc., etc. Or look at the tradeoffs they actually make.

----

If you have capital but no income then you can buy life insurance, at least until the capital runs out. Of course, if you have capital then you can also buy income.

I agree that retirement income is still income, which is why I bothered to add "even if you have no income". (Of course being retired and having no income of any sort is a highly unusual situation, because there are state pensions and the like.)

But, I repeat, it is simply not true that the only possible reason for buying life insurance is to make up for the loss of your income after you die. Here is a concrete situation to imagine:

You have some investment that provides income. It will continue to do so after you die. It's enough for you to live on, reasonably comfortably but not at all extravagantly. Your needs are few, so you don't take a job, you just live off your investment income.

The investment will not change as a result of your death. No one will be financially worse off when you die. But you have an aged parent who needs a lot of help: something like one person, full time. You do it for free -- you have plenty of time and you love them and care about them. But there is no one else who would be willing and able to do it for free.

So when you die, your parent will need a lot of help, and it will need to be paid for. They can inherit that investment and the income it brings, but that may not be enough to pay for the help they need. You are still fairly young and healthy, so you can get life insurance cheaply. That way, if you get hit by a bus or have an unexpected heart attack or something, your parent will be able to afford the care they need.

(This is a situation in which life insurance is bought for a reason other than replacing income. It is not a situation in which life insurance is bought by someone who has no income to be replaced. Those are separate possibilities, and I suspect there is no plausible scenario in which they both happen at once.)

[vlovich123]

If you ask a billionaire how much they’re willing to spend to save their life (or significantly improve their health) and you ask someone with a $1000 dollars in their bank account, is the answer to that question measuring the worth of a life or how much that capital is worth? Very wealthy people would be more willing to trade wealth for health/happiness whereas poorer people are less willing to make that trade off since they need that capital for more basic necessities (eating, rent, having kids, etc).

[gjm11]

It's measuring the value of their life relative to the value of money, for them. In many situations that isn't the statistic you actually care about.

(For the avoidance of doubt: my previous comment wasn't trying to claim that the "statistical value of a life", measured in such a way, is a good measure of how much a person values their life in non-monetary terms, or anything like that. I was just objecting to the specific claim I was responding to, namely that the "statistical value of a life" is measuring only its value as a future income stream.)

Very very crudely, the value of a small gain in money is something like inversely proportional to the amount you have already, which means that the value of a given amount of wealth increases something like logarithmically with the amount of money, and either of these means that financial institutions like markets care about people's interests roughly proportionally to their wealth. Everything in this paragraph is pure handwaving, but I find it a useful intuition.

[drdeca]

I imagine one could, in principle, look at how this varies (on average) with how much money a person has and/or their income.

Hm, if one did, then perhaps one could use this as a basis for expressing how much people value other things?

Though, I suppose there's the question of like, how would someone trade off risk of dieing within N years vs dying within 2N years. Like, if something would increase one's chances of dieing within 2N years by some quantity, but decrease one's chances of dieing withing N years by some other quantity, at what values would people make or not make that choice? (or, in the other direction).

Depending on how that works out, maybe that would mean that this isn't a great foundation for translating between "how much do they value this (in dollars), at their current income level" and "how much do they value this (in some other unit which is hopefully more natural in some sense)".

Is there something else that would be a better basis?

[jjoonathan]

> Economists like to talk about "utility" and the common good with their theories, but they tend to only measure money

Yeah, that's the problem. The economic notion of value weights according to wealth while the moral notion of value does not. It's absolutely scandalous that we let economists conflate the two.

Feed a starving kid in Africa? Zero economic value. The kid doesn't have money. Figure out how to merge together a bunch of megacorps to build a monopoly, raise prices, reduce quality, and make the lives of millions strictly worse? The market will ejaculate capital all over your value-creating endeavor.

[renewiltord]

This is nonsense. It's not The Market™ or The System™. It turns out starving kids in Africa are of no value to anyone except to their parents, who have no means to provide commensurate to the child's value to them.

The blunt truth is that arbitrary lives are probably nearly valueless and certainly worth less than $1000. I have tested this hypothesis by describing GiveWell's mathematics to people at varying stages before they would spend money similar to that: in every case, people choose to spend the money rather than save arbitrary life.

I have tested this hypothesis on myself and it turns out that a pair of Zipp 606 carbon fibre wheels are worth way more to me than two African children.

The "moral notion of value" is a nonsensical concept invented to reinforce the notion of self-worth while not contributing to anything. Test it on yourself each time you spend: is a human life worth more to you than a hundred burritos? a set of car tyres? the higher trim on your car? The magic of this method is that it's memoryless. Irrespective of whether you give a million dollars a year or ten, the question applies to the next one thousand.

Your spending habits will prove it. No. Arbitrary life is valueless to you. And if you disagree, it should be easy to prove since GiveWell can save one arbitrary life per thousand dollars. Show me your spending and I will construct a way you could save a life by giving up non-essential parts of life.

[jjoonathan]

> It turns out starving kids in Africa are of no value to anyone

Listen to yourself. This isn't normal, but on markets, it is.

> The "moral notion of value" is a nonsensical concept

No, it's the fundamental concept. Economic value should aspire to approximate it if we want the market to be a force for collective good. To the extent that economic value fails to approximate moral value, the economy fails to serve our collective interests.

In CS terms: greedy algorithms fail hard in predictable ways.

> [So why don't you give more through GiveWell?]

Because I'm stuck in a system that's designed to punish me for doing so above and beyond the intrinsic cost of providing for the kid. Here's a counter-proposal: I'd absolutely sign up for a wealth-proportional share of a tax for ending world hunger. I'm not poor, even by HN standards, so this isn't cheating, but the fact that this formulation of the solution wasn't obvious to you demonstrates how thoroughly you've been trained to see the world through the circus-house lens of wealth-weighted utility, and just how perversely that lens distorts the world.

[imtringued]

>>It turns out starving kids in Africa are of no value to anyone >Listen to yourself. This isn't normal, but on markets, it is.

If you treat starving kids as important then you will have more starving kids. If you treat starving kids as unimportant or undesirable you will try your best to prevent them from being created in the first place.

The vast majority of necessary policies that you need to change in the relevant countries have absolutely nothing to do with individual charity. A lot of what is needed is simple infrastructure projects. People waste their time acquiring water on foot instead of getting a water truck delivery. You can drive a water truck for 600 miles and it's still more economical than walking. The problem is often that there are no roads suitable for 20 ton trucks. You'll get stuck on the dirt roads so no delivery happens at all.

People think of complicated solutions like drone delivery of medicine because the government fails to maintain or set up basic infrastructure. It all boils down to government corruption and people's desire to work around it. It's not going to work out.

[buran77]

> If you treat starving kids as important then you will have more starving kids

If you care about cancer patients you will have more cancer patients? This is nonsense because you framed it wrong. Caring about [something] isn't necessarily about perpetuating or creating more [something], it's about solving (on of) the problem(s) behind it. And this can have solid economic value. On top of it you can have a layer of humanity where you do something purely for the the well being of another.

To the point, "caring about starving kids" means "caring about solving starvation". This has plenty of implications, not the least of which are that you developed tech that can be applied elsewhere, or that you just created a new market where the participants have a chance of actually paying because they have a chance at a disposable income. You "created" new valuable members of society capable of producing and consuming your products or services.

The reason starving kids don't pull that much attention is that "solving" starvation has a shaky business case, far from guaranteed success, and very unclear timeline. Things most businesses shy away from.

Why do you think Facebook is investing in internet in India or Africa? It's not because they care about people with no internet so by your reasoning they'll create more people with no internet. It's because they are untapped markets that need to be brought up just to the point where they become profitable. You have to spend money to make money. So far the case for solving world hunger has that threshold too high for today's "make money now" stock price driven business models.

[renewiltord]

Let me be honest: promises you make that take effect when highly unlikely events transpire do not convince me of your intentions. They are fairly typical of most proponents of this variant of "morality", since after all, their behaviour contradicts their stated intentions.

[winston_smith]

> I'd absolutely sign up for a wealth-proportional share of a tax

Very gracious of you to be willing to help but only if all of society signs up to do it with you.

> system that's designed to punish me for doing so above and beyond the intrinsic cost of providing for the kid

Bullshit. Nobody's going to punish you for giving to charity.

[Dylan16807]

> Very gracious of you to be willing to help but only if all of society signs up to do it with you.

Or in other words: being willing to help if it will make a significant difference.

Negotiated collective action is a good tool.

[SantalBlush]

You describe pretty well here just one reason why economists study markets: They tell us what people actually value, and how much, not just what they claim to value. It turns out, there can be a large disparity between the two.

Most people would say they place a high value on human life, but we don't know how true that is until we see what costs they're willing to incur in the name of helping others.

[imtringued]

>The blunt truth is that arbitrary lives are probably nearly valueless and certainly worth less than $1000. I have tested this hypothesis by describing GiveWell's mathematics to people at varying stages before they would spend money similar to that: in every case, people choose to spend the money rather than save arbitrary life.

Yeah it is pretty obvious that the value doesn't lie in the person but rather the relationships. In that context a job is just a beneficial relationship between an employee and employer. Parents and children form a strong relationship. Same with friends.

The idea that you value your own life and thus it gains inherent worth doesn't work out because how are you going to pay for that value if not from a currently ongoing or previous relationship? Are billionaires really a million times more productive than the average worker? Did they really do everything themselves?

[morelisp]

I live nude in a barrel by a river, all I do is trade cryptocurrency on my phone collecting over 8 figures annually, and everything I don't spend on potatoes I donate to GiveWell. How could I save more lives?

[naniwaduni]

If you wore clothes, you would probably increase your lifetime earnings by extending your useful lifetime by reduced risk of malnutrition, thus directing more money toward life-saving!

[renewiltord]

Presumably by spending less time on HN and more time on your crypto trading. I kid I kid. You are an inspiration to us all.

[imtringued]

Fight against government corruption. It'll save billions.

[hengri]

You are an inspiration to the rest of us

[gowld]

You are pushing a bit too far. GiveWell does raise many millions of dollars for those lives. It just doesn't raise all (or even nearly all) the money it would if people actually held the Communist or Utilitarian ideals they may half-profess.

[renewiltord]

The fact that they do raise money but not as much as they would if people adhered to these ideals indicates to me that the utility function is different. i.e. that it isn't just the life that is being paid for.

And that's fine. I think people should spend their money as they see fit.

It's the bit where people make arguments from fictional moral authority that needs some push back. It's just nonsensical outrage - the opium of the partly-informed.

[astrange]

It does seem to me that the rationalist/effective altruist position here reduces your ability to help in the future, not to mention your political power.

For instance, if you're the town treasurer and you donate all the town's funds to buy mosquito nets in Africa, the townspeople might have you killed, which would prevent you from buying more mosquito nets in the future.

[QuesnayJr]

I am an economist, and I have no idea what you're talking about.

[nmfisher]

I think parent is saying there's no economic incentive to save starving kids in Africa.

[astrange]

Note that Nigerian-Americans are one of the highest earning and most successful immigrant groups in America, and I'm sure some more countries will follow. So there probably is one if you're selfish, because their kids can be your doctor in a few decades.

[QuesnayJr]

But it doesn't make sense to blame economists for this. Economists take economic development in Africa seriously. The 2019 econ Nobel was for research in how to fight poverty in Africa.

[ajb]

It is difficult to get a man to understand something, when his salary depends on his not understanding it.

[renewiltord]

It is also difficult to get a man to understand something when you are not familiar enough with the subject. I suspect that is the more common failure mode.

[SantalBlush]

This HN cliché notwithstanding, economists actually do understand a lot more about the study of economics.

[imtringued]

It's just the general strawman. People only see economists when they fail so they think all economists fail even though it is only a subset.

[nickff]

Well there are (at least) two issues you're glossing over here:

1) Toxic workplace behavior is measurable, you can simply measure the wage premium paid by the so-called "toxic" employers or managers.

2) Bro culture may contribute to business success. I don't like that kind of 'culture', but it may help foster improved productivity in certain industries, and the lawsuits may just be a cost of doing business that's worth paying. Again, this isn't how I live my life, but it is conceivable that this is a workable model.

[vorpalhex]

How much is the harm, in dollars, of securities fraud?

Well the equation would be the expected profit based on the average share price over the given time period. We can argue details but that gives us a pretty tight range.

How much is the harm, in dollars, of being grossly disfigured?

There is definitely harm there. Is it the loss of earnings of the prostitute assuming she would make less money? That's some of it - the amount is at least that much. Yet presumably she also has less quality of life too - and how much is that worth? Is the basis for the quality of life of a prostitute less or more than a CEO? What if the prostitute really enjoys life and has a rewarding life, but the CEO is very drab and dislikes living?

That it's hard to put monetary figures on a harm isn't some failure in our understanding - it's because we comprehend money is not a universal salve. You can fix a business with cash, you can't fix a human life with it.

[1vuio0pswjnm7]

"There's a real gap in our understanding of capitalism and crime if it's easier tom compensate shareholders of a toxic company than it is to compensate the direct victims of that toxic behaviour."

Fortunately, the Strauss paper^1 on which this Levine newsletter entry is based does not suggest it is easier. Where did this idea come from. Instead, the author found that non-SEC regulators and primary victims generally received greater recoveries than investors and their securities fraud class-action plaintiffs lawyers, where the class-action lawyers were piggybacking on investigations by non-SEC regulators and litigation by primary, non-shareholder victims. (That is only based on available data; some primary victim settlements might be private.)

In this piggyback litigation the author reviewed, the vast majority of cases resulted were successful for both the primary victims (non-shareholders) and the securities fraud shareholder plaintiffs. In other words, the non-shareholder victims are getting compensated, and they are getting larger payouts than shareholders in piggyback securities fraud class-actions.

There is no suggestion anywhere in the paper that it is easier to be compensated in securities fraud class-actions than in actions brought by non-SEC regulators or non-shareholder victims of the corporation's conduct. In general, class-action securities fraud complaints have a very low probability of surviving a motion to dismiss. Rather, the paper suggests class-action securities fraud plaintiff's lawyers can increase their odds by piggybacking on non-SEC investigations and litigation by non-shareholders who are victim's of the corporation's conduct. That is not surprising.

1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664132

New title: Is Everything Also Securities Fraud?

[fuzzfactor]

Exactly.

Even when I was selling securities, I never tried to pretend that Everything was Securities Legitimate.

When a corporation is prospering without any actual greed being detectable in their operations, that can be some of the most reliable investments.

There should be plenty of money without that.

This kind of thing seems to have always been hard to find, so it can really take some effort to snoop it out.

Some things have always been more legitimate than others.