Kevin Carson says, "In a Truly Free Market, BP Would Be Toast"
Another BP post!
I copy below some comments I left on the above-entitled post by Kevin Carson (slightly tweaked, with emphasis & links added):
TokyoTom on Jun 9, 2010, 1:39 am:
Kevin, good post. I imagine that the $75 million liability cap affected decion-making by BP managers in any number of ways, but let me note that the cap doesn’t apply (1) to claims by state and local governments and (2) if BP is determined to have been grossly negligent (since this cannot be determined in advance of final judical decision, a potentially much larger sword was hanging over BP’s head, even if it was discounted to zero by BP). Still, I agree with you about oversight by insurers, but one wonders whether BP actually insured any of its risk here. They certainly have been more likely to do so if there was no liability cap whatsoever.
You fail to note some other, more basic government interventions, particularly the grant of zero liability to shareholders, which perversely both (i) incentivizes shareolders to look the other way at corporate activities that profitably shift risks to third parties and (ii) generates agency problems which leave shareholders vulnerable to poor decision-making by executives.
Finally, you and celocelo1 miss another way for society to force oil cos like BP to internalize more of their costs – expand and formalize “catch rights” programs that empower fishermen and other resource users (including when and where oil/gas is developed), and would give direct rights to sue polluters, and end the current system, where fishermen are both trapped in a tragedy of the commons and beholden to government for protection of the resources and for some recompense in the case of damages suffered. I discuss catch rights over at my blog.
Regards,
Tom
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