The private Gulf vs. public Gulf

How would a libertarian solve the Gulf problem, asks Edward Glaeser, viaAndrew 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 really just a contract among a group of people who want to centralize certain specific powers. Nearly every governmental experiment in history suggests that the fewer powers get centralized, the better off the community. Yet the areas that are better centralized are those dealing with public problems. Especially when the government is a party to the benefits i.e. (royalties and taxes) from which the problem arose.

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 for years to come and to possibly eliminate species of wildlife, not to mention affects on 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 Katrina mud — so much risk has been realized in this region that pooling has become nearly impossible, premiums are insufficient.  Private insurance currently offers no viable solution.

Even had BP's oil spill not occurred in “federal waters” the magnitude of the issue makes this a public problem, demanding a prompt public solution. Regulation maybe would have prevented such a disaster. Indeed the dearth of unenforceable oil regulations is just one more example of how cozy big government remains with big business as its primary contractor.

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

Searching for a private “libertarian” solution to the problem does not exculpate Big Government from failing to create the right incentives when we still could have avoided the accident.

Professor Richard Epstein wrote for the 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 correct its crime, but that money should be channeled through our public courts system to BP’s victims. 

Government’s fingers should be sticky from helping to scrub the Gulf, not in an attempt to wring this disaster for all it’s worth.  Even libertarians have called for government action in the Gulf. Why?

If for no reason other than the fact that this has become a public problem. The politicians and their K Street 'clean energy' special interest friends should not be in this mess hoping to collect.

Kathryn Ciano is a law student in Virginia

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