Thursday, June 17, 2010

Richard Epstein's comments on the handling of the BP gusher makes a lot of sense to me. He argues for a strict liability policy, a requirement under tort laws that parties engaging in dangerous, but beneficial, activities be held liable for all damage that occurs.
A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don't get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate.. . .

Tort liability does not preclude direct government safety inspection and regulation, especially in the Gulf of Mexico, where the government itself leases the drilling rights. So by all means work hard to make these better. Just be skeptical that this or any other presidential administration will reform the Department of Interior's hapless Minerals Management Service.. . .

Oddly enough, what is needed is a relaxation of the permit mentality in locations most suitable for drilling—including dry land and shallow waters, and ditto for nuclear power generation. In the case of nuclear energy, political parochialism also has killed plans to build a major nuclear waste disposal site at Yucca Mountain, Nev. The result is that large quantities of nuclear waste are housed in more dangerous temporary facilities throughout the land, generating a slew of complex lawsuits against the government for its failure to remove the waste.

Legal reform should not just be limited to oil spills. Environmental priorities also need to be straightened out. To take just one example, in virtually every coastal location today, acerbic green lobbies parade about as if new luxury beachfront homes are the moral equivalent of oil pollution. Those histrionic outbursts create civic discord and stunt our economic base. They can be stopped by insisting that private developers be compensated for the full costs of any new-fangled land use restrictions, at which point popular support for such lobbying will collapse.

Ultimately, the current BP disaster has its roots in the loss of our focus in developing a sound overall energy and environmental policy within the framework of a leaner and more responsive legal system. This disaster is proof we need to change course.
I think that this "permit mentality" is what has bothered me throughout all of this, because it assumes that government regulators will protect us from all bad things. That's nonsense, of course. What actually happens is that they're always playing catch up and calling for more laws. What should really prevent disasters is the prudence of parties seeking to develop these resources, and the knowledge that they have to provide for complete payment of damages if they screw up, or nature itself just blows up on them.

I also think the criticisms of Obama's highhandedness covered here are valid. This isn't leadership. It's demagoguery.

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