But I thought regulation was always bad? Isn't that the consensus here?
#2 It's the government capping BP's liability.
Not a libertarian, but please.
See http://www.law.cornell.edu/uscode/html/uscode33/usc_sec_33_0... subsection c.
1) The "if we could remake the world", fully libertarian state -- I can see some libertarians agreeing with you about knocking corporations down a peg here, but many other "libertarians" that are basically supply-siders or mainline republicans with affectations that wouldn't.
2) The things libertarians actually advocate for as far as real-world policy, as in people lobby for these things and vote for candidates that espouse them.
3) The subset of those things that actually get traction
Out of those, 3) winds up being an unabashedly pro-corporate set of policies advanced by the republican party and 2) actually seems to lean more pro-corporate than anti. YMMV. But I can see your point in regards to 1).
For example, if everyone in the BP executive chain were personally responsible, and would go to jail/get beaten up/etc. as a consequence of an oil spill, then this might not have happened.
Even if you did something as extreme as threaten jail time, the chance to make millions still outweighs the chance of any punishment.
Thats all it is at that point, its gambling. Either you make a ton of money, or you loose. The only problem is, when you loose, you make a whole shitload of other people and the environment loose in the process.
And if they'd been "regulated" by an insurer who promised to pay the cleanup costs of the once-a-decade spills, you can bet that these regulations would be to a higher standard.
Given that a large insurance provider called AIG promised to pay massive clean up costs and utterly failed at regulating its clients, I think your theory is incorrect. At the very least, it is incomplete.
Your theory needs to incorporate the fact that human organizations often behave irrationally, and even when motivated by appropriate incentives, they are prone to systemic reasoning errors. In addition, it needs to deal with the fact that a representative government cannot credibly refuse to promise to clean up messes of this sort, so an element of moral hazard will always remain.
1. they do carry insurance. Their fuel assets are insured by Jupiter Insurance ltd. ( a wholly owned subsidiary of...BP itself. According to their annual report, they consider external insurance a poor economy and carry as little as possible - basically $1 billion per incident, figuring that any overages can be paid for out of revenues. Awesome.
http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/gl...
2. OK, so make them carry more insurance...but then you're back to the dead hand of government regulation or whatever you want to call it. And with the best will in the world, sometimes events take place which are beyond our ability to predict. I imagine the government's recent cautious endorsement of more offshore drilling was based on a careful look at the number of rig disasters in recent years, and the assumption that the industry was sufficiently mature to appreciate the importance of risk management. It's kind of ironic that this occurred right after Obama upset the 'ban all drilling' crowd.
Really now, this "solution" boils down to "assume the existence of insurance companies that act radically differently from any insurance companies we have experience with"...tis much like "now, assume a can opener".
I'm no Libertarian, but I think it's unfair to characterise their position as being a kind of corporate anarchism.
Libertarian != Anarcho-capitalist
Stop trolling.
You seem to be confusing anarchists with libertarians.
For example, motorcycle helmet laws do not prevent any external cost. Motorcycle drivers pay extra for insurance (except when the government prevents insurance companies from doing this), and the only other "externality" is caused by government action (forcing ERs to service people who don't have insurance). I don't know enough about sarbox - what externalities does it prevent?
Libertarians may differ on things like regulation of drilling. Some believe the externality only exists when the harm actually occurs (and should be handled by tort law), while others believe the risk of harm is an externality(I lean towards the latter).
But I'm pretty sure the boundary between libertarian and anarchist is when you call for the government to stop protecting people from the bad acts of others.
This is why libertarian arguments always become absolutely ridiculous when you try to apply them in the real world. In what world would an ER turn away someone with a massive head wound because they don't have insurance?
Sarbox is intended as a fraud prevention scheme. Libertarians tend to be opposed to it on principle because hey it's just creating a bunch of extra unnecessary paperwork, drag on the economy and all that. If corporations aren't committing fraud, why do they have to do all this unnecessary work and let the capital-G Government snoop all over the business? All fair points until Enron and Worldcom collapse and blow up a million people's retirement funds. I'll take the drag, thank you. (actual implementation of sarbox could undoubtedly be improved).
You might be right about that boundary, but it's all in how you define bad acts. I'm glad that you see the risk as being an actual thing (5% chance of it means you caused 5% of the damage, statistically speaking, even if someone else drew the unlucky number).
I suppose it's all in how you define externality too. I'm all about hiking up the gasoline tax by 2-3 bucks a gallon over the next decade. We have a trillion dollar defense budget, a boatload of strategic issues and dubious alliances all based around oil - those aren't priced in, and that's why we have such a hard time getting off of it. But most libertarians would probably tell me that that's a perfectly functioning market, oil even gets traded on commodity exchanges, how can that not be a market? It's all in your frame of reference, I guess.
"Going out of business" is a product of regulation that
artificially separates the assets and liabilities of a
corporation from its owners.
In short: the problem with straight up libertarianism is that it would destroy capitalism.
If a supplier of a company agrees on limiting liability on the corporation, as they do now by obligation, that's ok. But if you commit an agression, as this oil spill is, there should not be any limit on the liability.
But we can't do that, the whole point of LLPs and Incs. is to limit the investor's liability.
This is partly why we have agency risk.
This is why while I consider myself a libertarian, I still think we need competent and aggressive regulators in all the places where the market is not self-corrective.
But I'm not sure how we could avoid regulatory capture for ever.
How will you determine what these costs are? It might be simple if I have a fishing business in Louisiana, but what if I'm a bar owner who depends on the dollars of hard-drinking oil workers when they're on shore? What if I'm just depressed by the whole thing and miss work? There are millions of people living in that area, and the gulf coast economy is about 2-2.5 trillion. You simply can't handle every individual case in court, it's going to be a series of class actions. And without some kind of judicial standards for how those should be handled, the result will be arbitrary at best.
Additionally, BP will argue that oil drilling is fundamentally risky and the residents of the area liked it when the going was good. So there will be further arguments about the degree to which it is really their fault. Again, without agreed standards in place the outcome of such wrangling will be arbitrary.
Finally, whatever a court orders BP to hand over as compensation for its poor drilling practices is purely hypothetical unless there is some way of enforcing it; BP might just sink the remains the of the rig, announce the failure of its 'gulf operations subsidiary' and just turn its attentions to operations elsewhere, where they have never had an accident. Perhaps they'll just blame the whole thing on inferior oil workers in that region.
So without standards for judging claims and liability, or mechanisms for enforcement of judgments, the situation will not be properly resolved. Those standards and mechanisms are the basis of laws, and we elect governments to serve as our agents in establishing and promulgating them.
Fishing business would then not pay those owners to operate in their property and lose an opportunity, but they are not owed anything, since those owners have no obligation of letting the fishing business operate in their property.
Obviously, it wasn't a good gamble this time, but it should be no surprise they've acted as our rules and regulations incented them to.
Even if the liability cap is pierced during this particular incident, that's still orthogonal to the impact it has had on the behavior of exploration up until now.
sounds pretty cut and dried to me. http://www.law.cornell.edu/uscode/html/uscode33/usc_sec_33_0...
Financially, they are incented to cut corners and risk paying MMS the occasional $25k, when the drilling platform costs $500k/day.
Yes, automobiles have many negative externalities but they are distributed and stochastic. Arguably, it is actually the petrol that is directly responsible for these externalities as simply owning a car endangers no one and only has a sunk environmental cost.
In the case of automobiles, we have, as a society, agreed that this is a good trade-off. In the case of industrial accidents, we have, as a society, agreed that the scale of the potential failure should be matched with commensurate concern for safety.
BP clearly has difficulty controlling their risk and they should be held liable for that just as you or I would be held liable for causing an auto accident.
Despite all it’s shortcomings, motorized individual transport still seems like a pretty sweet deal to me – I can’t really fault the government for forcing everybody and me to pay for the infrastructure, especially if – like you seem to argue – there is no other way to get that kind of infrastructure.
Somehow I don’t really think you are making a good case for your argument.
If the standard is endangering thousands and wreaking ecological destruction at a wide scale, the disastrous choice of designing cities to favor the automobile over other forms of transportation is not only a failure, it's a government failure more so than a market failure.
The problem is, the folks who think that more regulation is the answer seem to think that the government regulators are benevolent gods who themselves never make mistakes, are not subject to greed, corruption, political influence, negligence, incompetence, etc.
Give me a break. When you've finished tearing that straw man to pieces, maybe you can seek out what real people who support effective regulation are saying about it.