This is an exaggeration, but sometimes I feel like I could start a whole blog responding to Randy Cohen’s incorrect answers in his weekly “Ethicist” New York Times Sunday Magazine column. (The truth is I’d probably only get one good post every other week, but that’s still an astonishingly high rate of bad “advice” – if that’s even what it is attempting to be. On the opposite end of the hypothetical niche blog topic spectrum, I would have to quit my full time job to track Mike Lupica’s bad predictions and silly statements; and that’s really just counting the 30 minutes of Sports Reporters, never mind his columns in the Daily News.)

Back to Cohen… I’ve got several 80% complete yet-not-quite-fully-polished posts about his column in my “unfinished” folder regarding past logical transgressions, but this morning I felt compelled to ask Mrs. ACDL to watch the kids by herself – I’ll have to pay that back – while I came over to tap out a few thoughts about today’s column.

If you’ve already read the column, Truth in Suspension, you may be guessing that I objected to the first scenario, where a reader asks Cohen if it had been ethical for a private school to label the discipline meted out to some kids caught using marijuana a “restriction” instead of a “suspension”, presumably, the reader posits, so as not to ruin their college admission status.

This is immediately rephrased as the following question, “[I]s it acceptable to use deliberately deceptive language to a college admissions office?” This straw man is easier for Cohen to respond to, although the closest he comes to an actual answer is assigning the school administrators some George Orwell, Politics and the English Language, for summer reading.

While that would indeed make good fodder for a nominally criminal defense related post – pauses and puts that down on blog post idea list – I will instead address the absolutely, positively 100% not correct answer Cohen provides in the 3rd letter of today’s column.

Here’s the setup: some workman come over to your house and accidently damage thousands of dollars of clothes in your closet. The company pays for the clothes. You then write a letter to Randy Cohen asking if you have to give the damaged goods to the company, as they wish you to, or whether you can keep them because you plan to donate them to charity. And here is the supposedly ethical answer:

Keep your (stained) shirt on, or rather, in your charity basket.

If you badly damage your car and put in an insurance claim, the insurance company doesn’t come by the house to pick up the debris.

It is not buying scrap metal; it is making good your loss.

The imperfect painter, same deal. He’s compensating you for an injury, not for purchasing your spattered unwearables.

Ridiculous on its face. The injured party here is being compensated for the replacement value of the clothes.  The answer doesn’t change mathematically or ethically if they’re being given the fair market value of the clothes – but replacement value is the best guess available based on how the writer’s question was phrased.

First let’s start with the I-don’t-understand-how-insurance-works part of the answer, and then we’ll finish with some basic math on the actual example.

If your car is damaged in a collision, then the insurance either pays for it to be fixed (putting you in the same position you were before the fender bender) or pays the blue book value if it is less than the cost of repair. The second way actually puts you in the same financial position you were in before the crash, but if you’re upside down on your note it may not feel that way. (I’m also assuming that blue book is actual fair market value – not always the case, I know.)

In case number two, where they pay blue book or fair market value of the car before the crash… the insurance company does indeed keep the scrap metal. And to the extent that it’s still worth something, they would be overcompensating you if they let you keep it.

Let’s put some numbers on the clothes example, and work it out. You have three thousand dollars worth of clothes in your closet which the workman accidently damages. Before the accident, you have… this is easy, $3000 worth of stuff.

Now it’s damaged beyond repair (the writer tells us that “efforts to remove the stain were unavailing”). OK, so they company gives you the $3000 replacement value, and what? Let’s you keep the clothes?

The fact that you want to donate it to charity doesn’t change anything here at all. In fact, let’s say your marginal tax rate is 33%. You now get to pay one thousand dollars less on your taxes. So now you have the value of the clothes and the extra grand in your pocket. You’re being overcompensated. You started with $3000 worth of stuff, and you end up with $4000.  [Update below, I do the math again assuming they don’t take the original value as the amount of the deduction.]

And the company is taking the hit here. They should take the clothes, get the deduction, or sell them for whatever they can get. Heck they can wear the clothes around the office if they like. They have made you whole with the check for three grand. They’re allowed to limit their loss in this situation. No reason for you to double dip.

Faulty math, and a basic misunderstanding of how people are made whole, leads to faulty advice. Cohen ends with an attempt at humor:

Incidentally, I’d be surprised if any charity wanted those begrimed clothes. Even poor folks prefer unstained clothing.

Nice. So the ethical thing then is to refuse the company its due, but just trash the clothes. Honestly, I could blog regularly correcting the Ethicist. But the kids are being noisy out there. Duty calls.

Update: I’ve realized that my example assumes that the letter writer would take a $3000 charitable deduction, leading to the extra $1000 in his pocket (at the hypothetical 33% marginal rate). That would probably be hands down tax fraud. But let’s assume then that they estimate the donated clothes at less than 1/3rd the original value, say $900. That leaves them with $3300, instead of the $3000 they started with.

Maybe they won’t take a deduction at all? Fine, but they still seem to place value, perhaps personal fulfillment, in giving the clothes away. Now they have $3000 + the joy of giving.

Despite Cohen’s smart alec last line, the point is that the damaged goods still have value, and the letter writer wants to keep the $3K, plus whatever that value is. After all, if Cohen is correct that it’s just garbage, then why are they objecting to the company coming just to haul it away?

  • Michael

    It sounds like the only value the clothes have is as a deduction on someone’s income tax return. But the clothing owners can’t take a casualty loss deduction because they were fully reimbursed by the company.

  • Michael:

    I meant the tax deduction example as as way of illustrating the mathematics of why (or should I say how?) Cohen is wrong here.

    My guess – and I’m not a tax lawyer – is that a deduction would not be allowable if the circumstances were fully understood by the IRS.

    Also, I meant it as a charitable deduction, not casualty loss, but here again I’m getting over my head…

  • Michael:

    I think I more fully understand your comment having re-read it, and have updated with perhaps a more realisitic scenario.

  • Jamie Graham

    Jamie Graham

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