TT's Lost in Tokyo — by TokyoTom

Another BP post!

Both of Kevin Carson’s most recent posts at Center for a Stateless Society are worth a read.

BP’s Fate in a Free Market, Part Two

How’s All That Progressive Regulatory Stuff Workin’ Out For Ya?

In particular, Kevin’s “Part 2” post – and the comments to it and posts by others whom he references – are quite thoughtful. Below are some points that I think deserve particular attention (emphasis mine):

Shawn Wilbur, a leading scholar in the history of the individualist/mutualist tradition in addition to being an anarchist himself, agrees that oil companies like BP would be far less able to externalize costs on the public in a free market order, absent such privileges as caps on liability.  But he goes on to raise the issue of the “many kinds of value and interest” that are not adequately represented by markets:

“After all, sea turtles and brown pelicans don’t get any more of a vote in the market than they do in elections or campaign contributions. Private property conventions tend to establish a separation of interests not reflected in, or respected by, the circulatory systems of the biosphere …”

Gary Chartier, a market anarchist professor at La Sierra University, commented that since sea turtles lack any means of effectively asserting or defending rights on their own behalf, their interests in any system — whether under statism, market anarchy, or any other kind of anarchy — depend entirely on the existence of human beings who identify those interests with their own.

I would add that the present system includes many structural barriers that prevent humans who value the interests of other species or of the ecosystem from expressing that valuation in the marketplace.  For example, federal lease auctions allow only companies from the relevant industry (lumber, mining, etc.) to bid on access to federal land.  That means conservationists who value holding land out of use are banned from the bidding process, that the winning bid is hence lower than it likely would otherwise have been, and that resource extraction is artificially profitable.  Federal preemption of vacant land means, likewise, that the privileged access granted by the federal government is uncontested by other previous claimants.

Were vacant land not preempted by the state and then granted on a privileged basis, then the oil, mining and lumber companies could establish legitimate homestead rights only over the land that they were capable of effectively developing and fully prepared to economically exploit at any given time.  In the meantime, other groups might have homesteaded significant parcels of land with the intention of conserving  it.  As Wilbur himself states in the comments under his post, “active conservation” — like “a wildlife corridor, or critical wetland, or scenic area” — is “pretty obviously a use.”  In a free market regime with open homesteading, lumber and other extractive industries would have to buy out such competition at whatever price the latter demanded, if they were willing to sell at all.

As I mentioned in another post, one reason the ecosystem in West Virginia has had so little protection against mountaintop removal, is that the property rights of small owners had so little protection against expropriation, and the surrounding communities had been robbed of so much of their common law protection against tortious action by the mining companies against their air and water.  As chronicled in the movie “Matewan,” the first white homesteaders in West Virginia — who mostly lacked formal title to their land, having settled when government was still quite irregular — were later expropriated by the mining companies, who could afford to buy both good lawyers and bad legislators.

I would observe that Austrians at LvMI routinely discount – if are not actively hostile to – the preferences that non-industrial users (and destested “enviros”) have regarding common or publicly-owned resources. This is clearly inconsistent with Austrian principles. Further, Austrians also generally – and wrongly – treat with scorn even the notion that there are commons assets – such as “ecosystems”  that are important and valuable. Austrians are wrong to have their thumb on the scale in the way that they do when determining how government favor should be bestowed; this tendency amounts to fairly consistent support for/defense of statist corporations.

Kevin is entirely correct that “the present system includes many structural barriers that prevent humans who value the interests of other species or of the ecosystem from expressing that valuation in the marketplace.” So let me connect a link that somehow Kevin has overlooked in the context of the BP oilwell blowout and spill: the chief structural barrier here is the US government, which “owns” and “manages” the Gulf out to the 200 mile limit (there is moderate state control out a few miles), and which prevents indigenous and commercial fishermen, oystermen, shrimpers and conservationists from actually owning or directly managing any of the resources or ecosytems on which their livelihoods depend or that they otherwise value, and which is favors and is financially beholden to the oil industry.

See, for example:

http://mises.org/Community/blogs/tokyotom/archive/2009/01/14/for-crashing-fisheries-coalition-of-mainline-us-enviro-groups-calls-for-property-rights.aspx

http://twitter.com/Tokyo_Tom/status/15689063688
http://twitter.com/Tokyo_Tom/status/15689222932

I think Kevin that is also correct about mountaintop removal, which involves a frequently flagrantly corrupt use of the state to subvert common-law protections, as I have commented a number of times.

I also highly recommend the post by Shawn Wilbur that Kevin references; I may comment separately on it.

And the following comment on the state grant of limited liability to corporate shareholders is consistent with points I have made any number of times:

Brian Cantin on Jun 7, 2010, 9:53 pm: [I hope Brian does not object]

Without the government, a limited liability corporation would not have the protections they enjoy today. The corporation could gain limited liability if it is obtained via contract. Why anyone would sign a contract allowing a corporation limited liability is another question.

However, in the case of a tort, the owners of offending corporation would not only be possibly liable for the all of the assets of the corporation, they could also be personally liable down to their last farthing.

Strict liability is a great inducement to careful practices.

Another BP post!

1. Over on his The Money Illusion blog, Chicago-school economist Scott Sumner has a curiously uninsightful post up on the BP oil spill: “Stuff Happens“. Perhaps some of my friendly enviro-hater readers here might like it, but I didn’t. I left the following comments (still pending approval as I copy them here) (emphasis added):

Scott, what you’re rather glaringly missing with your cost-benefit analysis – which blithely ignores the real face of “externalities” – is the institutional setting, which can be summed up as a tragedy of the government-owned and (rather expensively) mis-managed comonns.

Ed Dolan is exactly right about incentives problems facing BP and regulators, none of whom really directly own the downside risks, which instead are borne by fishermen, oystermen, shrimpers, the tourist industry, those who value wildlife and a clean environment, and those who consume what harvesters catch. Some of these are very marginalized communities, but all face tremendous difficulties organizing and expressing their interests effectively with respect to resources on which their very livelihoods may depend, but in which they have no ownership rights.

On the other hand, the oil industry are very powerful actors, very well organized and represented in the corridors of power and influence (remember Cheney’s secret energy meetings, and that BP was one of Obama’s largest donors?), and are adept at shifting risks to others (though self-damage is possible when catastrophic losses occur). As Ed Dolan rightly notes, this is built into their very nature as a result of the government grant of limited (zero) liability to shareholders, who have disincentives to monitoring too closely or to questioning whether profits come at the expense of others who – because of government ownership – have no effective voice regarding losses they bear.

It’s hard to feel much sympathy for either the oil cos or government in theis Avatar-like situation, but I don’t mean to castigate either as “evil”. Rather, we simply need to take a close look at the problems of Moral Hazard that our government interventions – from grants of limited liability, to government resource ownership and concomitant inept and occasionally management – have been fuelling.

Answers lie not in gross CBA analysis, but in letting resources users own the rights to manage and harvest wild resources (which would give them direct claims agains polluters), AND to determine when and where seabed resources are developed. (NOAA’s successful experiments with “catch rights” need to be vastly scaled up.) We would still have oil & gas development, but the fishermen would do a vastly better job of policing the oil companies – who would have to face other resource users with full incentives and abilities to protect their livelihoods. (Obversely, oil companies would also be better managers if they had control over the very valuable fish harvest rights in particular blocks, and would manage to in a way that would reflect such value.

Sincerely,

Tom

Austrian-leaning Ed Dolan, whose recent post on Moral Hazard and agency issues I have just noted, joins in on the comment thread. 

Sadly, Sumner is not alone in paying little attention to those who are at the short-end of the messy oil stick.

2. Liberal blogger Matt Yglesias has a useful blog post up in response to Scott; unfortunately his comment thread has fallen into blind, clear-sighted partisan bickering.

3. I see Richard Posner now has a similar blind piece of blather up at the Washington Post: “From the oil spill to the financial crisis, why we don’t plan for the worst”; more on Posner perhap’s later.

4. Sadly/fortunately, for those of you who haven’t seen or (or could use a little further diversion) this litle one-minute “BP kittens ” YouTube video does a better job than virtually all discussions I’ve seen in noting relevant agency and institutional failure issues.

Another BP post! [links updated] I have just stumbled across  by Jeffrey Tucker’s May 27, 2010 post on the Mises Economics Blog regarding the Obama administration’s decision, in response to the BP mess in the Gulf, to suspend consideration of applications to drill in the Arctic.

TokyoTom June 8, 2010 at 5:14 am

Jeffrey, how true – but how ironic and sad that, like Lew, you only look at the potential impact on US consumers (and businesses) of Obama’s (much, much, MUCH delayed) action to suspend consideration of applications to drill in the Arctic (and now elsewhere on the OCS), but ignore the PRESENT and very real impact of incompetent and corrupt government management on all of the people who live in, on and draw their LIVELIHOODS from the Gulf of Mexico commons that are now being despoiled by the BP spill. I mean, aren’t losses to fishermen and others in the Gulf region staring us in the face?

See, e.g., the reports here on marginalized fishermen http://twitter.com/Tokyo_Tom/status/15689063688 http://twitter.com/Tokyo_Tom/status/15689222932And it’s a shame that, rather than float ideas on how to end the Tragedy of the Government-Owned/-Managed Commons – such as expanding fishermen’s rights to manage Gulf resources – you see fit to suggest that the real solution lies in more Avatar-like Drill, Baby, Drill! resource exploitation under the current and obviously flawed rules. As for the rest of you, generally my disappointment with shallow, partisan thinking continues. Perhaps a cut and paste from a recent post will serve? http://tokyotom.freecapitalists.org/2010/06/04/bp-39-oil-spills-inconvenient-quot-ecosystems-quot-reason-tv-rants-quot-dying-oceans-quot/

I continue to scratch my head on the knee-jerk reactions by Austrian-libertarians on problems regarding management of common resources: are not our physical and electronic communities commons? Don’t commons support many people directly, and us all indirectly? Aren’t there huge and obvious commons-related problems that stem from government ownership and “management” of resources – be they federal lands, the seas, our fiat currency, or our financial institutions and publicly-listed companies? Don’t we all know that government gets in the way, frustrating the ability of people with differing preferences to search for and reach mutual accommodations, and instead putting them at loggerheads in zero-sum situations? The unbecoming reflexive hostility indicates that even those who think they have their thinking caps on cannot see past the partisan conflict that government itself generates. Kind regards, your resident Austrian misanthrope, Tom

2. For those who want to put their thinking caps on, I note that I have a number of posts on managing commons resources – see my posts on Nobel-Prizewinner Elinor Ostrom for starts – and on fisheries and on federally-owned oil and gas resources like the OCS and ANWR. They might provide a little grist for the mill.

Another BP post!

I continue to scratch my head on the knee-jerk reactions by Austrian-libertarians on problems regarding management of common resources: are not our physical and electronic communities commons? Don’t commons support many people directly, and us all indirectly? Aren’t there huge and obvious commons-related problems that stem from government ownership and “management” of resources – be they federal lands, the seas, our fiat currency, or our financial institutions and publicly-listed companies?

Don’t we all know that government gets in the way, frustrating the ability of people with differing preferences to search for and reach mutual accommodations, and instead putting them at loggerheads in zero-sum situations?

The unbecoming reflexive hostility  indicates that even those who think they have their thinking caps on cannot see past the partisan conflict that government itself generates.

But I dither.  Allow me to gather here for interested readers some scraps of information regarding the state of our oceans.

1.  From my initial response to Lew Rockwell‘s “Feel Sorry for BP? ” post:

Lew: “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.”

Me: 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

4.  I note that I have already posted extensively on oceans/fisheries management; for interested readers here are links to some of those posts:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=ocean

http://mises.org/Community/blogs/tokyotom/search.aspx?q=fisheries

http://mises.org/Community/blogs/tokyotom/search.aspx?q=whale

5. Finally, one wonders whether, if fishermen in the Gulf of Mexico had clear “catch rights” or similar property rights, and had control over oil gas exploration and development decisions, they would not have done a good deal better in overseeing BP, and whether BP would not have been quite a bit more careful.( Likewise – if BP owned the Gulf, and received revenues from permitting fish harvests!)

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.

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”!

[from a Facebook post.]

Governments, themselves largely unaccountable institutions guided and staffed by persons who are personally unaccountable, create corporate Frankensteins that are owned, guided and staffed by persons who are personally unaccountable.

When “accidents happen”, our Big Brother may either shrug or rush in to “protect” us some more — in ways that are sure to enhance the power of government and to create more regulations that will reduce competition (and thus favor the existing larger firms in a particular industry), while leaving each of us with LESS power to do anything personally or collectively to protect ourselves — in the case of the massive #BP Horizon blowout, remember how the Feds stopped gulf states and towns from laying out their own booms to limit damage, and stopped people from digging on public beaches to take oil samples?

Corporations, made by the state, are truly “The Health of the State”.

IMAGINE, however, (1) if business was conducted only in organizations whose owners retained potential personal liability (as a partnership, association, or corporation whose shareholders only partially pay-in their equity commitment) and lived adjacent to their riskiest businesses, and (2) if old tort doctrines allowing people whose persons/property were damaged by others’ pollution to enjoin/stop such practices were still respected. In this case, the personal skin in the game of owners/execs, face in the community, personal risk to liability, and agreements with insurers would incentivize all to greatly reduce risk — in a manner that EMPOWERS people in the community around the business operations.