Chilean Miners: What is Rescue Worth?

Happily, rescue crews seem to have made better progress than anticipated toward rescuing 33 Chilean miners trapped deep underground since August.

Here’s a recent story giving details, by Alexei Barrionuevo and Christine Hauser writing for the NYT: Drill Reaches Miners in Chile, but Risks Remain

As the rescue proceeds, most of us will (rightly) be focused on the human side of this story, the ordeal those 33 men have gone through. But this story also has an important business- and economic component. Last month, I blogged about whether the trapped miners ought to be paid, and by whom. But another issue is that the rescue effort itself is likely to be exceptionally expensive. What should the companies doing the drilling be paid? Back in April, after a mine collapse in West Virginia, I blogged about the Ethical Obligation to Save Trapped Miners, and pondered the extent of the financial obligations of the mining company and the government in the face of such a disaster. Today, I’d like to look at the question from a different angle. How much should drilling companies involved in such a rescue be charging for their work?

Now, just to be clear, I’m not talking about the actual companies involved.
Brandon Fisher, founder & president of US-based Center Rock Inc., the company that made the drill used, is reported to have nobler motives:

He says the Chilean government is paying for his time and equipment — “that’s the plan anyway.” But he is not at the Mina San Jose for the money. He is there for the miners.

“I don’t know that there’s 10 minutes that you’re out here that you don’t look down there and think, ‘There’s 33 guys 600 feet below our feet,’ ” he said. “Whenever you’re tired, it’s real easy to think, ‘Hey, I’m out here seeing sunlight and breathing fresh air. It’s time to suck it up and get these guys out of here.’ ”

It’s also worth noting that, in fact, this is a competitive arena — there are apparently quite a few companies with relevant capacities, and they’re likely competing with each other to bid for the work. Perhaps they’re even charging less for this high-profile job than they normally would, because it’s good advertising. But let’s set that complication aside for the moment.

So, a thought experiment: what if there were only one company qualified to do the rescue work, or only one company available locally? What should that company charge?

A few quick options:

1. They should charge whatever the market will bear, which would essentially amount to charging the most the Chilean government and/or the mining company involved are willing to pay.

2. They should charge nothing. They should be happy to be involved, and to charge anything would be to put a price on human lives, which is unacceptably exploitative.

3. They should charge just enough to cover their own costs — machinery, fuel, and maybe their own workers’ wages.

4. They should charge exactly the same to drill this hole as they would to drill any other hole of similar size, depth, and complexity. No more (that would be exploitative), and no less (that would be foolish).

Do you favour one of those four? On what grounds? Or can you suggest another principled answer?

—–
Addendum: I found a story that offers the following relevant detail: “Local newspaper La Tercera reported that the rescue efforts, expected to last three to four months, will cost anywhere from $10 million to $20 million.”

8 comments so far

  1. Peter Faur on

    Hi, Chris. This is a great question! Option 1 is off the table because it is exploitative. It’s both morally wrong and extremely likely to come back to haunt the drilling company. A decision like that invariably would not stay secret for long.

    Options 2, 3 and 4 depend in large measure on the financial status of the company and how it’s been performing for its shareholders (another audience that factors into the equation). If the company is solid, and if it has had the foresight to set aside reserves in the event of such a situation, option 2 would be the best choice.

    If not in quite such a good position, option 3 seems the better of the two remaining choices. You’re neither losing money nor making money, but you are forgoing the opportunity to make money.

    Option 4 seems acceptable only if the company has its back against the wall financially, and this would make the difference between an acceptable performance and one that failed to meet the needs and expectations of shareholders.

    If it were my company, and I owned it privately, I’d choose option 2 if I could or option 3 if I had to be covered for my costs. Option 1 is far too mercenary, and as a matter of personal ethics, I’d prefer not to make any profit from the situation.

    More than you wanted, I’m sure!

  2. […] article is a very clever while straightforward analysis on what on the surface is a simple question but […]

  3. Prashant Sree on

    Different outlook at the situation. According to me, there are two components to this, a business view & a human view. If we take up the business view, then the drilling company is justified in charging money from the involved players as it is performing one more function.

    From a human point of view, they could do the work for free. hence, the right way for the drilling company based on the situation which you have postulated would be Option 3, charge the Chilean govt the money involved for the machinery, drilling operation and the wages. Charging extra, would be exploitative, but charging for the work would be a right balance.

    Regards,

    Prashant Sree
    *+

  4. Matt Zwolinski on

    Nice post, Chris. I’m inclined to say that a company that can afford to do so ought to charge nothing in such a case. The case for price gouging (option 1) just doesn’t apply in your hypothetical. Since there’s no market, the “market price” in this case doesn’t help to solve any problems in allocating scarce resources among competing demands, and there’s no issue of encouraging new supply.
    I tend to think this analysis holds for most rescue cases involving a monopoly rescuer, *unless* that rescuer has invested significant resources for the very purpose of putting itself in the position to be the monopoly rescuer. (Imagine someone who buys a trick, snow chains, etc., and drives the roads during snow storms looking for people he can charge for a rescue). The relevance of that kind of investment is reflected in the different treatment in admiralty law of rescue that is purely fortuitous versus rescue that is carried out by professional salvage operations.

    • Chris MacDonald on

      Matt:

      Thanks for the comment. I agree with you about the usual price-gouging arguments not applying here.
      I’m curious as to why you prefer option 2 over option 3 — is it a duty of charity? I think I could go for that under at least some circumstances. For example, Chilean drilling companies, profiting regularly from the Chilean mining industry, etc., might have an obligation to help out for free. But I’m not sure I can see why just any company would have such a duty.

      Cheers,
      Chris.

      • Matt Zwolinski on

        Chris,

        My view is that if the miners’ lives are threatened, and the company is the only agent able to save them, and can do so at a cost that is not at all comparable to the potential cost faced by the miners losing their lives, then it has an obligation to do so regardless of the miners’ ability to pay. That, I think, is the fundamental moral point.
        Whether the company should ask for payment after the rescue is an issue of secondary importance. I suppose I do not think they would be violating a duty if they did ask for payment. But it would strike me as being in rather poor form, and probably imprudent given the reputational effects.
        I also think, however, that the miners would have an obligation to *offer* payment, or at least to provide some fitting expression of gratitude. People sometimes ought to offer things that it would be improper to demand of them.

        -Matt

  5. Chris MacDonald on

    Matt:

    That makes sense, especially if the miners are the ones paying.

    But hopefully they’re not!

    Chris.

  6. […] #10. Chilean Miners: What is Rescue Worth? A mine rescue is heart-wrenching, and expensive. And every dollar spent on rescue is a dollar not spent on something else — perhaps spent more efficiently on achieving other socially-good objectives. In that context, how much it is worth spending is a difficult ethical question. […]


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