Moral hazard

Limited Liability, Oil Spills, and Moral Hazard

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A study I'd like to see: the effects of this system on how oil companies approach risky behavior.

Under the law that established the…Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.

The fund was set up by Congress in 1986 but not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the limits on liability, the Oil Pollution Act of 1990 imposed a tax on oil companies, currently 8 cents for every barrel they produce in this country or import.

[Hat tip: J sub D.]

Update: Steven Horwitz has some thoughts.