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Lecture 2

LAW 534 Lecture 2: Chapter 1

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Ryerson University
Law and Business
LAW 534
Lori Anne Heckbert

1. Chapter 1 (class 1) – Regulating and Deregulating Risk Historical Overview  Walkerton tragedy – The water contamination at Walkerton, Ontario, caused seven deaths and over 2,300 people to become ill. What does Regulation of businesses mean? Regulation is Principle or rule employed in controlling, directing, or managing an activity, organization, or system.  Free market vs. Regulation? Free market is an economic system in which prices and wages are determined by unrestricted competition between businesses, without government regulation or fear of monopolies. - No government involvement - Companies run the market- they decide the prices and wages Thomas Hobbes (‘contract theory’), industrial revolution (protecting the vulnerable) - Advanced the first comprehensive articulation called “contractarian” model of state - He described life in the state of nature as “nasty, brutish and short”  Adam Smith and laissez-faire theory (unregulated capitalism) - Invisible hand metaphor - Laissez-faire theory- stated that the economy was a natural system that regulated itself, that the stronger exploiting the weaker was just a matter of natural selection, and that government should be a spectator in commercial affairs.  Stock market crash of 1929 and onwards- regulations (securities, environment, health and safety, etc) By 1980, 20,000 regulatory offences per average province and 97,000 federal regulatory offences.  Deregulating Risk - The trend towards deregulation (removal of regulation) and privatization (divesting of public ownership) in the Reagan/Thatcher era - 1979 conservatives took power in Britain, and Margaret Thatcher became Prime Minister - Privatization- recognized that government need not engage in vertical and horizontal integration  Glass Steagall Act of 1933 – Consequences of repeal/deregulation in the banking and financial sector - Subprime mortgage crisis - Government bailout of very same banks and Wall street firms that wanted less government involvement and regulations - This Act was designed to stem the wild speculation that has helped fuel the market crash of 1929, by ensuring that banks could not make risky gambles with customer’s deposits. (page 1-12) 2008 and its Aftermath: Civil Penalties, But no Convictions, civil and criminal consequences  Subprime Mortgage Crisis Trend now against criminal prosecution Civil penalties and stronger compliance mechanisms Walkerton: A Case Study  The cause of Walkerton tragedy was multi-faceted. Failure to enact a legally enforceable regulation requiring the prompt and direct reporting of test results indicating unsafe drinking water to the ministry of the environment and to the local Medical Officer of Health contributed to the extent of the outbreak at Walkerton (May 2000) Privatization was an added factor. MOE started charging fees for routine testing of drinking water for municipalities. Fees created the opening for private labs to enter the field. Precautionary principle - rule that if a threat of serious or irreversible damage to the environment or human health exists, a lack of full scientific knowledge about the situation should not be allowed to delay containment or remedial steps if the balance of potential costs and benefits justifies enacting them. In other words, "prevention is better than cure." Risk Assessment and Management (page 1-16.13)  Risk Assessment to Risk Management – these are two different but related processes.  Risk Assessment: Scientific assessment of the true risk. A systematic process of evaluating the potential risks that may be involved in a projected activity or undertaking.  Risk Management: How do you manage that risk? Involves use of non-scientific factors to reach decision. Risk Assessment  Generally divided into four (4) activities - Hazard identification – determination of whether a particular chemical is or is not causally linked to particular health effects - Dose response assessment: e.g. Oxygen toxicity – the determination of the relation between the magnitude of exposure and the probability of occurrence of the health effects in question. - Exposure assessment (estimate amount of human exposure) – the determination of the extent of human exposure before or after application of regulatory controls - Risk categorization – the description of the nature and often the magnitude of human risk, including attendant uncertainty  Risk Assessment as a common activity from governments, judges and policy advisors.  Assessment more difficult over a long term horizon – example: exposure to chemicals
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