Liability vs. Regulation

On the evergreen subject of BP, here's a dumb column from Tom Frank and a decent response from Tim Carney. Frank sees conservatives criticizing the Minerals Management Service's cozy partnership with the industry it regulates and writes, "Galt only knows how many times 'coziness' of the MMS variety has been celebrated as part of the struggle for free markets and free people." Carney responds that "BP's oil gusher is in federal waters, on seabed leased from the federal government," so "asking Washington to manage its own backyard fairly and competently isn't akin to embracing Frank's statism." Frank, Carney writes, is confusing "pleas for government competence with a desire for bigger governments."

Beyond PatchouliCarney is clearly correct, but there's a larger point worth making here as well. When cronyism like the corruption at the MMS is exposed, there are people whose immediate response is We need to get better regulators and there are people whose response is We need to get a better system. The first group thinks in terms of creating and enforcing an ideal set of rules that will prevent accidents. The second group thinks in terms of ensuring companies know they'll feel the full impact of the liability for any damage they cause. Group two might prefer competent regulation to incompetent regulation, but it also prefers the limits imposed by attorneys and insurers to the limits imposed by regulators.

These are general approaches, not precise platforms. In the wake of BP's big leak, members of group one called for everything from stricter enforcement of existing rules to a ban on all offshore oil exploration. And while group two would probably agree on abolishing the drillers' $75 million damage cap and ending federal ownership of the seabed, some of its advocates have also called for reforms ranging from mandating liability insurance to rethinking the limited liability corporation itself. But the basic approaches are constant, even if the details vary. One group focuses on regulation, the other on liability; one group wants to concentrate intelligence at the center of the system, and the other wants to push it out to the edges.

I'm in the second group, so when I read those reports about the MMS I see an indictment of the regulatory state. Frank reads the reports and sees evidence that the regulatory state should be stronger. The difference is that I understand Frank's reasoning, whereas Frank seems hardly aware that there's another position here at all.

Elsewhere in Reason: My review of Frank's last book, in which he makes some similarly addled arguments. Also, an article I wrote way back when about Exxon's liability for the Valdez spill.

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  • ||

    The difference is that I understand Frank's reasoning, whereas Frank seems hardly aware that there's another position here at all.

    Yup.

    Tony and Chad should read this a few times.

  • Tony||

    The other position is dumb. It disingenuously ignores all the good, working regulation that exists out there. I just don't get the reason behind letting the oil companies do whatever they think is in their best interest, and then hoping litigation will account for any messes they make. It's just a plain, stubborn refusal to look at the world and address the facts in it because you care more about your precious antigovernment ideology.

  • &&||

    I just don't get...it
  • Chad||

    I agree, Tony. It is so trivially easy to show that litigation cannot, even in mathematical principle, solve some "usually profitable but on occasion disasterous" economic activies, and that ASSUMES that we have a litigation system that is perfect. Of course, in the real world, the litigation system is as riddled with problems as the regulatory system. Too bad this goes right over our lovely little libertarian friends' heads.

    It's simple folks: if there is an economic activity that generates good profits most of the time and blows up catastrophically occassionally, PEOPLE WILL ATTEMPT IT. Why? Because a lot of them will escape without ever facing a blow-up, and many of those who do will be able to hide much of their former profits through legal gimmicks. There really isn't much of a downside, even in theory, and certainly not in practice.

  • Fluffy||

    Chad,

    The "mathematical proof" you posted in the other thread is actually moronic, as I demonstrated in the other thread.

    Any society that refrained from engaging in productive activities that had a 1 in 1000 year chance of causing an unforeseen disaster would live in the fucking stone age.

    I have to imagine that you work at a fucking Best Buy or something.

  • Chad||

    Why is it moronic. You can play with the numbers any way you want.

    How about something that generates a million dollars profit 99% of the time, and does a billion dollars in damage to third parties the other 1%? Would you make that bet? I would, if I was the type of person who put self-interest in front of morality. A 99% chance of being rich is certainly worth a 1% chance of going bankrupt.

    It is patently obvious that liability is zero-bound on the downside, while profit is unlimited on the upside. Therefore, they cannot cancel.

  • Mike||

    The idea presented here is to remove the liability cap for that very purpose. If this spill reaches the coast, and there was no liability cap, the cleanup costs owed because of PROPERTY RIGHTS alone would make that bet a much worse bet. No, it wouldn't stop them from drilling, but it would absolutely make them spend a few more dollars on safety features, and a containment system for the rare "1 in 1000" case. Of course, part of the libertarian agenda would reform our litigation system too... so you can't attack one libertarian idea because of something that another one would solve. It's pretty dishonest, and assumes we just randomly throw out ideas for the hell of it. There's a reason for it.

  • Chad||

    Mike, YOU CANNOT REMOVE THE BANKRUPCTY CAP.

    Why is this so hard to sink into your skull? You can't sue someone past zero. It will always be possible for someone to take risks that they do not have the assets to cover, and the "free market" has no way whatsoever of handling this.

    I am not talking about the stupid $75 million cap (which is libertarians fault anyway, as you are de facto Republicans).

  • ||

    Apparently Chad has never heard of debt...

  • Chad||

    If I owe the bank $100,000 I got a problem. If I owe the bank $100,000,000,000, not only does the bnak have a problem, so does the government.

  • Mike||

    One day the Oil Companies are all enourmous and make immorally high profits and then the next day they have so little money and assetts that this one spill won't even be close to covered. Plus, remove the exemption from personal liability, and I don't care how little money someone has left. That's quite a deterrent. Be responsible for your own actions or lack thereof, simple as that. If the CEO has a possibility of going bankrupt after a life of success in addition to just the company, that's more than enough to deter them. Provided we stick to our guns and actually follow through with the judgement. Part of the tort reform idea, nifty ;)

  • ||

    Tony, I'd like to explain something to you.

    My ideology is not anti-government. It is anti-power. Just because government has a monopoly on power, doesn't mean I'm against everything government stands for. It just happens to be the case that government is constantly abusing and increasing its powers unjustly.

  • George Orwell||

    The central problem--how to prevent power from being abused--remains unsolved....
    'If men would behave decently the world would be decent' is not such a platitude as it sounds.

  • Michael Ejercito||

    The central problem--how to prevent power from being abused--remains unsolved....
    'If men would behave decently the world would be decent' is not such a platitude as it sounds.


    The Stanford Prison Experiment proved that humanity is incapable of decency.

    I wonder how a society run by a computer program would fare if that computer program stuck strictly to ethical behavior.

  • ||

    Just don't give people power to abuse in the first place is what I'm saying.

  • ||

    On the evergreen subject of BP, here's a dumb column from Tom Frank

    Is there any other kind of column from Frank?

  • T||

    Seriously, why does anybody read Tom frank? I haven't read any article from him that wasn't just pure fucktarded. Did he ever make a cogent point at any time?

  • CatoTheElder||

    I read Tom Frank's weekly column in the Wall Street Journal, and find that it illuminates American liberalism, progressivism, or whatever name that state-worshippers want their faith to be called.

    Though he grossly misunderstands Kansas and pretty much everything else, he gives great insight into what's wrong with American liberals: American liberalism is a mental disorder. It is not impossible that one of Frank's conclusions be correct but, if so, it's always for the wrong reason.

  • Geotpf||

    The problem with your second approach alone is that it fixes problems after the fact, while the first (in theory) might stop them before. That is, a company that doesn't give a shiat about preventing oil spills (like BP-their number of major citations was hundreds of times larger than ExxxonMobil) won't do anything before the fact even if threatened by lawsuits after the fact, but proper regulation and inspection might stop it before it happens.

  • ||

    The only solution to a failure of regulation is more regulation. Until there are government workers doing all the oil rigging and drilling, we won't be safe. And when something goes wrong then, it will still be the company's fault. So then the government takes over all oil production. Because government is so hyper-competent at everything.

  • Jason||

    We must have more regulation so we can have bigger disasters so we can have more regulation so we can have bigger disasters so we can have more regulation...

  • CatoTheElder||

    The largest oil production incident in history was caused by a national oil company. Ixtoc-1 gushed about 130 million gallons of oil into the Gulf of Mexico in 1979. PEMEX, which is 100% owned by the Mexican government, was owner and operator of the Ixtoc-1 operation.

    Mexico was, of course, able to claim sovereign immunity from damage claims by those affected by the spill in Texas.

    Also, the largest oil pollution incident in history was the willful responsibility of a government. Saddam Hussein intentionally destroyed oil production and storage facilities in the Persian Gulf and released approximately 500 million gallons in the Persian Gulf.

    Iraq claimed that

    BP Deep Horizon stands at about 25-30 million gallons to date.

  • Fluffy||

    You could say the same thing about only arresting muggers after they commit crimes.

    "But - but - we should be able to put muggers in jail before anyone has to suffer through a mugging!"

  • ||

    You could say the same thing about only arresting muggers after they commit crimes.

    That's the stupidest analogy I have ever seen.

    I expected better from you Fluffy.

    A more apt analogy would be like cops pulling over speeders. The reason why speed is regulated is because it makes driving safer for everyone involved. If im the guy who gets killed because some guy was driving like a maniac and rammed into me, his having adequate liability insurance to compensate my family for my lost life isn't much of a consolation.

    The point is to put rules in place to prevent these things from happening. Not to merely hold people responsible after they happen.

    A world with speed limits and enforcement of those limits is a far superior one than a world where everyone gets to go as fast as possible as long as they have enough liability insurance to pay for their bad behavior.

    Financial liability is a secondary concern. Settlements and payouts aren't going to magically bring wildlife back to life, nor will it undo the environmental damage that BP caused.

    People like Frank understand position two. It's just an absurd position for cases like this.

    I don't care that BP can afford to pay for a leak like this. I don't want BP (or anyone) to be able to cause this kind of disaster in the first place.

    Liability isn't going to prevent that.

  • &&||

    Liability isn't going to prevent that.

    Nor will regulation, since it clearly failed to prevent the current catastrophe.

  • Tony||

    But it is blindingly obvious that it could have.

    There is so much duplicity in your side on this issue. You want fewer regulations, when having fewer regulations fails to prevent something, you point to that as proof that fewer regulations are good. How in the hell do you fit that into your head without it collapsing in on itself?

  • T||

    How could regulation have prevented the current catastrophe? What specific regulation would you impose (beside the obvious banning all offshore drilling) that would have prevented this?

  • ||

    How could regulation have prevented the current catastrophe?

    Are you really trying to pretend that this was not preventable? Was the explosion an act of God?

    The MMS wasnt even following it's own policies of inspecting the rig once a month.

    Had the MMS been enforcing safety violations and not letting BP do things on the cheap (like skipping expensive tests on the cement linings of the well) or not allowed BP to avoid filing a blowout plan maybe this would have never happened.

  • T||

    So, you're telling me existing regulations weren't being followed because MMS wasn't doing their job? Shocking. Explain to me how this is a failure due to lack of regulation again?

    Again, what regulations would have prevented this? The ones already in place? How does that justify new regulations? I mean, aside from ones applying to the MMS.

  • Chad||

    We could have had this regulation, like most sane nations.

    http://online.wsj.com/article/.....36798.html

    And of course, we could QUIT ELECTING RIGHT-WINGERS WHO PAD REGULATORY AGENCIES WITH CRONIES.

    So the "solution" is simple. More regulations and more Democrats. Problem solved.

  • Michael Ejercito||

    And of course, we could QUIT ELECTING RIGHT-WINGERS WHO PAD REGULATORY AGENCIES WITH CRONIES.

    So the "solution" is simple. More regulations and more Democrats. Problem solved.


    That Republican Obama really screwed things up.

  • Fluffy||

    There is no system of regulation that can account for every possible mechanical failure of every possible system.

    All the descriptions of the events leading up to this disaster that have been published to "expose" BP have, to me, done the opposite. This wasn't a bunch of guys smoking at a gas station. For several days top engineers consulted about whether or not they had a potential problem. They ran tests. They tried to figure out what to do. And then the fucking thing blew up.

    You're claiming that the only reason libertarians always favor litigation is because of ideological bias, but the same can be said of you and regulation. The truth of the matter is that you have absolutely no knowledge of the engineering involved, no knowledge of what the existing regulations were, no proposal for what other regulations could or should have existed to prevent this disaster, nothing. You're just convinced that there is SOME regulation that could have made everything perfect, as you always do in every situation. That's your fundamental delusion.

  • Chad||

    Fluffy, liberals support regulation AND liability. Hell, most of us support criminal proceedings as well. We need multiple layers of protections against these problems.

    Btw, when are you going to refute my math? How do you avoid the zero-bound on liability, which arises because it is impossible to sue someone beyond bankruptcy.

    The engineers could have stopped the well from blowing up that day, but they were pushed forward by management. Of course, if the proper safety protocols and devices had been applied, it wouldn't have mattered anyway.

    I am quite certain that there are plausible regulations that would have prevented this disaster, many of which are policy in other countries. They have been all over the news...haven't you been watching?

  • Mike||

    So what you're saying is it blew up because current regulation was being ignored? OK, I'll let you run with this one. You can, through logic, convince me that those current regulations were necessary and effective if you can figure out a way to force them to be followed. You mentioned right wingers stuffing regulatory agencies with friends? OK, another fair point. That's something we libertarians want to end too. Only, you want to do it by only electing Democrats, which is delusional at best, and definitely not effective. We have an idea of our own. Create a system where the lobbyinsts have no incentive to spend money on candidates. Just like a law doesn't stop speeding, but creating an incentive to make speeding not worth it might. (Maybe something like cutting off all subsidies, including those for oil which artificially keep the price low, and this is assuming you can convince me speeding is actually bad...) How do we create a system where there's no incentive to get friendly with government officials? How about a system where government officials have no favors to provide? That would pretty much do the trick! If one segment of a market were no longer able to get government help weeding out their competitors, we could see what the actual market would do.

    However, instead of concentrating on why the current regulations weren't followed, you just want to create more regulations. They will be just as equally inneffective if we don't fundamentally change the way government is able sell favors. I suggest that the best method is the one I described. If you have a better one, I (and I assume just about every other reader here) am willing to listen to it.

  • Chad||

    How do we create a system where there's no incentive to get friendly with government officials

    Utterly impossible. Get over it.

    Instead, try to figure out how to have proper checks and balances to mitigate this problem. This certainly doesn't involve having economic conservatives gut regulations and load regulatory agencies with industry cronies.

    And you keep missing a key point: we WANT to change things such that already existing regulations are followed. YOU ASSHATS PREVENT THAT. This is totally separate from the matter of whether new regulations are appropriate.

    *facepalm*

  • Mike||

    Not impossible at all. In fact, the simplest method of all is the one we are most well known for supporting. Reduce government power. Simple, done.

    And how do WE ASSHATS prevent it? Last time I checked, the people stacking agencies aren't libertarians at all. At best, their 50% libertarian, just like you and your people are the other 50%.

    Don't confuse neo-conservatives for libertarians.

  • Mike||

    and some self-immolation for improper grammar in 3..2..

  • Michael Ejercito||

    But it is blindingly obvious that it could have.


    And yet, it did not .

  • Chad||

    Because of twits like you. You morons break something, and then complain that it should have never been made in the first place, because it is inevitable that someone would break it.

    *facepalm*
    *facepalm*
    *facepalm*

  • Mike||

    Borderline feeding a troll here, as his logic has gone from understandable to blatant willful ignorance... But I'll try one more time. How did WE break it? WE didn't build this system, and OUR ideas did not break it. Neo-conservatives and Liberals fighting with eachother over how to spend way too much of our money broke it. Libertarians had NOTHING to do with this.

  • cynical||

    But the point is that mugging has been clearly defined as unacceptable in a written rule; we don't have to argue about the amount of money they stole or whether they should technically be liable or what have you.

    That is, in other words, more of an analogy for regulation than tort.

  • Invisible Finger||

    The problem with your second approach alone is that it fixes problems after the fact,

    The problem the first approach is that regulation DOES fail at times and therefore the regulator (aka the taxpayer) is culpable as well. There are property tax increases levied in numerous towns in order to pay for the damages caused by an idiotic decision by a public official. Since he's acting in an official capacity there's no personal liability on his part - at worst he gets fired and has to get a similar job in another town. The only thing worse than a limited liability corporation is a limited liability regulator.

  • ||

    The problem the first approach is that regulation DOES fail at times and therefore the regulator (aka the taxpayer) is culpable as well.

    Everything fails at times.

    Lack of perfection isn't a reason to throw out regulations.

    If it fails --and in this case it failed because of the much too cozy relationship between the regulator and the one being regulated, not to mention fraud and deceit on the part of BP (the filed paperwork with MMS that stated they could handle a spill this size and larger that was complete BS) -- then the response is to look for why it failed and improve on that.

    Like maybe not allowing the revolving door between industry and regulators. Or allowing non-regulators to allow for enforcement (sort of like the way e the arizona immigration law allows citizens to sue the police if the citizens feel they aren't enforcing the law)

  • Mike||

    You're right, that everything fails sometimes. Our way will not prevent any accident from happening again either, and we don't claim that it would. But we do claim that a true liablity (not a capped one) would at least make them more worried about the accident, and take their own precautions. Not only that, but because it still wouldn't be enough to assure nothing would EVER go wrong, they'd be forced by their own cost-benefit analysis to have some sort of containment system on hand. They wouldn't just claim they did through fraudulent paperwork, they'd actually want it there themselves, to avoid a potentially bankrupting liability.

    Your way might prevent a few more of these from happening than currently do (which by the way, is a tiny amount) but it still allows them mostly off the hook after 75.

  • Seer||

    You're assuming that the existence of liability doesn't completely alter the cost-benefit analysis of safety devices. If BP knew they would be on the hook for hundreds of billions in damages, rather than a mere 75 million, they would take far greater precautions to prevent accidents.

    Why ask politicians to craft legislation that will hopefully be based on cost-benefit, rather than provide incentives for the oil companies to do the analysis themselves?

  • ||

    Jesse, this topic has already been discussed in the last BP thread:

    http://reason.com/blog/2010/06.....nt_1739903

    I await Tony and Chad's brilliant rebuttals.

  • ||

    Still waiting on those brilliant rebuttals...

  • OMG||

    "here's a dumb column from Tom Frank"

    Jesse Walker aka Captain Obvious

  • Tman||

    Has anyone ever seen Tony or Chad in the same place as Thomas Frank?

  • Fluffy||

    Cato,

    For the name of the mental disorder you describe, I suggest "Kunstleritis".

    James Kunstler wrote a fairly admirable historical analysis of land use development in the United States, where he chronicles in intimate detail how the type of development he likes arose spontaneously in a near-anarchic situation where individual property owners made all the decisions about development, and further chronicles how all the development he hates with every fiber of his being was brought into being by conscious and deliberate intervention by state planners.

    He then writes a postscript where he calls for giving greater powers to planners.

    "Kunstleritis". They all suffer from it.

  • ||

    "Galt only knows how many times 'coziness' of the MMS variety has been celebrated as part of the struggle for free markets and free people."

    Ummm, okay...

  • ||

    Tony said,

    The other position is dumb. It disingenuously ignores all the good, working regulation that exists out there.

    That is pretty rich coming from someone who disingenuously ignores all the bad, failed government regulations that exist.

    The US corps of engineers and the bureau of reclamation have destroyed far more wetlands and waterways than the exxon valdez did or bp horizon has to date.

  • Tony||

    I gladly point out failed regulations, such as the ones that failed to prevent the Gulf disaster, because they are unequivocal examples of the failure of your ideology. People who believe exactly the way you do regarding regulations were running our government for a long time, and every goop-covered pelican is a testament to their and your wrongness about the glories of an unregulated market.

    Your second point may be true, but is not relevant to the discussion at hand.

  • T||

    Failed regulations are unequivocal examples of a failure of our ideology?

    When are the failed regulations an example of the failures of your ideology? I mean, you're sitting here screaming about how we need more regulations, so assume, arguendo, that more stringent regulations are passed and the next offshore drilling project goes up in flames. Wouldn't that be a failure of your ideology?

    Oh, wait, I forgot. You're one of those idiots that think the financial sector was "deregulated". Never mind, continue being a moron.

  • Tony||

    I would hope that we could come up with regulations that are reasonably sure to prevent a monumental disaster such as the one we are witnessing, and if we can't, maybe we shouldn't be drilling a mile beneath the surface of the ocean for oil in the first place. There are lots of wells out there, and only one coastline to completely destroy, after all.

    And it's not just me saying the financial sector wasn't adequately regulated (which is not the same as completely deregulated--but I suppose any piddly amount would prove your point in your mind), it's most economists and anyone who has paid any attention to the world.

  • cynical||

    "I would hope that we could come up with regulations that are reasonably sure to prevent a monumental disaster such as the one we are witnessing,"

    So, you have a faith-based approach to government?

  • Tony||

    No faith necessary, we can look to other countries as examples. My point is if regulation is inevitably inadequate to prevent an incident such as this, then we shouldn't be drilling at all.

  • Mike||

    Other countries that have prevented disasters like this you mean? Ok, let's find one that's actually prevented one, and I'll show you a country that most likely just hasn't done enough off-shore drilling to fulfill the law of probability.

  • Michael Ejercito||

    And it's not just me saying the financial sector wasn't adequately regulated (which is not the same as completely deregulated--but I suppose any piddly amount would prove your point in your mind), it's most economists and anyone who has paid any attention to the world.


    How is "thou shalt not steal" (let alone regulations requiring stockbrokers to get licenses) insufficient?

  • ||

    You're one of those idiots that think the financial sector was "deregulated"

    So what was the repeal of Glass-Steagal? That wasn't deregulation?

  • Jordan||

    Glass-Steagal is a red herring:

    In fact, multiple exemptions to Glass-Steagall had been granted for years before Gramm-Leach-Bliley was signed into law. Most European financial markets, not normally known as more “deregulated” than the U.S., never separated commercial and investment banks in the first place. And there is no correspondence between institutions that benefited from the repeal and those that recently collapsed. Institutions that didn’t take advantage of the Glass-Steagall repeal, such as Lehman Brothers and Bear Stearns, were the ones that failed most spectacularly, in part because they lacked the stability provided by commercial banking deposits.

    If anything, Gramm-Leach-Bliley may have softened the blow. The George Mason economist Tyler Cowen argues that Gramm-Leach-Bliley made way for more diversity in the financial sector, and “so far in the crisis times the diversification has done considerably more good than harm.” Under the Glass-Steagall rules, Bank of America and J.P. Morgan Chase would not have been able to acquire Merrill Lynch and Bear Stearns. Nor would Goldman Sachs and Citibank have their current unified form, which may have helped them survive.
  • Michael Ejercito||

    People who believe exactly the way you do regarding regulations were running our government for a long time, and every goop-covered pelican is a testament to their and your wrongness about the glories of an unregulated market.


    What unregulated market?

  • ||

    That is pretty rich coming from someone who disingenuously ignores all the bad, failed government regulations that exist.

    This is rich coming from someone who ignores the successful regulations as well.

    It's knee-jerk anti-regulatory attitudes that put us in the position we are in. People who want to do high risk work -- like drilling for oil 3 miles under the surface of the ocean -- should have the shit regulated out of them. (Especially in an industry where it's a fucking oligopoly -- regulations aren't going to pick winners and losers or distort the "market" when there are only a couple of major players anyway). If a fuckup is going to poison and kill and destroy large swaths of the environment and put the economic liberties of those whose livelihood depends on a healthy environment (like fishing and shrimping and tourism etc) than yes....more regulation with strict rules and erring on the side of conservative and cautions is the proper way to go about things.

    I'm not saying all regulations are good -- there are plenty of failed and BS regulations that do nothing but favor certain actors over others, but it's your ideology that is absolutist and keeps pretending that all regulation is inherently bad.

    Common sense dictates that you look at things on a case by case basis, and if the worst case scenario is going to fuck over the whole coastal economy, then maybe there should be some rules in place to prevent or at the very least mitigate that.

  • Fluffy||

    Tom,

    The problem is that for regulation to be the solution, it has to be possible for you to devise in advance a regulatory scheme that can anticipate and prevent every possible disaster, and you can't.

    One simple act could have prevented all deep-sea drilling disasters: having no limit on the liability of off shore drillers in the case of such a disaster, and creating a broad tort basis for people to claim economic harm [like beachfront businesses that have to close, for example].

    That would have made off shore drilling uneconomic, and it wouldn't exist.

    That's the central fact missing from the debate here: that the FIRST REGULATORY ACT taken here was to change the law to protect drillers from their real liability, because left to "the market" companies didn't want to drill.

  • Tony||

    Glad you admit that government heavily subsidizes this industry and that it should probably go away in a free market that factors environmental harm into costs.

    I still don't see the point of the less efficient, bigger government, after-the-fact litigation when you could just have a rule in the first place. Surely the oil industry is involved in interstate commerce, not to mention that it leases these sites from the government.

  • Mike||

    First off, yes, we can agree that the government heavily subsidies the industry and that it should probably go away in a free market that factors environmental harm into costs. That's exactly what we've been saying this whole time.

    As to your second point, I disagree that large powerful regulatory agencies create a smaller and more efficient government than litigation on a case by case basis (remember the last time an environmental catastrophe cause by a corportation happened?) Yeah, you'll probably get a few, but put that in perspective, really.

    As to your last point about interstate commerce... Personally I can agree that constitutionally the federal government has the *authorization* to regulate this industry, as it currently exists. Our contention is that authorization does not equal a mandate, and that even with that as an option, we should still use the best option. We don't just cry out for following the constitution because we want to be stubborn and stick to an ancient document for the hell of it. We want it stuck to because it is a legally binding contract with the people, and if it is followed, it works. If it didn't work, we'd be in favor of ammending whichever part of it was at fault.

  • Chad||

    First off, yes, we can agree that the government heavily subsidies the industry and that it should probably go away in a free market that factors environmental harm into costs.

    Mike, do you not see the obvious contradiction in the concept of a "free market that factors environmental harm into costs". Corporations will not factor in environmental harm unless the government makes them do it!

    There are at least three cases where a liability-based system would fail.

    1: As we have been talking about, the case of rare, expensive disasters that would bankrupt the corporation.

    2: The case where the harm is done to future generations, who obviously can't sue.

    3: The case where the damage is spread so thinly that no one would sue anyway. For example, imagine you invented a scheme that generated $1 million in profits each year, but did a penny's worth of harm to everyone on earth. This obviously fails cost- benefit, but is anyone going to sue you over a penny?

  • Mike||

    You're living in an interesting world. Your points are logical, and I would consider them valid if it weren't for...

    1: Personal liability is part of the deal. CEOs, the board, heck, even stockholders when there's a referendum policy vote, should be held personally responsible. In this case, yes, there would still be situations where even considering all those people, there wouldn't be enough money. But you're telling me that if you thought your own finances could be in jeapordy because of a disaster, you wouldn't make damn well sure you had every possible safeguard in place?

    2: This self-critiquing system would *eventually* create a culture that even given a disaster, containment contingencies would be in place as to not let it be widespread enough to cause harm to future generations. Mercury in freshwater sources would carry a liability to pay for the purification of that water until it was perfectly back to the way it was. If that's a potentially insane number, you'll watch where you go dumping things, no?

    3: This assumes that everyone will be exactly equally and minisculely affected. There is no society, market, or industry on Earth where this would happen. The people with the largest amount affected start a class action, everyone else joins for free. Of course not everyone would join, but... hell this is a ridiculous scenario anyway. There have been a few class action lawsuits in the entertainment/technology fields in the last decade or so where the judgement money is never even supposed to get to most of the people, but instead a charity or something that the people agreed on. While it won't restore your little penny to you, you probably won't care about that as much as creating a deterrence for the future, which that would still do.

  • Mike||

    Good point about the monopoly. Seriously. It seems to be a good argument that without enough players to reduce the average size of these companies and therefore increase the liability costs against their profits, that we should regulate. But instead of that, how about taking a look at all the government action that basically ensures there will only be a few players? Let's open the market up a bit, and see how the market *actually* works with issues like this.

  • ||

    A more apt analogy would be like cops pulling over speeders. The reason why speed is regulated is because it makes driving safer for everyone involved.

    Speaking of terrible analogies.

    Just yell "Lowest Common Denominator" at the top of your voice.

  • ||

    Just yell "Lowest Common Denominator" at the top of your voice.

    How on earth is that a lowest common denominator situation?

    The reason we don't want everyone driving as fast as they personally feel comfortable is because it puts others at risk.

    That's what regulations are for. To prevent you from putting me at risk because you're a idiot. How would liability accomplish that? It wouldn't. It MIGHT prevent you from doing it a second time....unless your pockets are deep enough.

  • ||

    I think it's incredibly bizarre that you think the people with the deep pockets, i.e., those who can actually satisfy a judgment, will...be cool losing all that money!

    Like, the guy who is too poor to be sued...will be more likely to have his behavior corrected by tort law?

    what is this I don't even

  • ||

    ...and there are people whose response is We need to get a better system.

    What about those who oppose regulation AND liability?

    The sad fact is that many opponents of regulation also support "tort reform" policies like "damage caps" - aka. "arbitrary limits on liability".

  • Michael Ejercito||

    The sad fact is that many opponents of regulation also support "tort reform" policies like "damage caps" - aka. "arbitrary limits on liability".


    Tort reform is necessary because of defects in our justice system.

    Ask Radley Balko.

  • ||

    The sad fact is that many opponents of regulation also support "tort reform" policies like "damage caps" - aka. "arbitrary limits on liability".

    That's a very good point.

    Most of the people who advocate deregulation are the same people who want limits on liability and argue against punitive damages.

    It's almost as if what they are really advocating is for these entities to be able to do whatever they want and not have to face any consequences ever.

  • Fluffy||

    The punitive damage issue is completely separate, so I'll leave that to one side for a moment.

    But I don't advocate damage caps. My big problem with the tort system is the spurious assignment of liability in cases where the plaintiff is actually at fault. For me tort reform is an assignment of liability question and not a damage amount question.

  • Mike||

    What he said. I don't know any libertarians that want damage caps. In fact, it is an inherently un-libertarian idea. We say we want more freedom, you guys always seem to get that part right about us, but you always forget that we are in favor or people being held responsible for what they do with that freedom.

  • ||

    Chicago Tom,

    Until the Horizon BOP stack is off the seafloor, on the shop floor, and the failure analysis is completed on it we won't know a big chunk of what caused the disaster.

    Without knowing the cause of the disaster we have no rational basis to decide if new regulations would have prevented the disaster.

    Yet you folks are calling for more regulation even before we know what caused the disaster.

    We do know poorly thought out government actions can and have caused vast amounts of environmental destruction.

    Might want to consider that before calling for additional regulations before it is determined what caused the stack failure and what will prevent similar failures in the future.

  • Fluffy||

    Don't be silly, Duracomm.

    ChicagoTom knows that every bad event that happens everywhere in the world, EVER, is the result of the failure to regulate.

    If you got a flat tire this morning, MORE REGULATION.

    A bear shits in the woods and you step in it? MORE BEAR REGULATION AND MORE HIKING BOOT REGULATION.

  • Chad||

    Fluff, you are really full of strawmen, aren't you?

    Tony and I believe that both the markets and the government are imperfect, and we utilize both to construct the least-bad system we can device. You assume the former is close to perfect, the latter is hopelessly flawed, and then stick your head in the sand any time the data says otherwise.

    Litigation alone CANNOT solve the problem, even in theory and certainly not in practice. Neither can regulation, nor even criminal prosecutions. But all can be part of the solution, and all should be as well-designed as they can be.

    If you aren't going to help us build a useful regulatory system, get the hell out of the way.

  • Tony||

    An oil geyser is an oil geyser... there are ways to prepare for one so that it can be sealed promptly.

  • Mike||

    This I can agree with. I would just rather those ways of preparation were ways the company *wanted* to undertake, since I think it would be more thorough and effective. This, as opposed to a system where those preparations are forced on to them as extra costs that they don't see the need for when they have liability caps that are less than(per pot odds) the cost of the safeties. We could regulate more, and maybe you could fill the agencies with people that won't slack off... for now. Nothing about that system inherently assures that down the road.

    In a nutshell... let's make the oil companies WANT to prepare for things like this as best they can.

  • Kolohe||

    That is an awesome illustration and some decent alt-text, Mr. Walker.

  • ||

    Tony said,

    An oil geyser is an oil geyser... there are ways to prepare for one so that it can be sealed promptly.


    Those of us in the reality based community think it would be a good idea to find out what caused the blowout before deciding two things.

    1. Would new regulations prevent the problem.

    2. What should those regulations look like.

    We know poorly thought out government policies cause vast amounts of environmental destruction.

    The folks screaming for more regulation now, before the failure mechanism is determined, run the risk or implementing poorly designed regulations.

    Poorly designed regulation pose a very real risk of causing more environmental destruction not less.

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