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Comment by andreyf | Hacker News Reader

I'm not a libertarian, but I imagine a libertarian plan might include the privatization of parts of the ocean and shoreline. When an spill like this happens, BP can then be sued for violating the rights of the owners of the clean ocean surrounding the rig, and the damage they've done to the shoreline. As long as the shoreline is public property, they can get away with convincing senators and bureaucrats that they'll spend $x on cleanup, donate $y to their campaigns, and that's that. If the cleanliness of the ocean/shoreline were privatized (those private rights enforced by courts), the threat of a lawsuit would lead to both more responsible pre-accident risk assessment on behalf of BP and a more responsible cleanup strategy.

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What happens when the firm that destroys the coast simply goes out of business afterwards? All the profits they made before the recklessness came to roost has been funneled to shareholders around the world.

Not a problem, just require firms that have the potential to inflict substantial costs on the rest of society to carry insurance against such a catastrophe. The pricing mechanism on the insurance will act as an incentive to minimize the real risk to society.

But that's regulation... Lots of it actually because the insurance companies need regulated too (lest they default when a huge oil spill occurs).

Two problems here.

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.

Sure! BP could just get an insurance policy from a reputable insurance provider like...AIG. What could possibly go wrong? I mean, a reputable insurance company like AIG would never, ever, ever offer policies for complex products that it did not fully understand for prices so low that it couldn't cover the risks involved. Insurance company officials would never ever ever cut lots of fundamentally unsound deals in exchange for big bonuses. And even if they did, such behavior could never blow up and eliminate a few trillion dollars of value in a massive economic collapse. That's totally absurd.

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".

"Going out of business" is a product of regulation that artificially separates the assets and liabilities of a corporation from its owners. I expect that the hardcore libertarian argument would be to make bankruptcy conditional on the corporation having insurance sufficient to cover any possible liability - failing that, the shareholders are held fully responsible for their share of the corporation's liability.

I'm no Libertarian, but I think it's unfair to characterise their position as being a kind of corporate anarchism.

Actually, I've heard many libertarians argue for precisely a kind of corporate anarchism. That is, at the end of the day, exactly what deregulation really is: removing government from having power over the actions of corporations. Taken to the logical extreme that people such as Rand Paul seem to honestly want, then that implies that a government cannot enforce the conditions of bankruptcy, nor the liability of owners.

Straw man, red herring, spotlight...

Libertarian != Anarcho-capitalist

Stop trolling.

I don't know of a single libertarian that opposes government action to prevent harmful externalities. They may differ on the mechanism (property rights + tort law vs preemptive regulation), but they all believe preventing harmful externalities is a responsibility of the government.

You seem to be confusing anarchists with libertarians.

We must be operating under different definitions, then, because every libertarian I've ever met expresses their policy goals specifically as being against government action to prevent harmful externalities. "The market will work it out, and it's not government's job to make my decisions for me". From motorcycle helmet laws on upwards (we all pay for head injuries via insurance). It goes on up to a default position of being against regulation on almost everything -- against sarbox on principle, not just the implementation, against regulations regarding offshore drilling most likely until 4 weeks ago and now they're re-evaluating. If your default philosophy is to approach every issue with "less government" as priority #1, you're going to be against government taking action most of the time.

No, most libertarians are against government action to prevent non-externalities.

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.

You're centering your argument around "the government is forcing ERs to service people who don't have insurance"

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.

That regulation is the essential ingredient required to allow capitalism to function. It reduces the amount of risk that the natural persons involved in a company run. The company is the legal person carrying the full burden of risk, but it is also in the position to take on that risk, because it has the assets to do so. No individual person would ever have enough assets to take on the risk that a company like BP does. However, companies can also leverage more risk that they can chew and go out of business. However, the natural persons involved would have gone bankrupt long before that.

In short: the problem with straight up libertarianism is that it would destroy capitalism.

Risks should not be ignored. Doing so promotes risky behaviour and misallocation of resources.

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.

Isn't tort reform and an ending to "frivolous" lawsuits one of the clarion calls of those same libertarians?

Usually corporatists, not libertarians.

Splitting the hairs pretty thin at that point.

Really? I don't think so at all. Libertarians are generally proponents of a whole swatch of changes that would knock large corporations in the US down a few pegs. That's in addition to greatly limiting the power corps have to do business by legislation.

Well, I'd say my picture of "what libertarians are proponents of" boils down to 3 categories or "levels of advocacy":

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).

Suing is all fine and dandy. But no amount of money is going to fix the ocean.

The idea is that assigning a tangible cost to fucking up will cause people to try hard to avoid it.

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.

No, it won't. The execs will make their money, spend it or squirrel it away, and be gone when the damage is done.

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.

That argument applies to any transaction that transfers money. The point is to give BP the proper incentives. There is some point at which the reward for drilling (cheap energy) is worth the risk of a disaster. By ensuring that they'll get sued for the monetary cost of the disaster, you can get the socially optimal level of drilling.

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.

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.

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