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Source link: http://archive.mises.org/13473/the-antiregulation-case/

The Antiregulation Case

August 4, 2010 by

Many people looking at the effects of the spill see the pelicans soaked in oil and the fishermen out of work, but they cannot possibly see all of the benefits of the use of oil accruing to everyone in the entire economy. FULL ARTICLE by Eric Perkerson


J. Murray August 4, 2010 at 9:16 am

The funny thing about the spill is the bulk of the damage was caused by government itself. We see those pelicans, but the vast swath of beach in the “affected” areas are clean. What we don’t see in the pictures are the hundreds of people standing around on clean beaches doing nothing, the large dumpsters full of empty plastic bags that were issued to cleaning crews to clean up absolutely nothing. We don’t hear the stories about how recreational fishing has been reopened nearly 100% and there are no reports of any contaminated fish being brought back. The only reason commercial fishing hasn’t restarted isn’t becuase of safety and health concerns, it’s entirely because government has not deigned to allow it.

The whole spill was made out to be a huge disaster when, in reality, it was barely noticable to anyone had government just gotten out of the way. It made for sensational news, but it didn’t have the kind of impact. The volume of oil, while seemingly large, barely made a blip considering the square mileage of the area.

At the end of the day, our government caused all the real damage from the BP oil spill. BP can’t be faulted beyond the lives lost in the initial explosion.

Glenn O'Dell August 4, 2010 at 10:18 am

An excellent article. Regulation means more government power and a less free market. I couldn’t have said it better myself.

The_Orlonater August 4, 2010 at 10:22 am

Exactly, and regulators have problems enforcing whatever will they have because of the nature of their centralized bureaucracy. Anyway, a quick, fun, and short article like this needed to be written, and I’m glad it was.

Kris August 4, 2010 at 11:20 am

Nice article. I like your strategy of incorporating a sweeping defense of free market principles on what is perceived as a very narrow issue. Keep it up!

greg August 4, 2010 at 12:14 pm

It was the liability cap of $75 million that is the real problem. This cap allowed companies to cut cost knowing that if something happen, their liability was limited. Furthermore, the owner of the well is solely responsible for damages allowing subcontractors a free liability ride.

The government, acting in our interest, established these liability limits in order to encourage offshore oil development. Basically saying that the companies can pay the first $75 million and society will pick up the rest. After all it is in the best interest of our society to have more oil. This legislation should be considered a contract and enforced.

But the oil spill happen and when it was clear that cost were going to exceed $75 million, the government broke the contract and placed the entire cost of damages on BP.

I agree we don’t need more regulation, we need enforcement of contract law.

Jonathan Finegold Catalán August 4, 2010 at 12:39 pm


Like I’ve argued on this blog before, I am not so sure you are correct. You write,

It was the liability cap of $75 million that is the real problem. This cap allowed companies to cut cost knowing that if something happen, their liability was limited.

The fact is that the value of lost product is worth much more than the $75 million liability cap, and as such the fear of losing tens of thousands of barrels of product serves as ample incentive enough to make sure such an accident never occurs. Furthermore, companies like BP are well-aware of their public image, and as such are also well-aware of the limitations of legislation like the liability cap in actually limiting a company’s liability. I do not think that BP was surprised that they would have to virtually ignore the liability cap in favor of maintaining as much of their public image as possible.

While I do think that BP’s cost-benefit scale was distorted by interventionism, I think the underlying factor behind the present accident was clearly poor decision making. The problem is that defenders of the market automatically reel at the idea that entrepreneurs can fail at decision making, but entrepreneurial mistakes (a product of entrepreneurial uncertainty) are a part of the market. Knowing how complicated something like an oil rig is, an accident like this can happen on the free-market.

The next step should be accepting that the Deepwater Horizon catastrophe cannot be entirely blamed on interventionism, as most of the blame probably falls on BP itself (there was enough of an incentive, as I outlined above, to avoid such accidents). The mission, therefore, should not be to blindly defend BP as a victim of a distorted market, rather to educate those unaware of such basic economic principles as entrepreneurial uncertainty.

Predictably, this might be seen as a case for government regulation. But, if one thinks deep enough, it is realized that self-regulation is much more effective than government regulation. Indeed, despite the liability cap, the median time between major oil spill has lengthened. It has been around twenty-one years since Exxon Valdez (which is completely unrelated, given that it was a ship which capsized not an oil rig with poor safety mechanisms, and as such the time between similar accidents of comparable magnitudes is actually much longer).

My point is that we should remain faithful to the usual Austrian trait of remaining intellectually consistent and absolutely impartial.

Furthermore, the owner of the well is solely responsible for damages allowing subcontractors a free liability ride.

I have not done any research of my own, so I am not sure if the following is true, but I heard that the owner of the well actually did approach U.S. Government regulators, making them aware of the shortcomings regarding Deepwater Horizon. The regulators shrugged them off.

noah August 4, 2010 at 3:31 pm

No, the liability cap of $75 million was not the real problem. That cap is only valid if gross negligence does not occur, and it surely did. BP knew that cap was void from day one.

Perhaps the real problem is that BP is the among hugest of players: it gives cash to politicians, it employs the best of lobbyists and lawyers, helps make (or weaken) policy and regulation, and knows if it cuts corners that it has the power to socialize some of its losses. It is the “too-big-to-fail” attitude: if the risks pay off, the profit is ours; if the risks bust, we burden others with some of the costs.

Guard August 4, 2010 at 1:32 pm

Again in this article I’m seeing the assumption that corporations are in the business category and not in the government category. Corporations exist solely by the power and sanction of government. They are artificial entities whose nature is inimical to humanity. I have seen some good writing on this subject, but it just doesn’t seem to register with people on this site. Unless this confusion is cleared up, otherwise good solid arguments about libertarianism will often remain muddled.

Vanmind August 5, 2010 at 10:10 am

Nah, a corporation is just a way to arrange a team that works toward a specified goal, like a co-op or any other such structure (e.g. co-ops are artificial entities as well). It’s the corporation as a “person with rights” that you’re talking about. That’s the socialist crime going on there, the legislation that made the corporate business animal “more equal” than others.

In other words, corporations don’t exist “solely by the power and sanction of government.” Corporations would exist under anarchy, just as communes would exist under anarchy.

Jim August 4, 2010 at 3:13 pm

Wait, so gguard is saying that the State is a natural entity because it uses force to establish itself instead of voluntary trade?

Dave Albin August 4, 2010 at 5:20 pm

What he’s saying is that limited liability corporations are allowed to offset some of the risk of doing business, and thus, may distort the free market.

Jim August 5, 2010 at 8:32 pm

Ok ok, sorry. I misinterpreted meaning. Im doing that alot on this site. Im used to argueing with socialists.

Jim August 5, 2010 at 8:38 pm

If Ive made a comment similar to this one to you please excuse it. I may have mistook you for advocateing govt controls or something.

Mark Thornton August 4, 2010 at 4:13 pm

Nicely done!

john August 6, 2010 at 11:50 am

This is total bull shit “Costs imposed on third parties by any business through actions such as an oil spill should be fully paid by the offender, but this should be the only recourse taken.” are you kidding me. It’s not just about money!… what does an ecosystem cost? or a species?
the whole philosophy that free markets will regulate themselves is great if the only criteria was the economy. Fragile community and natural resources would be destroyed in the wake of greed! these things cannot be replaced with money.
Part of the American dream is that the least of us are protected form the rich and powerful!
the key here is PROPER REGULATION!

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