Fri, 28 May 2010

Not the free market's job

A bunch of people are tweeting and retreeting the question "I didn't look today, did the free market clean up the oil yet?". I have a couple of responses to that. First that there is no such thing as a free market. You're not free to sell something unless someone else is willing to buy it. That points to the conclusion that there are only customer-regulated markets and government-regulated markets. And that poses the question: who's the customer here, and if they're not regulating why not?

If customers can't regulate the behavior of sellers, then it's not even close to being that-thing-which-is-called-a-free-market. So that points to this: when governments regulate, they don't regulate in a vacuum. Their regulation displaces customer regulation. If you look at the oil industry, you'll find that it's regulated up the wazoo and back down again. Customers can't regulate because they're being prevented from doing so by government regulation.

Thus, to my friends who are asking this question, I suggest that since a free market isn't present in the oil industry, it's silly to expect that something which doesn't exist is capable of taking action.

And my second response is to ask what would have happened had this oil spill happened on private property. It's certainly the case that the property owner would have a contract with BP, and the contract would specify remedies. One way or the other, the property owner is going to be compensated for the risk of oil spills.

Who is the property owner here? Why, it's the federal government, which claims to own the seas off our coast. What does their contract with BP say? If it doesn't hold BP's feet to the fire for enough money to clean up the oil, then why did the government allow the drilling?

So the question is not why the free market hasn't cleaned it up yet, but instead why the government screwed up. Private companies fire incompetent executives, and if they don't do that, they go out of business. Who's going to lose their job over the irresponsible handling of the BP drilling? And if they don't, will the government go out of business?

The answer is obviously "no" to the second, and probably "nobody" to the first. And that, my friends, is exactly why you want to limit the things you let your government do.

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