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Does it make any sense to treat corporations as "persons", given the differences in incentives structures?

May 18th, 2010 No comments

 

Well, one may well argue that, if BP were a person, it would be “a career criminal”, but surely not all corporations behave in a criminal matter.

Nevertheless, I think we all recognize that although corporations are owned, managed and staffed by real people, the incentives that people in such organizations face and their consequent collective behavior – what we call the behavior of “the corporation” – may differ quite markedly from those of ordinary, living and breathing humans who live in communities, and from people in groups that do not have limited liability (a feature that underlies the pervasive and increasingly enormous and costly  “moral hazard” problems that our society now confronts), unlimited life and purposes, other favors granted by the state, which have less political power, and for which the “principal-agent problem” is less severe.

So does it make any sense to treat “corporations” under the law – or for purposes of discussions on LvMI pages – as if they have the same rights as real persons?

Allow me to refer to a post I did in wake of the recent Citizens United decision by the Supreme Court : Speech and Sociopaths: Does it make sense to collapse, for Constitutional and legal purposes, the distinctions between human beings and corporate “persons”?

My other posts on the Citizens United decision are here.

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Important call for ethical leadership in civil society at American Conservative; is LvMI up to the challenge?

May 18th, 2010 No comments

Daniel McCarthy, senior editor of The American Conservative, posted a thoughtful essay the June 1 issue, Better Red.

Here are a few excerpts (emphasis added); skip to the last paragraph if you’re in a rush:

Everyone’s worst fears for America are coming true. The traditional Left sees increasing inequality and falling real wages for workers. The libertarian Right grows alarmed at the federal government’s ever heavier hand in the economy—from bailouts to healthcare reform—and the steady erosion of civil liberties before the flood tide of the national-security state. Cultural conservatives, meanwhile, lament a toxic environment of competitive sex and recreational violence. Americans still enjoy freedom of a sort, but not old-fashioned economic or political liberty, only the chimeras of lifestyle choice.

You can sleep with whomever you want, but there will be no legally binding commitments, and whether you keep your house or your children will be up to a judge. You can quit your job at any time, but good luck finding another. You can vote for the Republican or Democrat of your preference, and they will both give the country bigger government and more wars. Even which church to attend is a consumer choice, as self-interested and trivialized as which soft drink to buy. For all the fetishization of choice, Americans are taught by their institutions that there is only one way to live: casually, unconcernedly, without strong connections to anything but the provider state and its flag.

This is not the world that conservatives or progressives, or for that matter libertarians, wanted to make, but all deserve a share of the blame. The welfare state has deprived millions of Americans of the will, as well as the ability, to manage their own lives. Indiscriminate application of a free-market ethos to other spheres of life has reduced attachments to whims, atomizing society. And for all their hand-wringing about culture, conservatives have not applied themselves to creating art or literature, but have spent their energies glorifying militarism and shivering in fear of leftist and Islamofascist phantoms. They locate the ills of society not in the state or the oligopolized market, but in bad people—Commies, terrorists, McGovernites [and envirofascists! ed.] —who can be bombed, jailed, or tortured away.

A different kind of economy, politics, and society can be imagined, one characterized by smaller government, more widely dispersed property, and an interesting local life not defined by big bangs delivered from a glowing screen. Progressives like Christopher Lasch have tried to describe such an alternative. So have left-libertarians like Karl Hess—they are Left not because they are “libertines,” as the canard goes, but because they look critically at concentrations of power. And so, too, have traditional conservatives—and now Red Tories like Phillip Blond. …

In practical politics, too, American conservatives have often made a point of promising to tame the market and create what George H.W. Bush called a “kinder, gentler America.” Yet the results have been disappointing. Richard Nixon entertained the idea of creating a negative income tax to benefit the poor—but his escalation of the war in Vietnam (and Laos and Cambodia) and the Watergate scandal put the lie to the myth of Nixon’s bleeding heart. George W. Bush’s “compassionate conservatism” and vows to foster an “ownership society” may have sounded distant echoes of G.K. Chesterton’s distributism. Yet Bush, too, is remembered for other things—like Enron, Abu Ghraib, Lehman Brothers, and “Mission Accomplished.”

Conservatives of many stripes have recognized that there is something deficient in the American tradition. Yet attempts to supply the missing element have not only failed, they have served to provide rhetorical cover for further consolidation of wealth and power in Washington and Wall Street. …

McCarthy’s appeal is echoed in Tom Friedman’s recent essay calling for greater personal and civic responsibility (and “more and better” regulations, too, of course).

In the U.S., however, the greatest escalations of police powers have taken place under Republican presidents elected in the name of “values voters” or the “silent majority.” Anti-liberal leaders like Nixon and the second Bush have only made matters worse—the culture coarsens all the more while the demands of national security displace those of hearth and home.

As actual morality disintegrates, politics becomes deeply moralistic. This is not a paradox: it is always easier for the virtucrat to demand that government reform society than for him to reform himself or his own neighborhood. Conservatives no less than liberals have indulged in morality by proxy, according to which the measure of a man is not how he behaves but how he votes and what ideology he professes. Control of government has become a substitute for leading a good life …

America does not just suffer from the absence of similar institutions to give authoritative voice to counter-values. We have national institutions, but not of the traditional, pre-liberal kind. Ours are the White House, the Pentagon, and the Federal Reserve. Everything else is the domain of wealth and private interest—including Congress and our churches. …

Here is McCarthy’s challenge, which to me speaks directly to the mission of The Ludwig von Mises Institute and other Austrian institutions of excellence:

There is no way around that: without formal institutions of authority, informal hierarchies rooted in excellence of character will have to do. George Washington, after all, had a higher place in the hearts of his countrymen than George III did in those of his subjects. Today the place for such ethical leadership is not in the White House, but in legislatures and the splintered institutions of civil society—perhaps most of all in the nonprofit sector of think tanks and universities, the closest things we have to what Samuel Taylor Coleridge described as the clerisy. Our universities have fallen far short of their missions, but institutions such as the Tocqueville Forum, which hosted Phillip Blond at Georgetown, may yet provide seeds of regeneration.

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Sociopaths-R-Us? Here’s someone’s interesting thought experiment: "What If BP Were A Human Being?"

May 17th, 2010 No comments

Further to my preceding BP posts regarding the gaps between (i) Austrian insistence that we focus on individual rights and plan formation and (ii) the penchant of some (many!) libertarians to support corporations while bashing citizens groups which are unhappy with the impacts of corporate actions on others, I stumbled across the above-captioned essay by Bruce Dixon, Editor of The Black Commentator (May 12, 2010, AlterNet).

I here are some liberal quotes (no pun intended; emphasis added):

If BP were a person it would be a career criminal, a pathological liar and an international serial killer with a rap sheet several times the size of the Chicago Yellow Pages.

The third largest oil company in the world, BP was born in 1909 as the Anglo-Persian Oil Company, and was partly owned by the British government. Its headquarters offices are in the UK.. So if it were a flesh and blood person, far and away the wealthiest person on earth, and a British subject. Assuming that our imaginary human BP got into the oil business at the youthful age of say, 20, and stayed at it for just over a century, BP the human being would be closing in on his 121st birthday. Damned few of us will see triple digits, and none of us that reach even our 60s and 70s retain the level of energy, or often of interest that we possessed only a couple decades before. A normal 120 year old human will have more than a few ailments and bodily systems on the brink of failure. But not our human BP. If BP were a person, it would be immensely, almost inconceivably wealthy AND perhaps immortal. ….Among flesh and blood humans, there are no precise analogs to what corporations do when they buy and sell each other. The acts of matrimony and cannibalism perhaps comes closest, with consenting or non-consenting spouses and/or victims, along with assumption of the spouse and/or victim’s assets. Among humans, marriage is a reason to change one’s name too. Another reason to change one’s name is simply to escape one’s old record and reputation. Among humans, that’s called assuming an alias. So our immortal, immensely wealthy human BP may have been married several times, perhaps several times at once, could be a cannibal, albeit with sometimes willing victims, and operates under several aliases.

You don’t have to look too long and hard to understand why a flesh and blood BP would need aliases. The objective of the Anglo-Persian Oil Company was to monopolize the rich oil resources of what is now Iran. Among the many illegal acts it committed toward that end was a £5,000 bribe to future British PM Winston Churchill back in 1923 to lobby for its interests A secular nationalist and democratically elected Iranian government kicked BP out in the early 1950s. BP turned its lobbying to Washington DC, and in 1953, helped persuade the U.S. to overthrow the Democratic Iranian government and installed its puppet, the Shah, popularly known as the Crowned Cannibal. The Shah, in the course of killing millions and stealing billions, invited BP back, and it stayed until 1979, when the Shah was overthrown.

In a century of doing business, BP has been implicated in bribery of public officials, grand theft, fomenting unjust wars, of murder, torture, plunder, environmental destruction, and money laundering in and between scores of countries on every continent except Antarctica. If BP were a person it would be a career criminal, a pathological liar and an international serial killer with a rap sheet several times the size of the Chicago Yellow Pages.

Given his (we’re reasonably sure a human BP would not be a woman) global reach and proclivity to corrupt public officials around the world, and past record, BP the human being would be a flight risk. It would be indicted for murder, or at least negligent homicide in the deaths of the last eleven oil workers to die when its rig exploded in the Gulf of Mexico. U.S. law doesn’t have death penalties for corporations, but the federal government, and most or all of the first wave of Gulf Coast states where the oil slick will wash up do. We’re talking Florida, Alabama, Mississippi, Louisiana and Texas.

The assets of corporations are protected against lawsuits of all kinds. BP and other oil industry giants long ago paid for the insertion of provisions into the U.S. federal code that limit their liability in the case of oil spills to a mere $75 million dollars. But there are no limits on the liability that individually held wealth can occur. A human BP, even though 120 years old and immensely wealthy, could see all his assets around the world frozen, would be imprisoned without bail, and might be on trial for his life.

But of course the real BP is a corporation, and death penalties, like laws in general are for humans, not corporations.

In the single instance of the blown rig at Deepwater Horizon, BP had a deal with the U.S. federal government that excused it from paying any royalties, and subcontracted the building and operation of the rig to Halliburton, Cameron and other corporations. If they too were human beings like our hypothetical human BP, we could add “conspiracy to commit” and “conspiracy to conceal” in front of all the previously mentioned offenses, and the lot of them along with many of their favorite government officials could be rounded up.

When it suits their purposes, employees and mouthpieces of various transnational firms hasten to assure us that “corporations are people too.” In a sense this is certainly true. Despite what some bible thumping fundamentalists will tell you, corporations were not ordained by the Almighty. Corporations are legal fictions. They are artificial shields under which we agree to allow a handful of extremely wealthy people to rule over the rest us, and plunder the planet and its people at will, just as centuries ago most of the humans who mattered agreed that kings, queens and nobly born, the “people of quality” had the god given right to ride roughshod over humanity.

Ultimately, people woke up, rose up, and revoked those privileges. How long will it be before we revoke the lawless privileges of corporations, before we limit their immunity, curtail their immortality, and rein in their immorality?. How long can we, and the planet on which we depend for life itself, wait? Is there every a line that cannot be crossed? Where is it? What will it take?

Apart from Mr. Dixon’s questions, it seems to me one must ask – does it make any difference, either to the broader statist environment that we find ourselves, or to the behavior of BP, that BP is a corporation that is granted unlimited life and whose shareholders are excluded from any personal liability for corporate acts? I think that it undeniably matters, and quite deeply.

Just as libertarian and other commentators have suggested that we need to insist that firms that engage in the banking business be partnerships with unlimited liability in order to control the moral hazard engendered by the current system, so too should libertarians insist on restoring personal responsibility and ending corporate limited liability. If we do so, we will certainly see much greater efforts by those who own and/or manage business enterprises to control risks and behave responsibly – which will take pressure off of spiralling calls for corrupt and inept governments to “do something”!

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James Galbraith castigates a "disgraced profession [that] failed miserably to understand the forces behind the financial crisis."

May 17th, 2010 No comments

I thought I would bring to readers’ attention this concession/semi-confession by James K. Galbraith in testimony to the US Senate Judiciary Committee earlier this month.

Galbraith’s testimony is interesting and useful, but nevertheless shallow – he completely misses the role of government regulkation and money manipulation in fostering moral hazard run rampant, or the insights of Austrians, who generally had a great idea of the problems – for decades 

Galbraith focusses solely on financial fraud, and ignores the deeper failures of Keynesianism. His litany of failures is sobering, but he provides zero insights into why those failures occurred – other than the greed understandably manifested when those who govern are busy playing with OPM – Other People’s Money. Still, I can’t argue with his closing(emphasis added):

Some appear to believe that “confidence in the banks” can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.

But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you.

Readers might also enjoy this interview/debate Galbraith did on the Scott Horton Show/Anti-War Radio with Robert Higgs, Senior Fellow in Political Economy at the Independent Institute.

Galbraith is Professor of Economics at The University of Texas at Austin, and is author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too.

 

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Corporations uber Alles: Conveniently inconsistent on "abstractions" like "the environment", Austrians overlook their preference for "corporations" over individuals,& their lack of interest in problem-solving

May 16th, 2010 No comments

I have already criticized Lew Rockwell’s May 5, 2010 piece, “Feel Sorry for BP?”; and commented on a response that I received from Stephan Kinsella; I’d like here to  focus on a curious inconsistency.

1. I note that Lew Rockwell asserted that: (emphasis added)

The abstraction called the “ecosystem” — which never seems to include mankind or civilization — has done far less for us than the oil industry, and the factories, planes, trains, and automobiles it fuels.”

and

the environmentalists went nuts yet again, using the occasion to flail a private corporation and wail about the plight of the “ecosystem,” which somehow managed to survive and thrive after the Exxon debacle.”

While I questioned whether Lew really intended to assert that resources like air, that we use freely from the atmosphere are “far less” important to us than the oil-derived energy we use and disagreed with his facts about the continuing effect s of the Exxon Valdez spill), I agreed with him that the “ecosystem” is an abstraction that may often be unhelpful (emphasis added):

Austrians understand that focussing on the “ecosystem” is often an unhelpful abstraction and distraction from the fact that there are competing and conflicting interests held by people in resources that are not effectively owned or managed. The Austrian focus is on how to enable those with conflicting desires to coordinate their planning …

This perspective was neatly summarized by Roy Cordato, who said (emphasis added)

“by placing environmental problems within the context of personal and interpersonal plan formulation, we discover that they are not about the environment per se but about the resolution of human conflict.”

“The “social cost” approach to environmental economics has led to the “dehumanization” of issues related to the environment [where] [p]ollution or “tragedy of the commons” problems are not problems because of the damage that some people may or may not be inflicting on others, but because they create what amounts to disembodied harms. A problem occurs because some goods are “overproduced” while other goods are “underproduced.” In its more extreme form this has led to a separation of the concepts of costs and harm from human beings completely, substituting notions such as “costs to the environment,” and damage to the ecosystem.”

“pollution problems …  create an interpersonal conflict over the use of means and therefore obstruct efficient plan formulation and execution. Pollution is therefore not about harming the environment but about human conflict over the use of physical resources.”

“Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.”

Even while I agree with Cordato about he focus on plan formation, concepts such as “ecosystems” and the “environment” may still be useful, and are often simply short-hand for resources “in the commons”, that is, resources that people value but are either unowned, partially-owned, commonly-/community-owned or government-owned. Some readers may recall that Elinor Ostrom the winner of the Nobel Prize in Economics last year, is a political scientist in the Austrian tradition who has devoted her career to studying human management of common resources? Lew himself expressly recognized the usefulness of “environment” in this case:

in a world in which government owns vast swaths, and the oceans are considered the commons of everyone? It becomes extremely difficult to assess damages to the environment at all.

2. Despite Lew’s focus on the abstraction of the “ecosystem”, it was curious that Lew (a) asserted that BP is by far the leading victim” (my emphasis)  and that “The incident is a tragedy for BP and all the subcontractors involved while (b) severely castigating what I referred to in my post as “those nasty enviros” and their nature-loving, misanthropic motives. Lew’s words:

torrents of environmental hysteria.

the environmentalists went nuts yet again

he environmentalists, with their fear mongering and hatred of modern life [are happy about the disaster]

The environmentalists are thrilled because they get yet another chance to wail and moan about the plight of their beloved marshes and other allegedly sensitive land

The main advantage to the environmentalists is their propaganda victory in having yet another chance to rail against the evils of oil producers and ocean drilling. If they have their way, oil prices would be double or triple, there would never be another refinery built, and all development of the oceans would stop in the name of “protecting” things that do human beings not one bit of good.

But as I noted in my response, Lew fails to follow the Austrian insight that the focus should be on human plan formation and conflict resolution. What does he mean by the abstract term “environmentalists” – just who are they and what do they want, and how can Austrians provide advice on how to enable parties with conflicting goals and preferences to resolve their conflicts? In the case of the BP oil spill, there is very ;little room between the “environmentalists” and ordinary Gulf coast resident. In any case, as I noted previously,
Surely any clear-thinking Austrian can see that, just as Austrians hate our modern kleptocratic, incompetent and moral-hazard-enabling government, many enviros are relatively well-off people who dislike how “modern life” seems to take for granted the way government-ordered “capitalism” enables a systemic shifting of risks from manufacturers to those downwind and downstream, and to all who enjoy what remains of commons or government-owned property.
The Austrian focus is on how to enable those with conflicting desires to coordinate their planning, not to engage in some muddle-headed balancing of collective “utility” that says one powerful group of users is “right”, so other claimants should be scoffed at and chased away.
Lew, of course, is entitled to his own preferences, but it is fairly clear that his purposes are NOT to aid conflict resolution, but to bash one group of people whose preferences regarding common and government-owned resources conflict with those of another group whose interests he favors.
3.  And so I arrive at my principal point:  In pushing his preferences, Lew has not only failed to help any of us understand who “environmentalists” are and what they want, but he has also fail to identify just who  “BP” is, that we are supposed to feel so sorry for.
“BP” is corporation – a legal entity created by the state – and is not itself any one person, but a complex organization of very many people. Sure, we should feel sorry for the families  those who lost their lives (employees of contractors) – but they receive only passing mention from Lew. Who is left to feel sorry for –  BP’s highly paid executives, who like those of Halliburton and Transocean, are busy trying to find someone else to blame for the blowout, failed shutoff valve, lack of response preparation, and resultant enormous and continuing spill (that even now – with the complicity of the Administration) – they continue to low ball by orders of magnitude)? Other employees, some of whose routine has been interrupted by the damage control efforts, but remain gainfully employed? Or are we to feel sorry for the mass of shareholders, whose dividends might be cut, but not by the full amount of losses that others will suffer? Employees who feel some psychic pain at the blow to their company’s reputation (direct or indirect moral suasion from those injured or who feel enough stake in the matter to be upset)?
Lew refers to the government viewing “every capitalist producer as a bird to be plucked” – but none of BP’s shareholders is a capitalist producer. Someone may be plucked by government from time to time, but this time, pray-tell who is plucking whom?  Sure, Obama’s press secretary, Robert Gibbs, can make unsavory boasts like the government plans to keep “its boot on BP’s neck” but as BP HAS no neck, a little specificity as to whom the government may be oppressing would be helpful in weighing Lew’s arguments.
Without any specificity of whom we are to see as they “biggest victim”, it seems that Lew’s complaint amounts to little more than sympathy for executives and shareholders under our current system of statist corporations, firms that exploit government and then whine about the groups of citizens who inevitably feel they have to seek redress from government. If this is the defense that Lew intends, then it is one I’d be grateful to see him elucidate more carefully, in response to my reply to Stephan Kinsella. I think Sheldon Richman and Kevin Carson would also be grateful.
While corporations are composed of people, they themselves are not people. Accordingly, while I certainly agree with Lew that “there is every reason to express great sadness for what has happened”, Lew is ALSO right that “the idea that BP should be hated and denounced is preposterous” – because BP is just a thing, a legal fiction, and not any particular person. For that reason, the very idea that BP is the “leading victim” or that we should “feel sorry for BP” is, as Lew says, preposterous.
4. In this context, let me note my ongoing strong disagreement with Stephan Kinsella about the state grant of limited liability to shareholders. Stephan seems to think that the grant is irrelevant (despite the fact that it is one of the chief reasons why investors choose the corporate form) since, under the system of large public corporations that has arisen as a result, it would be unfair to ascribe any liability to shareholders who did not personally direct any action that damages others. (This, is of course, besides the point – the grant itself is cannot be justified on libertarian grounds, and it clearly affects choices of corporate form and subsequent corporate behavior and oversight dynamics.)  I agree with Stephan that it is crucial that libertarians not lose their focus on individuals when examining any organization – but note that the slippage in focus from individuals to large, impersonal organizations where personal responsibility is extremely difficult to locate is precisely one of the salient consequences of the state grant of limited liability corporate status.
I also note that despite Stephan’s insistence that only managers and employees who caused damage to third persons or their property should have any liability (and individual shareholders carry no burden of responsibility without any direct involvement in particular decisions), Stephan too falls easily into defending an impersonal”BP” while bashing the perennially undefined “enviros“, whom he sees generally as “cancer on the earth … anti-human, anti-industrialist sickos [who] are the real enemies of humanity.”  Is it too hard to expect some consistency in focus on individuals, both in and out of corporations, instead of a lumping of groups into “good” and “evil”?
5. Let me make a final reference to Cordato, who states (emphasis added):
“The Austrian focus is on how to enable those with conflicting desires to coordinate their planning …”
“Under … Austrian approaches to welfare economics, therefore, the solution to pollution problems, defined as a conflict over the use of resources, is to be found in either clearly defining or more diligently enforcing property rights.”
“This is not to suggest that the clear definition of property rights is an easily achievable goal in all situations. It is not. But, while the Austrian approach to solving pollution problems may face implementation problems at the margin, i.e., with certain “tough cases,” defining and enforcing property rights already stands as the fundamental way in which interpersonal conflicts of all kinds are avoided or dealt with. This approach is clearly operational as it has been in operation, to one extent or another, throughout human history. The challenge for Austrians is to explain how we apply the theory in certain tough cases, not to explain, in reality, how it can be applied at all.”
In the case of the BP spill or other “environmental” issues, are either Lew Rockwell or Stephan Kinsella remotely interested finding ways to solve interpersonal conflicts over common resources or resources with poorly defined property rights? Or are they simply engaged in a reflexive tribal defense of “corporations” against malevolent, grasping citizens – the so-called “enviro-fascists”?
And am I the only one who thinks it is no small disgrace that so many Austrians prefer “smashing watermelons” to hard work, and is left wondering – if we must use terms like “misanthrope” – just who the misanthropes are?
Scratch that last thought – clearly peppering one’s speech with fulminations about the evil intentions or actions of other is not an effective approach to discourse, trust-building or problem-solving. This misanthrope refuses to further cloud his own mind or to impair his feeble powers of persuasion.

 

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Sheldon Richman doesn’t feel sorry for BP, either

May 14th, 2010 No comments

As a follow-up to Lew Rockwell‘s Feel Sorry for BP? and my two sets of comments on it (Risk-shifting, BP and those nasty enviros, and Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens), I note and highly recommend Sheldon Richman’s May 14 commentary, “Self-Regulation in the Corporate State: The BP Spill; Which system failed”, at TheFreemanOnline.org.

Here a portion of Sheldon’s commentary (emphasis added):

Yet, the New York Times reported, “Despite … repeated promises to reform, BP continues to lag other oil companies when it comes to safety, according to federal officials and industry analysts.” The Times said BP chief executive Tony Hayward “conceded that the company had problems when he took over three years ago. But he said he had instituted broad changes to improve safety….”

Why did BP have problems? The Times goes on: “Some analysts say the safety problems indicate that BP has not yet reined in the culture of risk that prevailed under Mr. Hayward’s predecessor, John Browne…. Mr. Browne set aggressive profit goals, and BP managers drastically cut costs to meet their quarterly targets. After the 2005 explosion in Texas City [killing 15 workers], investigators found that routine maintenance that might have averted the accident had been delayed because of pressure to reduce expenses.”

What we seem to have is a company that, in pursuit of short-term profits, was less than meticulous about safety (other people and their property, that is) while it and its industry effectively vetoed government safeguards that might have prevented the explosion that killed 11 workers and caused the damaging spill.

Some will defend BP in the name of the “free market” or minimize the event, protesting that the Obama administration’s remedial measures will “undermine our capitalist system.” Meanwhile, the “progressive” statists will declare that once again the free market has failed. The respective bases will be rallied.

Corporatist System

But BP’s defenders and statist critics both have it wrong. This is not the story of a well-meaning or negligent firm operating in the free market. Negligent or not, BP is a player in a corporatist system that for generations has featured a close relationship between government and major business firms. (It wouldn’t have surprised Adam Smith.) Prominent companies have always been influential at all levels of government — and no industry more so than oil, which has long been a top concern of the national policy elite, most particularly the foreign-policy establishment. When state governments failed in the 1920s to put a lid on unruly competition and low prices, the oil companies turned to Franklin Roosevelt and the federal government, winning the cartelizing Petroleum Code, significant parts of which were revived after the National Recovery Administration was declared unconstitutional. In the 1950s, when cheap imports depressed prices, the national government imposed quotas on Middle Eastern oil. (In 1960 OPEC, a “cartel to confront a cartel,” was founded.) Republican or Democratic, energy policy is not made without oil industry input.

In this context there’s less to the contrast between government regulation and corporate self-regulation than meets the eye. Self-regulation in a corporate state does not constitute the free market. When companies are sheltered in any substantial way from the competitive market’s disciplinary forces, incentives turn perverse. Moreover, “state capitalism” and the corporate form (pdf) – with its agency problem – can produce the temptation to cut costs imprudently in order to make the next quarterly report look attractive to shareholders.

“Putting profits before people” is a feature of state, or crony, capitalism not the free market.

I accepted the invitation of an empty comment thread to post a few comments, which I copy below:

Sheldon, great post.

I also posted a few thoughts in response to Lew Rockwell’s sympathy for BP and in reply to a response by Stephan Kinsella:

Risk-shifting, BP and those nasty enviros – TT’s Lost in Tokyo http://bit.ly/alFkim

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens http://bit.ly/dc3RD9

I agree with what you wrote, but would note the following as well:

– government’s “ownership” of the seas & seabed leave a continuing tragedy of the commons in its wake, as resource users have no rights to manage, invest in sustainability, or exclude, sue or negotiate with other users whose interests or use conflicts. Thus, fishermen, shrimpers, oystermen and the like were not in a position to negotiate in advance with BP on precautions, and are poorly situated to seek damages.

– you touched on the ridiculous and counterproductive limitation of liability the the US government gifted to BP, but fail to directly note or criticize the much deeper and pervasive problems that stem from state governments’ grant of corporate status, particularly “limited liability”.

From limited liability and corporate status flow a steady transfer of risks from enterprises to the public as a whole: the corporate form enables the growth of large enterprises poorly managed by shareholders (who are dis-incentivized by “veil-piercing” judicial doctrines from trying to closely manage, and generally have little practical ability to oversee anyway), the growth of risk-taking by managers (who, like shareholders, can capture the upside of risky ventures but have little or no personal liability when injury is caused to innocent third parties), growing power and ability to influence judges, politicians and media – and so greatly eroding strict common-law protection of property rights from pollution, and resulting threats to health and safety that spur government action and thus the cycle of struggle for control over government, in which insiders always have the upper hand.

But beside these points, I note that simply explaining that what led to the spill and our general state of affairs was not “free market” capitalism isn’t particularly helpful in giving people direction on how to improve our situation.

Should we:

– insist on ending legislative grants of limited liability, both for ocean oil & gas drilling and for corporations generally? should we insist that drilling only be conducted by partnerships that have no limited liability (but can buy insurance)?

– are there tools of moral suasion that we ought to apply? should we be insisting on naming the names and demanding personal responsibility by managers involved?

Not merely your diagnosis, but your thoughts on practical courses of treatment would be helpful.

Sheldon, great post.

I also posted a few thoughts in response to Lew Rockwell’s sympathy for BP and in reply to a response by Stephan Kinsella:

Risk-shifting, BP and those nasty enviros – TT’s Lost in Tokyo http://bit.ly/alFkim

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens http://bit.ly/dc3RD9

I agree with what you wrote, but would note the following as well:

– government’s “ownership” of the seas & seabed leave a continuing tragedy of the commons in its wake, as resource users have no rights to manage, invest in sustainability, or exclude, sue or negotiate with other users whose interests or use conflicts. Thus, fishermen, shrimpers, oystermen and the like were not in a position to negotiate in advance with BP on precautions, and are poorly situated to seek damages.

– you touched on the ridiculous and counterproductive limitation of liability the the US government gifted to BP, but fail to directly note or criticize the much deeper and pervasive problems that stem from state governments’ grant of corporate status, particularly “limited liability”.

From limited liability and corporate status flow a steady transfer of risks from enterprises to the public as a whole: the corporate form enables the growth of large enterprises poorly managed by shareholders (who are dis-incentivized by “veil-piercing” judicial doctrines from trying to closely manage, and generally have little practical ability to oversee anyway), the growth of risk-taking by managers (who, like shareholders, can capture the upside of risky ventures but have little or no personal liability when injury is caused to innocent third parties), growing power and ability to influence judges, politicians and media – and so greatly eroding strict common-law protection of property rights from pollution, and resulting threats to health and safety that spur government action and thus the cycle of struggle for control over government, in which insiders always have the upper hand.

But beside these points, I note that simply explaining that what led to the spill and our general state of affairs was not “free market” capitalism isn’t particularly helpful in giving people direction on how to improve our situation.

Should we:

– insist on ending legislative grants of limited liability, both for ocean oil & gas drilling and for corporations generally? should we insist that drilling only be conducted by partnerships that have no limited liability (but can buy insurance)?

– are there tools of moral suasion that we ought to apply? should we be insisting on naming the names and demanding personal responsibility by managers involved?

Not merely your diagnosis, but your thoughts on practical courses of treatment would be helpful.

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More PR-novice scientists bring BB guns to the war over climate policy; fossil-fuel interests and "skeptics" tremble

May 11th, 2010 No comments

[Update: added a link  to Roger Pielke, Jr. at the end.]

My pal Stephan Kinsella has pestered me about the recent letter in Science by a bunch of the world’s leading scientists, so I suppose I ought to mention it.  (I won’t make another “Climate Confession”, but some of my earlier remarks about the Great Climate Email Kerfluffle may be worth repeating, particularly as various investigations concluded that no scientific dishonesty occurred)

Those who have more than a passing interest in science, the role of science in policy and in climate-related rent-seeking ought to read the letter, signed by 255 members of the the National Academy of Science, including 11 Nobel Prize winners (in hard sciences); I won’t post any extensive quotes here.  I simply note this conclusion:

“Compelling, comprehensive, and consistent objective evidence that humans are changing the climate in ways that threaten our societies and the ecosystems on which we depend.”

The letter is a reaction, chiefly by scientists not active in the IPCC process, to recent harsh attacks on their “climate science” colleagues (including threats of legal action by Sen. Inhofe and initiation of legal action by the Virginia Attorney General), and an effort to support such scientists by expressing a strong concerns about the possible consequences of continued inaction. The letter urges policy action and blames much of the attacks on efforts by rent-seeking fossil fuel interests to protect their advantaged position. The letter itself – as well as the fact Science put it behind a paywall along with a Photo-shopped photo of a polar bear on an ice floe! – showcases the political naivete and amateurishness of the scientific establishment.

Obviously scientists have no particular expertise in making public policy, but it IS striking that so many of them are willing to venture out onto thin ice by raising their voices in alarm.

Readers may find the following background/commentary on the letter to be useful:

1. I repeat some of remarks I made when the email scandal arose (altered somewhat):

  • The Climate Hack is certainly egg on the face of some climate scientists – although this has been spun ridiculously out of context (much criticism is clearly simply wrong, though those who find the whole thing “delicious” have a tough time looking past the sources they prefer to read) – but the implication that the science is nothing but a conspiracy is an obvious fantasy. The political amateurishness of the scientists alone tells us that. (If any readers honestly need help in finding their way through the fog – self-deluded or deliberate – of the “skeptics” here, please let me know.)
  • Austrians/libertarians already knew that much of the climate science is politicized, especially here, not simply because of public funding, but chiefly because all parties – fossil fuel investors seeking to protect a generous status quo, enviros, politicians & bureaucrats, and those seeking greater advantage or more investment climate certainty – are seeking to steer government in particular directions, in ways that may significantly affect all of us. A further factor in such politicization is the simple difficulty that laymen (and scientists) have in wrapping their own heads around the climate science, and for which personal confirmation may take a lifetime. Personal and tribal predilections to hate “environazis”and the like, on the one hand, or to disdain evil capitalists, on the other, has nearly everyone looking reflexively for whatever scrap of science confirms their existing views and/or suits their political preferences.
  • The discord among scientists and attempts at gate-keeping are part and parcel of science – publicly-funded or not – but because of the political importance of climate science, we need greater, not less, transparency. The apparent efforts at gate-keeping (seeking to influence what gets published in peer-reviewed journals and what appears in IPCC reports) is what seems most objectionable, but there has been plenty of disagreement and change in views even in the dominant view; the science is and will always remain unsettled. All dissenters have found ways to make their views known, most of which have been examined and found wanting, and few dissenters have mutually coherent views.What has happened is that scientists who are extremely concerned about climate change have felt that political action is needed, and that dissenting views are dangerous distractions, and have made efforts to limit “distractions”. Such a belief appears to have been well-founded, but acting on it in this way a strategic mistake. Greater openness is required for publicly-funded research, particularly here where there is a strong, established and resistant rent-seeking class that seeks to minimize the science and to distract public discussion. While the efforts of climate scientists to provide data to and to address the arguments of “skeptics” would necessarily entail a distracting amount of attention, it is apparent that they simply need to grin and bear it.
  • Much – though not all – of the “skepticism” is clearly revealed as an extended, deliberate campaign by fossil fuel interests, dressed up in part by scientists who are non-experts in the field they criticize, with support by “conservatives” and “libertarians” who prefer a massive unmanaged meddling with global ecosystems (and defense of a government-entangled, pro-fossil fuel firms status quo) over a likely expansion of government.

2.  Andrew Revkin’s NYT Dot Earth blog piece and an article at the Guardian both provide useful explanation of background and links.

3.  The related editorial by Brooks Hanson (deputy editor for physical sciences) and has some insightful remarks on the perceived urgency of the problem and how scientists can better interact with the public and policy makers.

4.  Nature, the highly respected British scientific journal, had an interesting (but misguided, I believe) editorial in March that appears to have influenced this letter; here is an excerpt:

Scientists must now emphasize the science, while acknowledging that they are in a street fight.

Climate scientists are on the defensive, knocked off balance by a re-energized community of global-warming deniers who, by dominating the media agenda, are sowing doubts about the fundamental science. Most researchers find themselves completely out of their league in this kind of battle because it’s only superficially about the science. The real goal is to stoke the angry fires of talk radio, cable news, the blogosphere and the like, all of which feed off of contrarian story lines and seldom make the time to assess facts and weigh evidence. Civility, honesty, fact and perspective are irrelevant.

5.  While scientists have concerns and policy preferences, clearly they are not politically powerful, even as opposition to climate change policy is very solidly grounded in efforts by sophisticated fossil fuel interests to protect investment returns. Here is a brief introduction to the mis-information campaign.

6. The Royal Society of New Zealand has recently posted a statement regarding man’s impact on climate and ecosytems that is also worth review.

7. Roger Pielke, Jr. has some interesting comments; chiefly, he seems to castigate scientists for their poor PR skills – an approach consistent with his penchant for ongoing criticism of scientists (to the approval of “skeptics”), but hasn’t led any scientists to sign Roger up to be their PR coach.

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Geoengineering: Bill Gates keeps investing his personal fortune on ways to offset man's impact on climate – this time on artificial clouds to increase albedo; libertarians cheer?

May 11th, 2010 No comments

Bill Gates – who clearly must have a screw loose (because all of us smarter people are absolutely sure that puny man can’t possibly affect climate, unless we’re trying intentionally, of course) – continues to invest in geoengineering projects that might be helpful to dampen climate change.

His latest venture? According to a report in Times Online

Bill Gates, the Microsoft billionaire, is funding research into machines to suck up ten tonnes of seawater every second and spray it upwards. This would seed vast banks of white clouds to reflect the Sun’s rays away from Earth.

The British and American scientists involved do not intend to wait for international rules on technology that deliberately alters the climate. They believe that the weak outcome of December’s climate summit in Copenhagen means that emissions will continue to rise unchecked and that the world urgently needs an alternative strategy to protect itself from global warming.

Many methods of cooling the planet, collectively known as geoengineering, have been proposed. They include rockets to deploy millions of mirrors in the stratosphere and artificial trees to suck carbon dioxide from the air. Most would be prohibitively expensive and could not be deployed for decades.

However, a study last year calculated that a fleet of 1,900 ships costing £5 billion could arrest the rise in temperature by criss-crossing the oceans and spraying seawater from tall funnels to whiten clouds and increase their reflectivity.

Silver Lining, a research body in San Francisco, has received $300,000 (£204,000) from Mr Gates. It will develop machines to convert seawater into microscopic particles capable of being blown up to the cloud level of 1,000 metres. This would whiten clouds by increasing the number of nuclei. The trial would involve ten ships and 10,000sq km (3,800sq miles) of ocean. Armand Neukermanns, who is leading the research, said that whitening clouds was “the most benign form of engineering” because, while it might alter rainfall, the effects would cease soon after the machines were switched off.

To the extent that he’s investing his own money and not twisting anyone else’s arms, I imagine that good libertarians and conservatives are cheering. I mean, hasn’t Gates embarked precisely on the type of bold, we-can-fix-it type of course that George Reisman and Stephan Kinsella have envisioned? And there’s still hope that Gates might finally invest in the pet idea of Dr. Reisman and Stephan of open-air “nuclear winter” testing!

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Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

May 10th, 2010 1 comment

I pulled out my peashooter the other day and levelled a few criticisms (“Risk-shifting, BP and those nasty enviros“) at  Lew Rockwell‘s Feel Sorry for BP?.  I don’t imagine that Lew noticed, but my buddy Stephan Kinsella did.

I have long noted the reflexive defense of corporations by prominent Austrians and the stubborn unwillingness to closely examine the role that the special grants to corporate investors that lie at the core of the problem of snowballing corporate statism, spiralling politicized rent-seeking battles, incompetent government and concupiscient and grand-standing politicians. So Stephan’s comments come as no surprise:

1.  Stephan chooses to set the stage with a bunch of labels –  “enviro-global-warming anti-corporation libertarian”. Whatever makes you happy, Stephan. I know you and others have a hard time resisting the urge, which is why I often playfully sign off as the resident friendly enviro fascist! Nah, couldn’t possibly be a “real” libertarian.

On corporations, the “environment”, and climate – as on central banking, fiat currency and the whole mess of banking and capital markets regulation – I’m simply anti-un-contracted-for-risk-shifting-and-government-enabled-moral-hazard and arguments against rent-seeking that ignore existing special deals.

But if it’s easier, just keep calling me”anti-corporation” and continue to lump me in with “enviro-fascists”.

 2.  I had wondered: 

Even if one concedes that some criticisms of BP will be unfair, how can BP possibly be cast [by Lew] as the LEADING victim – as opposed to all of the others whose livelihoods or property are drastically affected by this incident, which they had no control over whatsoever?

Stephan’s lame response?

BP is a victim in the sense that a terrible tragedy just happened to it, and it’s gonna cost it dearly. It’s the leading victim assuming the others damaged are going to be compensated from BP. The point is it’s a bad thing that’s happened to it.Why not feel sorry for them?

Really, Stephan?  BP deliberately measures and takes risks as part of its business; no one else who has been or maybe injured had a clear concept of such risks or either assumed them or had any ability to control them. Clearly, BP is the one that has interfered with others’ use and enjoyment of their own property, of common property and of government-owned property; in law, we call them “tort-feasors”.  They are not a “victim” in any sense that we commonly apply in situations like this. Empty word games like yours turn reality in its head. Right, Toyota is a victim when its cars’ brakes have problems, TVA is a “victim” when its coal fly ash dams break, and so are others who “unintentionally” injure the health or damage the property of others – when latent risks materialize or they are caught at it and suffer some economic loss as a result.

It’s hard to believe you want to further support Lew’s absurd claim that BP is the leading victim now – we simply have assume that in the future, BP or someone else will throw some compensation at all of those other unworthy, insignificant passive victims. Nice.

Sure, it’s too bad that this happened, all around. BP gambled (heroically?) to make money; everyone has lost. Poor BP!

3. Lew: “The incident is a tragedy for BP and all the subcontractors involved. It will probably wreck the company”

Me: 

The incident will certainly be costly for the firms involved, but the firms will survive the death of employees, and there is certainly very little risk indeed that BP will be “wrecked” by the spill. Far from it; it is unlikely that BP will even bear the principal costs of cleanup efforts, much less the economic damages to third parties that federal law apparently caps at $75 million.

Have you not heard of “INSURANCE”? A little thinking (and Googling) would tell you that BP (and its subcontractors) has plenty of it. To the extent BP is NOT insured, it has ample capability to self-insure, unlike all of the fishermen, oystermen and those in the tourist industry who are feeling significant impacts. Insurers will bear the primary burden, not BP.

Stephan:

Obama has threatened BP and they have caved in, agreeing to pay above the $75M cap. And the cap was in exchange for a tax on oil companies to be put into the Oil Spill Liability Trust Fund for such emergencies–do you think that BP will be able to get that tax refunded? Naah.

Sounds like you’re agreeing that this incident is unlikely to “wreck”BP, given insurance, self-insurance and the $1.6 billion Oil Spill Fund. But it sounds like you also are suggesting that BP has every right to negotiate with government for liability caps. Interesting.

4. Lew:   “we might ask who is happy about the disaster: 1. the environmentalists, with their fear mongering and hatred of modern life”

Me:

Sorry, but this is perverse: enviros might feel that they have been proven right – and you might be annoyed that they can make such a claim – but they certainly aren’t “happy” with any of the loss of life, damage to property or livelihoods of the little guy (or of bigger property owners), or to a more pristine marine environment that they value.

Stephan: 

Aren’t happy? Have you seen, say, Spill Baby Spill, Boycott BP! ? And another tolerant, caring liberal on Slate’s Political Gabfest Facebook page said, “I don’t get the calls for pity. Boohoo another oil giant might have bankrupted itself.” These misanthropic sickos oppose nuclear power, which makes fossil fuels necessary. They act like they hate BP. Why? For making a mistake? Mistakes are inevitable. For drilling for oil? Why? We need oil.

Let me repeat: some might feel vindicated and be eager to use this incident to bash BP, etc. – people/firms certainly are fighting over government – but that doesn’t make them “happy” that disaster has occurred.

You apparently missed it, but there were plenty of “misanthropic sickos” on Lew’s comment thread who expressed thoughts similar to “I don’t get the calls for pity. Boohoo another oil giant might have bankrupted itself.”

The rest of this is also packed with nonsense.  Funny that Austrians fail to overlook that enviro opposition to nukes and to other fossil fuels is more than a little related to government’s dirty role in the industries, including liability caps like those present here. Do Austrians “hate” banks, securities firms and AIG for making “mistakes”? But aren’t mistakes “inevitable”? And don’t we need lenders and insurers? And a domestic auto industry?

Just what do these utilitarian arguments have to do with libertarian principles, anyway?

5.   Me:

[Lew’s] projection of happiness at damages to common resources/private property and hatred of modern life is especially perverse, given your own explicit recognition that government ownership/mismanagement of commons, and setting of limits on liability both skew the incentives BP faces to avoid damage, and limit the ability of others (resource users and evil enviros) to directly protect or negotiate their own interests. Why is the negative role played by government any reason to bash others who use or care about the “commons”?

Stephan: No libertarian is in favor of liability caps. What is he talking about?

Simple, Stephan. Lew explicitly recognizes that government has screwed up  the ability of enviros and others who have conflicting preferences about the use of resources to engage in voluntary transactions that would advance mutual welfare – yet he chooses to bash those whose preferences are frustrated by government, while feeling sorry for those whose preferences are favored. What is remotely even-handed – or Austrian – about this imbalance? Is it simply that it’s okay for those who make omelets to take eggs from others, since the omelet “makers” are being “productive”?

6.  Me:

We have seen Austrians – sympathetic to the costs to real people in the rest of the economy – rightly call for an end to a fiat currency, central banking and to moral-hazard-enabling deposit insurance and oversight of banks. In an April 9 post by Kevin Dowd on the financial crisis, we even had a call “to remove limited liability: we should abolish the limited-liability statutes and give the bankers the strongest possible incentives to look after our money properly” – but Dowd’s comments simply echoed in the Sounds of Silence. Why do you and others refuse to look at the risk-shifting and moral hazard that is implicit in the very grant of a limited liability corporate charter – not only in banking, but in oil exploration and other parts of the economy?

Stephan:

Removing artificial caps on liability has nothing to do with the limited liability of passive shareholders in a corporation. Their liability is limited simply because they are not causally responsible for the torts of employees of the company in which they hold shares.

I suspect this is the key reason why Stephan troubled himself to respond, but surely he can see it is not only counterfactual, but dodges any consideration of the consequences of limited liability in terms of fuelling industrialization and fights over using government to check corporate excesses. Investors then and now deliberately choose to conduct business activities through corporations precisely because government absolves owners from any liability in excess of enterprise assets.  While it is possible for voluntary counterparties (employees, lenders and others doing business with the firm) to agree in advance to limit their resources solely to enterprise assets, those who are injured by acts of companies or their employees and agents do not in advance choose the nature of the those who are responsible for harming them. Accordingly, the broad blanket grant of limited liability to corporations is clearly anti-libertarian.

Accordingly, dividends received by shareholders from risky activities are not clawed back if risks are realized and claims exceed corporate assets. Further, shareholders are given disincentives from too closely directing manage risk (for fear of claims that they have direct responsibility for torts). When combined with other corporate attributes (unlimited life & purposes, relative anonymity of ownership, remoteness of owners from communities in which the firms operate, and ability of powerful firms and wealthy investors to influence judges, legislators, bureaucrats and other officials), we have seen a steady erosion of common law and growth in the regulatory state – as citizens fight to limit the risks and costs that corporations impose on individuals and communities. Is Stephan unaware of the central role of corporations in rent-seeking battles? In the perversion of the 14th Amendment – designed to protect emancipated slaves and Chinese coolies – into a weapon to elevate corporations over the states, and to permanently shift power to the Federal government?

Just as most commentators overlook the massive moral hazard and risk-shifting that is part and parcel of the federal oversight of banking (necessitated by deposit insurance and fractional banking), so do Stephan and Lew insist on keeping their eyes closed to the legacy of risk-shifting, statism and escalating fights over increasingly incompetent and corrupt government. Why?

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Risk-shifting, BP and those nasty enviros; or, why does Lew Rockwell feel sorry for BP?

May 9th, 2010 No comments

[I that note my subsequent BP posts can be found here]

I refer to Lew Rockwell‘s May 5, 2010 piece, “Feel Sorry for BP?”

http://mises.org/daily/4331

Lew, I largely agree with your criticism of government but some of your piece is simply confused.

1. “It should be obvious that BP is by far the leading victim, but I’ve yet to see a single expression of sadness for the company and its losses.”

BP is the leading “victim”? Victim of what/who? Sure, they’re a target (1) for all manner of evil people whose livelihoods or enjoyment of their property or common property are directly or indirectly affected by the spill, (2) for evil enviro groups (relatively well-off citizens who profess to care about how well/poorly government manages the use of “common resources” by resource extraction industries), and (3) for evil governments and politicians looking to enhance their own authority/careers. But these are all a consequence of the accident, and not a cause of it. Has BP been defrauded, tricked or strong-armed into drilling anywhere? Is BP the “victim” of its own choices?

Even if one concedes that some criticisms of BP will be unfair, how can BP possibly be cast as the LEADING victim – as opposed to all of the others whose livelihoods or property are drastically affected by this incident, which they had no control over whatsoever?

2. “The incident is a tragedy for BP and all the subcontractors involved. It will probably wreck the company”

The incident will certainly be costly for the firms involved, but the firms will survive the death of employees, and there is certainly very little risk indeed that BP will be “wrecked” by the spill. Far from it; it is unlikely that BP will even bear the principal costs of cleanup efforts, much less the economic damages to third parties that federal law apparently caps at $75 million.

Have you not heard of “INSURANCE”? A little thinking (and Googling) would tell you that BP (and its subcontractors) has plenty of it. To the extent BP is NOT insured, it has ample capability to self-insure, unlike all of the fishermen, oystermen and those in the tourist industry who are feeling significant impacts. Insurers will bear the primary burdemn, not BP.

3. “we might ask who is happy about the disaster: 1. the environmentalists, with their fear mongering and hatred of modern life”

Sorry, but this is perverse: enviros might feel that they have been proven right – and you might be annoyed that they can make such a claim – but they certainly aren’t “happy” with any of the loss of life, damage to property or livelihoods of the little guy (or of bigger property owners), or to a more pristine marine environment that they value.

“Hatred of modern life”? Surely any clear-thinking Austrian can see that, just as Austrians hate our modern kleptocratic, incompetent and moral-hazard-enabling government, many enviros are relatively well-off people who dislike how “modern life” seems to take for granted the way government-ordered “capitalism” enables a systemic shifting of risks from manufacturers to those downwind and downstream, and to all who enjoy what remains of commons or government-owned property.

Haven’t Walter Block, Roy Cordato, Murray Rothbard and others written about this? Or do “good” Austrians these days simply hate government, but love big corporations and banks, and the way government enables them to shift risks to the rest of us?

Your projection of happiness at damages to common resources/private property and hatred of modern life is especially perverse, given your own explicit recognition that government ownership/mismanagement of commons, and setting of limits on liability, both skew the incentives BP faces to avoid damage, and limit the ability of others (resource users and evil enviros) to directly protect or negotiate their own interests. Why is the negative role played by government any reason to bash others who use or care about the “commons”?

We have seen Austrians – sympathetic to the costs to real people in the rest of the economy – rightly call for an end to a fiat currency, central banking and to moral-hazard-enabling deposit insurance and oversight of banks. In an April 9 post by Kevin Dowd on the financial crisis, we even had a call “to remove limited liability: we should abolish the limited-liability statutes and give the bankers the strongest possible incentives to look after our money properly” – but Dowd’s comments simply echoed in the Sounds of Silence. Why do you and others refuse to look at the risk-shifting and moral hazard that is implicit in the very grant of a limited liability corporate charter – not only in banking, but in oil exploration and other parts of the economy?

http://bit.ly/atelEr

4. “The abstraction called the “ecosystem” — which never seems to include mankind or civilization — has done far less for us than the oil industry, and the factories, planes, trains, and automobiles it fuels.”

Frankly, this is nonsense. Austrians understand that focussing on the “ecosystem” is often an unhelpful abstraction and distraction from the fact that there are competing and conflicting interests held by people in resources that are not effectively owned or managed. The Austrian focus is on how to enable those with conflicting desires to coordinate their planning, not to engage in some muddle-headed balancing of collective “utility” that says one powerful group of users is “right”, so other claimants should be scoffed at and chased away.

And the “ecosystem” is what gives us air to breathe, water, food and a host of other things. Do you really mean to say these are relatively unimportant?

5. “the environmentalists went nuts yet again, using the occasion to flail a private corporation and wail about the plight of the “ecosystem,” which somehow managed to survive and thrive after the Exxon debacle.”

Seems to me your “facts” about the damage done by Exxon Valdez to the “environment” – including the small segments used by by man – and recovery/compensation are basically counterfactual:

http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill

http://www.alternet.org/environment/22260

Further, it seems you don’t have any real clue as to the escalating damage that man is doing to our shared ocean “commons”. These two TED talks might help open your eyes:

http://www.ted.com/talks/jeremy_jackson.html

http://www.ted.com/talks/sylvia_earle_s_ted_prize_wish_to_protect_our_oceans.html

6. Finally, like BP, you have understated the degree of the oil leakage; BP initially estimated 1000 bpd, but later agreed with estimates by others that the leak is at least about 25,000 bpd, with risks of an even larger blowout.

Here’s to hoping for greater insight and more productive engagement from LvMI.

A lurking hater of mankind 😉

TokyoTom

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