Friday, August 6, 2010

Redstate Revisited

After my deeply untraumatic experience of being banned by, I was curious about what the reaction had been to my post. So a friend who will remain nameless went to the site and copied the thread for me.

To recap, a Redstate regular contributor (named Vladimir) had posted an article about how those crazy Democrats were proposing to raise the liability cap on oil spills to $20 billion or even remove it, how this would turn the Gulf coast into a ghost town, and how the likely result was $8 a gallon gasoline. There were two sorts of response. The first was from people who offered technical discussion of exploratory versus production wells and the Brent spot price (along with discussion of how crazy, or evil, the Democrats were).

The second was more along the lines of this: "Nothing more enjoyable than causing misery. Plus, if everybody’s income goes down, if people suffer more, won’t they turn to government for help? How can the collectivists lose? They just vote themselves raises and move on," and "I know this is all part of the sob’s in charge grand plan to destroy this country and if he cant get crap and tax [I think this is a reference to cap and trade] through the Senate this will do just fine."

Which brings us to my comment (under the name of one of my heroes from fiction) and the responses I never saw, starting with Neil, one of the ironically titled "moderators" at Redstate:

I don't get it
panzer Tuesday, July 27th at 3:52PM EDT
Sorry, Vladimir, I don’t see why the government is getting involved at all. Why should the government be subsidizing the industry by setting liability limits? Nobody puts limits on my liability when I drive. If drilling is so safe, insurance will be cheap. If it’s not, why should we say don’t worry about the damage you do to everyone else? Let the market decide.

Neil Stevens Tuesday, July 27th at 4:05PM EDT [Thirteen minutes later!]
Nice try, but you can’t bootstrap a small government argument that way, when it’s the government that is enforcing this liability to begin with.
These liability laws are passed on the grounds that making people pay for this kind of spill is for the greater good, but we can also decide a cap is also for the greater good.
Because we need oil, thanks to you leftys who short-sightedly ban shallow water drilling so much.

Actually, I have an answer for that, Mr. panzer.
Vladimir Tuesday, July 27th at 5:55PM EDT
Nobody ever, ever, ever suggested that an oil company’s (or a tanker company’s) liability be limited as to the cost of cleaning up the spill.
Anybody who spills oil into the waters of the United States is absolutely liable for the cleanup costs, even if it puts them out of business.
What is at issue, and what liability limits cap, are economic damages. I imagine that there is a joint in Bozeman, MT that can make a claim of being economically damaged by the BP spill since they don’t have their regular supply of shrimp for All-You-Can-Eat Thursdays.
The concept of liability limits was to put smaller firms on a competitive footing with larger ones, since smaller firms could never hang with the cost of litigating all the potential (and some specious) claims that might arise from a spill of this magnitude.
You may disagree, and that’s fine (we’ll never know, R.I.P.), but at least that’s the rationale for why the limits were there in the first place. If you prefer that the biggest companies always have a competitive advantage, that’s cool.
But whatever it is, it ain’t a “subsidy”.
Every man should have a built-in automatic crap detector operating inside him. It also should have a manual drill and a crank handle in case the machine breaks down. - Ernest Hemingway

Alas, Vlad, I won't have the chance of responding to you there, but in case you ever find your way here, here are replies to Neil's comment and to yours:

Neil: Please don't interrupt when the grownups are talking. I never had any intention of making a small-government argument; I was making an argument about the relative efficacy of markets and government-imposed solutions. Yes, it is true that you can refer to our civil-law system as "government," as long as you're comfortable with the statement, "The entire private sector would quickly grind to a halt without government." Yes, it is true that that we can change the civil-liability system; the question is whether that change will make the market work better or worse. Drop me a line when you've read Posner and we'll talk.

Vlad: If you're saying oil companies drilling in the Gulf should be liable for damage they cause in the Gulf but not in Bozeman, MT, I'm OK with that. But I don't think that's what the current law says. It says that any damage above a very low cap is not their problem.

I don't understand this distinction you're making between "economic" damages and other damages. Apparently you think that oil companies should be responsible for cleaning up the oil they spill, but not for the damage they cause if they fail. If you think about it, you'll see that a rule like that doesn't give companies any reason to invest money in effective cleanup. If, however, we make companies responsible for damages, then they will have the appropriate incentive to invest (but not overinvest) in cleanup, without government needing to tell them what the right amount is.

As for subsidies, in effect we're saying, "Do something risky and if you succeed you can keep all the profits. If you fail, we'll pay the bill." Doesn't that sound a bit like what we told the banks? By putting a cap on liability we're giving oil companies something of value-- that's the point, after all-- by telling them we'll pick up the bill if things go wrong. If a loan guarantee is a subsidy, then that's a subsidy. As for the independents, if we're so worried about them that we're cutting them a break on liability, why are we cutting the same break to the majors who could afford to pay for the damage they cause?

And btw, what's the deal with your friend Neil? Is he afraid that he'll turn out not to be as smart as those "leftys" [sic] he scorns? (If that's his fear, I'm afraid it's justified.) Has he named himself the Inquisitor of the Church of Redstate, whose job it is to keep the simple faithful from being confused by heretics? Don't you find it all kind of embarrassing?

Finally, Vlad, I've got $500 that says we won't see $8/gallon gas during Obama's current term. Interested?

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