Problem with Hammurabi - 1

Hammurabi’s code, from almost 4,000 years back, includes the oft quoted construction law #229, something along these lines:
“229. If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.”
Many people lament the lack of similar laws today. Not literally, but similar in spirit. After all, the benefits seem obvious, as the Farnam Street blog says:
“Imagine yourself as a Babylonian builder. Each time you construct a house, there is a risk it will collapse if you make any mistakes. So, what do you do? You allow for the widest possible margin of safety. You plan for any potential risks. You don’t cut corners or try to save a little bit of money. No matter what, you are not going to allow any known flaws in the construction. It wouldn’t be worth it. You want to walk away certain that the house is solid.”
The same article summarizes in general terms this approach to law making:
“When you align incentives of everyone in both positive and negative ways, you create a system that takes care of itself.”

But I’ve never been a supporter of this kind of law. Because it has other consequences, none of which is good for society. Wouldn’t having the “widest possible margin of safety” for everything not cause prices to shoot up? Time to deliver to increase? Outright refusal to provide certain services because the provider can’t possibly know of every conceivable way things could go wrong?

In fact, mankind’s standard of living has shot up exponentially only after the invention of capitalism. And guess what is one of the bedrock concepts of capitalism? It’s the concept of limited liability, i.e., the ability to demarcate personal from corporate assets. Put simply, if a company owned by an individual goes bankrupt (in good faith, not due to malice), then the people who are owed money can only take over the assets of the company. They can’t come after the personal assets of the owner. So why is this such an important aspect of capitalism? Because, without that, the number of people willing to risk starting a company or a new venture would fall through the floor. Why would anyone risk everything they own to start a new business?

So yes, a Vijay Mallya might provoke you to support a Hammurabi kind of law. But that would just be throwing the baby with the bathwater. We need to think big picture and long term when it comes to such matters, and not react emotionally.

Comments

  1. Ramiah KumarDecember 8, 2017 at 12:29 PM

    Without even going into Mallya case, in our country, people's ways need to change in order that law of the land can start having an effect for the better. Putting people to death or very harsh punishments are things that get discussed emotionally in this country, from time to time. We talk extremes very easily. The solution rarely lies in that direction.

    What goes wrong often is that the laws that are in place, which are not all that difficult to follow, are much violated here. Even a 10% increase in law abidance by people would make a drastic difference because we tend more towards not caring in general.

    How often do we find Sobha (or equal) high-rise building is collapsing due to wrong design or slip-shod construction? Don't we get the news from time to time when low-caliber constructors build violating many norms so that the danger presents itself from time to time? This kind of thing is applicable in other areas too, not just construction.

    Things are undergoing change here and the future is going to be very different. People are wanting better ways and that is going to happen. Nothing is static.

    ReplyDelete

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