Libertarians and the Gulf

What would a libertarian propose as a Gulf solution, asks Edward Glaeser, via Andrew Sullivan:

Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But what if the leak is so vast that the driller doesn’t have the resources to pay? The libertarian would respond that the driller should have been forced to post a bond or pay for sufficient insurance to cover any conceivable spill. Perhaps, but then the government needs to regulate the insurance contract and the resources of the insurer.

Government is a contract among a group of people who want to centralize certain powers.  Nearly every governmental experiment in history suggests that the fewer powers get centralized, the better off the community.

Control is not a public good.  Whatever control powers individuals relinquish to the centralized entity are powers they no longer have — and, the experiments teach us, powers individuals are unlikely to regain.

Yet individuals do give up certain powers.  There are certain areas where we simply cannot look out for ourselves.  The common theme across powers likely to get centralized when a group of people get together is that we give up control over public goods.

When it comes to the oil spill, we are not dealing with a series of private violations commensurable with a class action torts suit.  BP spilled enough oil to affect many states’ domestic product, to eliminate species of wildlife, to affect coastlines for decades to come.

Libertarians might suggest insurance as one solution.  Yet insurance companies will teeter under the strain of compensating even one livelihood prospect.

Even with private indemnification from BP, insurance companies will not collect funds in time to weather the imminent hurricane season.  Indeed, many Gulf insurance companies remain mired in the mud after Katrina claims — so much risk has been realized in this region that pooling has become impossible, premiums are not enough, and private insurance no longer offers a libertarian solution.

The oil spill has catapulted into the realm of public problems, demanding a public solution.  Regulation may well have prevented such a disaster.  Indeed the dearth of enforceable oil regulations is just one more example of how cozy big business remains with big government.

The Obama Administration should give careful consideration to its goals in this matter.  It makes little sense for Big Government to capitalize on such a disaster in an attempt to squeeze blood from the crude, or an energy reform agenda from the pits of despair.

Searching for a private “libertarian” solution to the problem is a worthy mental callisthenic, but it does not exculpate Big Government from failing to create the right incentives when we still might have avoided the accident.

Professor Richard Epstein wrote for today’s Wall Street Journal:

Legal reform should not just be limited to oil spills. Environmental priorities also need to be straightened out. To take just one example, in virtually every coastal location today, acerbic green lobbies parade about as if new luxury beachfront homes are the moral equivalent of oil pollution. Those histrionic outbursts create civic discord and stunt our economic base. They can be stopped by insisting that private developers be compensated for the full costs of any new-fangled land use restrictions, at which point popular support for such lobbying will collapse.

Government should limit its response to removing the centralized policies that encourage bad behavior, like incentive for special interest lobbying or liability caps.  BP should have to pay an amount suitable to its crime, but that money should be channeled through the public system to BP’s victims – the government should not be in this mess hoping to collect.

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