2 Aug 2010

Government Failure

Many people disagreed with my argument that the government was "responsible" for the Deepwater Spill, so I have a few more thoughts to add:
  1. BP (and subcontractors) were guilty of "firing the gun," but poor government regulation gave them an excuse to do so.
  2. How? Three out of every four lobbyists who represent oil and gas companies previously worked in the federal government. The incompetent and corrupt Minerals Management Service has now been disbanded, but they failed to do their job, to protect us.* (James Surowiecki talks about competent regulators.)
  3. Can BP claim that it's not their fault, in the same way that the CEO of Massey blames the government for coal miners' deaths? No, they still pulled the trigger.
  4. And that's what people misunderstood about my original point: The spill would not have happened if the government had made/enforced better regulations, but it still did. The shot would not have been fired if the gun was not sold to the felon, but it was. Both government and polluter are responsible, but the government made the polluter's action possible.
Bottom Line: The solution to incompetent government is not more time or more money, it's less government.
* If you want to get even more depressed, read about our rogue government's security-industrial machine. We are not wasting money to be less secure and spied on by a Red, White and Blue KGB.

Hattip to JWT.

19 comments:

J. Brian said...

So the argument here is that since the government failed, less government is a solution? This seems like a non sequitur to me. Why does it follow that since the government failed to prevent this spill, things would have been any different with a smaller government?

What mechanism does a smaller government give us that will improve anything in this case? This post simply states that the government was part of the problem. While that is granted, having fewer regulators seems like it's setting up the exact same scenario that caused the spill.

Can we both agree that the ideal situation would be one that prevents a spill of this magnitude? I would suggest that an effective regulatory oversight body would do exactly that, and that the problem was a deliberately ineffective body bought off by the industry.

Can anyone suggest a mechanism by which this spill would be prevented without significant regulation?

Without that, the goal then becomes obvious; the only means for prevention is to achieve effective regulation.

Wainstead said...

I have to concur with J. Brian: less government would not have prevented this problem, nor will it solve it. Not that "government is the solution to everything," mind you, but in this case, like national defense, there's a clear role for government regulation to protect America's shores.

W.E. Heasley said...

Thomas Sowell, Milton Friedman, and Hayek have all eluded to the concept: "If markets fail, then governments fail as well".

Will have to side with Dr. Zetland as he is in very, very good company regarding the subject.

Josh said...

It is true that if we didn't have a government regulation of oil wells, then it wouldn't have been partly government's fault. But that is not the same thing as saying that if we had less government, then we wouldn't have had a spill. Right now, where there is much less government, we have BP and others spilling gigantic amounts of oil into the environment (Africa), and yet, their profits do not suffer to the extent that the market corrects for these.

So sure, if government weren't there, then they couldn't be to blame.

W.E. Heasley said...

Maybe this helps clarify the concept of “If markets fail, then governments fail as well”. When a market failure is perceived, beginning in the 1930’s, through FDR via progressives, the political-economy response has been for market intervention by government. The perception is: government regulation solves the problem.

Yet government intervention rarely works and failure persists. The same problems exist again and again. In some cases, as in Fannie and Freddie’s intervention into the private mortgage market, government actually causes the problem and solves nothing.

Hence governments do fail and obviously more and more government merely results in more and more failure.

Josh said...

Mr. Heasley, I agree that governments can and do fail from time to time, just like markets. All of our human attempts get buffered and battered, and our personal demons interfere daily. I'm fine with that.

As for the horrible, terrible, awful period of famine, misery and servitude we in the U.S. have felt since the 1930's, I'd take that any day over places I've seen with real government failure in the world.

But there is no less-government solution to the oil spill failure. We have examples of failures with government regulation (here) and without government regulation (Africa), and frankly, even with the lackluster, largely failed government action over the Gulf, it is still miles and eons preferable to the no-government options seen in Africa.

Anonymous said...

Total non-sequitur! Less government is in fact what led to the government failure to prevent the spill. (Which, to be fair, was probably inevitable - meaning, low-probability events will inevitably occur if you give them enough chances.) So, maybe more government would not have prevented it; but certainly, less government would give us more spills, not less.

In what way would the market self-correct to prevent spills like this? Economic incentives led BP to take decisions that caused the catastrophe. Leaving economics in charge is a guarantee of more such catastrophes.

Mr. Heasley (and others who point to gevernmental "failures" to argue for less government) make the classic asymmetrical argument. Do you know what the rate or magnitude of failures would have been without the governmental intervention? As Josh notes, we do have examples for comparison, and they suggest the situation would be far worse. Half a loaf is better than none.

@DZ - If government cannot prevent these catastrophes (and obviously it cannot), then who or what can? What is the better alternative to the inefficient and corrupt governmental regulation?

David Zetland said...

@all -- the government allowed the drilling and failed to regulate, so the government is at fault. If (1) there was no right to drill or (2) the right was help by a private interest, then the spill would (1) not have happened or (2) would have been less likely.

@albionwood -- sometimes no government (no drilling) is preferable to weak government. Alternatively, put someone with SKIN IN THE GAME in charge of the resource. They will make sure that it's not wasted. (Compare BLM land and forest management of "our" land with private property...)

W.E. Heasley said...

albionwood said:

“Mr. Heasley (and others who point to gevernmental "failures" to argue for less government) make the classic asymmetrical argument. Do you know what the rate or magnitude of failures would have been without the governmental intervention? As Josh notes, we do have examples for comparison, and they suggest the situation would be far worse. Half a loaf is better than none.”

Sorry, but you are not answering/countering the argument that “if markets fail, then governments fail too” with the phrase “…make the classic asymmetrical argument”. You are merely putting forth an argument-with-no-arguments by simply brushing aside the concept of “if markets fail, then governments fail too” as “asymmetrical“ and hence no counter argument appears.

However, lets examine a few examples so you get your asymmetrical onto another level. Social Security solved what problem? As Social Security got larger and larger it further solved a problem? Medicare and Medicaid solved what problem? As both programs grew larger they further solved the problem? Welfare and the U.S. Agricultural Department are problem solvers? Has education improved as more and more government involvment was introduced?

We have not even got into the concept that government failures create cascading failure consequences.

Josh said...

David, skin in the game doesn't always cut it. Counter my examples from places where there is no government regulation of oil drilling. There are huge spills, yearly, resulting in massive damage and even death. And yet, it was this spill that shook BP.

If I keep my car door unlocked, and somebody steals my radio, is it my fault? What if I lock my door, but they break the window? Still my fault, because I wasn't there to watch all the time? Just because we don't/can't have Big Brother doesn't mean it is therefore government's fault.

We'll just have to disagree on the "skin in the game comment" - but frankly, history sides with me. We've seen free markets, and every developed country has opted for some regulations.

David Zetland said...

@Josh -- you confuse "no government" with "incompetent government." If you want private, no-spill examples, then look at the Audubon Society's agreements to allow drilling in its reserves. (Old article: http://www.perc.org/articles/article167.php)

Your radio stealing examples are irrelevant, since people are breaking the law.

And, no, you haven't seen "free" markets, because these REQUIRE laws and regulations -- to protect property rights and enforce contracts.

Stop fighting a caricature of anarchy and start looking at what "enlightened" government has accomplished...

W.E. Heasley said...

Dr. Zetland:

"And, no, you haven't seen "free" markets, because these REQUIRE laws and regulations -- to protect property rights and enforce contracts."

Well said!

FDB said...

I agree with this (most of it), but would add it's also the fault of tyour typical, anonymous, middle American (particularly the heroic, flag-waving, anti-limey ones who've been refighting the War of Independence over this) who can't even move from the kitchen to the living room without taking his hummer (OK, it's true, those ARE a lot of hamburgers to carry). Plus, the conclusion is totally incoherent: the solution is not more - and certainly not less - government, but better.

Josh said...

David, ah, so people weren't breaking the law in spilling oil. Interesting.

Yes, what has enlightened government wrought? Well, I don't have to worry about diarrhea killing me, my neighbors burning me or just taking my house over my religion. I can trust that whatever the hell they make 99% of my food out of won't kill me. I've got a 50-50 chance that I'll live twice as long as I would have 100 years ago. I don't have to worry about my kids dying of dysentery or going blind for lack of vitamin E. I don't have to worry about scurvy or gout. I can purchase a highly flammable explosive for the specific purpose of having it explode millions of times mere inches from my feet. I get to read your desires for an enlightened society with government there only for what you want. I don't have to sig heil or goose-step. I get reliable power and water 99% of the time.

Yeah, it's been Hell here in California. Real Hell.

David Zetland said...

@FDB -- in the absence of good government, I want less government (cf, USSR, most LDCs today)

@Josh -- you are mixing up "goods" that come from the government with goods that are government regulated with goods that require no regulation at all.

The oil spill was illegal in the same way that murder is illegal, but it happened b/c of government incompetence.

TragerWaterReport.wordpress.com said...

Good points, David. Ron Paul had it right when he said there should be no limited liability by the government for oil drilling. Oil companies wanting to do so should have to indemnify themselves against disaster. Instead, they get off easy paying a $20 billion bribe to Obama. Of course, if they had to indemnify this risky rig, it never would have been drilled.

Josh said...

David, so then you do agree with my car break-in analogy. I incompetently left the door unlocked (didn't consistently regulate my private property) and so due to my incompetence, it is my fault...

Only, I don't believe it is my fault that somebody else chose to do something wrong. I've learned a lesson, for sure - but that's sad, not good. And it still isn't my fault, even though I failed to protect my stuff.

David Zetland said...

@Josh -- yeah, it's your fault for MAKING IT EASIER. That's not the same as someone breaking your window in terms of blame or who facilitated what.

Same game as making it too easy to get guns to violent people...

Josh said...

Well, David, we'll have to agree to disagree. I don't blame you because that dude got into your hotel room in Panama, and you shouldn't, either. He's the a-hole, and it ain't your fault.

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