Thursday, June 24, 2010

A (not so) Short Response

Due to pesky character limits, I decided to put what I thought was a "short" response to a comment by a "mysterious" poster in its own blog-post:

RobertB said...
Perhaps this is a naive view of libertarianism, but it looks to me like it's relying on after-the-fact remedy and a 'rational' assessment of risk/reward to keep things like Chernobyl and the BP spill from happening. Suing BP out of business isn't going to make that oil magically go away.

I also think that gutting regulatory agencies then pointing out their failures as examples of why regulation is pointless is a circular argument straight out of the Reagan playbook.

I don't think what you're presenting is a completely naive view of libertarianism; however I'm not sure it's in line with MY libertarian view. I can't hold anyone else liable for that. Libertarianism is already a minority-view. So it's hard to walk around indicting people for not being versed in my minority-view of a...well...minority-view. Your criticism (I think) is more applicable to the standard libertarian position. But it's important to understand - for the sake of discussion - that libertarianism is actually a pretty wide spectrum in and of itself. YOUR view of libertarianism proper is probably more along the lines of Ayn Rand and Milton Friedman; whereas my views are more in line with Rothbard, Chartier, and Long. The differences might seem too subtle for casual conversation, but I think it's important to distinguish this point for future reference.

In any case...

You'll have to forgive me here because there have been volumes and volumes of material refuting the counter-arguments you're presenting here at length, and it's nearly impossible to condense all that theory down into a short response. But I will try to offer some of the most obvious arguments, and if you want links back to better source material (seeing as how I'm not exactly a genius here) I'll be happy to provide what I can.

The first criticism here is that free-market solutions seem to be ad hoc. The obvious flaw in that argument (at least to me) is that government solutions are ALSO generally ad hoc. I'd venture to say that every piece of protective legislation we have shares a causal relationship with some mis-hap. It's only after such mis-haps that the public pushes for a solution. In many areas, they've done this politically. But it can be, and has been, done via markets as well.

Take a look at something as basic as household appliances. There's 120V of possible death surging through the walls and floors of the modern household. I'd venture to say some of the first plug-in appliances weren't too safe. There were probably some pretty serious accidents (more than today per capita). Was it massive government interference and regulation that pushed manufacturers to make products safer, or did market demand for safer products push industry towards adopting systems of standards, and rigorous third-party (voluntary) inspection and approval?

This is kind of tangential to an argument Mises used to make regarding markets and politics. It seems like a conflicting view to assume that we can trust the masses to politically enforce regulation upon industries but that they somehow have absolutely no control over how they "vote" with their own money. In some ways, the free-market is a pseudo-democratic process. If Ford starts to make death-traps made out of cardboard and rusty metal, I don't find it likely that a democratic majority would be so opposed as to push for regulation, but not so opposed as to not purchase the product. In that way, the market is self-regulating.

On the point of "rational" risk/reward assessment, is it really your view that this disappears when government becomes involved? Everything that is done privately OR publicly is subject to that kind of assessment. As long as resources are finite, that's simply reality. Now, you can make a claim that government is better at moving the goal-posts (I disagree), but you can't pretend like the goal-posts magically go away when government walks in.

We could spend hundreds of billions of dollars on inspecting oil rigs, or we could spend nearly nothing. We could enforce a minimum of 10,000 safety mechanisms per rig or none. We could send send five inspectors to every rig or we could send 1,000. We could send them every year or every day. It's all a risk/reward assessment...regardless of who's doing it. As we become more productive, I think there's less slack to give . But nonetheless there is a give and take. People die of preventable cancers. People die in car wrecks. And yet, we don't go to the doctor every single day and we don't all drive tanks. It's not because there are evil people who want us to die. It's because there are real economic trade-offs that are inescapable.

And on that point, even while you seem to gesture towards the issue of funding, it seems that government didn't prove to be too effective in any case. I'm not sure exactly how many MILLIONS of dollars the MMS receives, or how much you figure they would need to do their job, but they certainly had enough to have issued BP over 800 citations without reprisal. Did they just need an extra $300 in stamps to get it to some other bureaucrat's desk? Maybe if they had spent more of their money on that and less of it on meth and hotel rooms shared by/with BP employees, this could have been avoided.

Of course, maybe if the regulatory apparati of government didn't have such incestuous relationships with the institutions they try to regulate that wouldn't be as much of an issue. Safety is too dangerous to be left to the adversarial relationship of a liability insurer, customers, and a company, but it can be left to a government who employs heavily from within those industries (they are the experts, right?), and one that is heavily lobbied by those industries? Does the hand-shaking and corruption magically disappear because it was written down on paper somewhere that it's not supposed to happen? At the heart of it, it seems to me that humans are corruptible whether they are in government or not. I'm much more impressed with the incentives a free-market provides than the lack of incentives AND corporate protection that government offers.

If your claim is that market incentives aren't strong enough, I'd agree. AS IT STANDS (the way things are right now) market incentives aren't enough. My claim, and that minority anarcho-libertarian claim, is that government dilutes those incentives. I don't think this post warrants an in-depth discussion of each item, but here are a few ways government perverts market incentives when it comes to oil spills:

1. Public Property - I can't help but invoke the tragedy of the commons here. No individual owns any part of the ocean per se. In fact, the only body that claims a sovereign monopoly on it is...government. A government that receives royalties from letting companies like BP drill on "their" property.

2. Incorporation - Limited individual liability brought to you by none other than the state. At the end of the day, the most that will happen (because of that fictitious body we recognize as a corporation) is that BP might go bankrupt. However, the executives or owners will hold no personal liability for the damage they've caused, and will continue to legally hold onto whatever assets they have personally. And that doesn't even begin to touch the fact that their liability as a corporation is/was legally limited as well.

3. Subsidies - Let's not forget the direct subsidization the energy industry gets for development and distribution. This includes everything from direct funding to what sometimes seems like monopolistic privilege in the realm of government grants, contracts, and licensing.

4. Regulation as King-maker - Sometimes we forget that regulation can bring forth economies of scale. While subject to free-markets, EoS can provide for cheaper goods and services, but induced purely with government privilege such a thing isn't the case. Huge corporations like BP aren't nearly as strangled (financially) as any would-be competitor is. It seems counter-intuitive, but government regulation stifles competition - the engine of free-markets. Do you think Walmart began to publicly support mandatory health coverage from employers because they suddenly had a change of heart in 2009?

5. Free Roads - I hate to invoke ye olde faithful public good here, but roads are ostensibly free at the margin. Do you think that people having to truly bear the cost for road usage (in a real sense) might shift the demand for newer technologies - in other words, less expensive/oil-related ones? Could decreased demand change the incentive structure for riskier operations - like deep-sea drilling?

6. Regulation as Risk-pusher - A related item, part of the whole picture (which people seem to be ignoring) is that it's much more expensive for companies like BP to drill deep in the ocean. They aren't doing it because there aren't any reserves closer to land. They're doing it, largely, because government regulation regarding drilling has made this the next-best option for them. Call me crazy, but it might be easier to cap a spill that isn't 5,000 feet under the ocean.

There are dozens and dozens of similar political and economic points that have been made and expounded upon. And I'm sure I'm not doing the ones I've brought up much justice here - I'm certainly not the intellectual fall-back for libertarian theory and I'm not going to pretend like I have all the answers. But what I am going to say is that their arguments over the years have seemed increasingly compelling to me as compared to the statist excuses that are offered in the wake of every disaster that happens upon us. The best that government apologists can seem to do is hold steady to that regulation-ratchet claim of government never intervening enough, pretend that free-markets actually exist now (and are ipso facto responsible), and/or just ignore government liability altogether. Those just haven't proven to be convincing arguments to me.

I know I'm holding the fringe-position here. I don't get any better reception from conservatives when I excoriate their views either. I could be as completely wrong as the next guy on any of these issues. But I have to go where my own sense of reason takes me, and every pro-government/pro-corporatist argument I've heard made on the subject has just absolutely fallen apart under the light of that "fringe" libertarian political and economic theory for me.

And trust me, it's not easy to hold those views. It doesn't win me any friends. There's been an awful lot of cognitive dissonance involved on my end. Name about any issue and I've probably been on the opposite side of it at some point. The idea that I was very pro-market-regulation at sixteen is just as embarrassing for me as the fact that I was pro-Bush and pro-Iraq-War when I was twenty. But that doesn't mean I've shut off my mind to new ideas. If someone starts making arguments that can stand up to those of Rothbard and Hoppe, I'm more than willing to listen. But until then, the excuses just don't fly with me.

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