For whom does safety pay? The case of major accidents
Introduction
Government agencies regularly use the argument that ‘safety pays’ as a way of motivating employers to attend to occupational health and safety (OHS). The assumption is that if employers can be made to realise that expenditure on safety is a good investment they will have a financial incentive to improve workplace safety. In so far as employers embrace this view, the need for government agencies to enforce OHS law will be reduced.
But how effective is this strategy? This paper seeks to answer this question in the context of major accidents. Does safety in fact pay in these contexts and does this argument have the potential to provide decision makers with the motivation to attend conscientiously to catastrophic risk? These are the questions of central interest here. But before focussing on major accidents, it is useful to look at the argument more generally.
Section snippets
The macro approach
Advocates of the argument that safety pays often present national figures to support their case. They calculate the numbers of injuries nationwide and from this produce an estimate of the total cost borne by employers, the workers concerned, their families and governments. In Australia, for example, estimates range from $20 billion (IC, 1995, p. 94), to $37 billion (NOHSC, 1994). These figures are quite beyond most people's comprehension. To put them in context the Industry Commission (IC)
Costs as the enterprise level
The British government's Health and Safety Executive (HSE) has developed this argument further in a major study of the costs to employers of workplace accidents in five organisations: a creamery, a construction site, a North Sea oil platform, a transport company and a National Health Service hospital (Cutler and James, 1996). The study included incidents which produced either injury or economic loss without injury. Thus, while not just a study of the costs of injury, its findings are
Is it economically rational to prevent disasters?
I move now to a consideration of rare but catastrophic events. Does it make economic sense to spend money to prevent disasters? Intuitively the answer is yes. Disasters may cost anywhere from millions to billions of dollars. (The Piper Alpha disaster is estimated to have cost more than four billion dollars, Wright, 1994, p. 95). Presumably it would pay to spend large sums of money to avoid such losses. Let us take a particular example to illustrate the point (Cutler and James, 1996).
In 1987 a
Institutionalised irrationality?
To return to the Herald of Free Enterprise, the question which arises is why, given the economics of the situation, were warning lights not installed as the ferry masters requested. When one master wrote a memo to senior management 2 years before the disaster, the memo was circulated to various members of senior management for comment. These comments are preserved for all to see. One wrote: “do they need an indicator to tell them whether the deck storekeeper is awake and sober? My goodness!”
Bounded rationality
We cannot leave the matter here, however (and Wright does not). To describe behaviour as irrational is no explanation. It is simply an admission that the behaviour is inexplicable in terms of the concepts to hand. A concept with the potential to advance our understanding a step further is Simon's idea of bounded rationality (Simon, 1957). He argues that decision makers do not have access to all relevant information and could not process it even if they did. They are thus not in a position to
For whom does safety pay?
To understand why the safety pays argument appears at times to be so ineffective, we need to address again the question, for whom does safety pay? An analysis which has been done of the Bhopal disaster reveals the crucial significance of this question.
In 1984 toxic gas leaked from a chemical plant owned by Union Carbide in Bhopal in India. It drifted over nearby residential areas, killing at least 2000 people and injuring over 200,000 (Kletz, 1994, p. 95), the worst industrial disaster in
Moura
The final section of this paper illustrates some of these ideas in the context of an Australian coal mine disaster (Hopkins, 1999). The Moura mine in central Queensland exploded in 1994, with the loss of 11 lives. The mine was sealed, entombing not only the dead miners but also millions of dollars worth of mining machinery. I shall show in what follows that the ‘safety pays’ argument had absolutely no leverage in this context.
We start by asking whether or not safety paid from a rational
Conclusion
This paper has uncovered a number of problems with the safety pays argument as a means of controlling catastrophic risk. Even though it would appear to be entirely rational from an economic point of view to devote considerable resources to minimising the risks of disaster, organisations far too often fail to do so. In so doing they act in apparently irrational ways. Part of the explanation for this lies in the inability of organisations and their managers to act in fully rational ways; all that
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