At least before he tears into environmentalists.
Epstein, Richard A. 2010. "BP Doesn't Deserve a Liability Cap: The best way to deter future spills is to expose drillers to the full costs of any mistake and not let any company without proper insurance near an oil derrick." Wall Street Journal (16 June).
http://online.wsj.com/article/SB10001424052748704312104575298902528808996.html?mod=WSJASIA_hps_sections_opinion
"What's needed going forward is a comprehensive legal strategy that addresses the risks though a combination of regulation before the fact and tort liability (and criminal sanctions where appropriate) afterwards. Tort remedies are essential to protect people (and their property) who do not have contractual relations with defendants from harms such as air and water pollution. The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others -- which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases. The fundamental question here is one of technique: What mix of before and after sanctions will do the job at the lowest cost?"
"The first element in the mix is a no-nonsense liability system that fastens full responsibility on the parties who run dangerous operations, no excuses allowed. Accordingly, we have to be especially wary of statutory caps on tort damages."
"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. This logic also suggests that the Price Anderson Act's $375 million cap on damages for each responsible party to cover incidents at a nuclear power facilities should be rethought."
Utterly self-contradictory drivel. NeoPigouvian drivel at that.
ReplyDeleteThey are precisely able to impose such costs due to an elaborate system of laws that are constitutive of the powers of capitalism.
The libertarians have never ceased to be utterly afraid of the legal realists. It's like trying to get Episcopalean ministers to read Neitzsche. Even a cursory reading of the history of the western legal tradition[s] indicate that laissez faire never existed. But, hey, denial is a commodity in great demand.
That someone like Epstein is a teacher makes me want to vomit.
So, how do we price the ecosystem services of the Gulf of Mexico?????????? Who will invent the financial instruments to make the reconstruction of the trophic webs possible?
James Lovelock is right; the human race is hopelessly incompetent.
Ian
"The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others -- which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases."
ReplyDeleteWell, there goes the business model. :(
"Full responsibility" for damages under tort law is not the equivalent of collectibility for such damages. Will those responsible have deep enough pockets? Will insurance (or self-insurance) be available to cover the damages?
ReplyDeleteIf the legal system would hold polluters fully liable, then he'd be right. Picking up on something Paul Krugman wrote - I've been hammering the theme that limits to downside liabilities effectively subsidize externalities and risk taking that is foolish from a system point of view. But that is what we have had over the past couple of generations so BP took these risks and failed to invest in technologies to either mitigate the risk or clean up the mess after the fact.
ReplyDeleteMight it be better to change the incentives? Much of BP's 'carelessness' stems from its complete focus on maximizing profit for shareholders
ReplyDelete(executives). We might change corporate licensing to require equal consideration of labor and community (commonweal) concerns and needs.
--ml
PGL,
ReplyDeleteIn the case of BP "full liability" would be tantamount to unlimited liability given the destructiveness of the leak. I suspect this is why Michael likes what Epstein is saying, for unlimited liability would mean a major transformation of corporate governance law in the US and would lead to international "spillover" effects.
Mark Sagoff has written quite lucidly about the serious problems associated with thinking about pollution in terms of externalities.
Epstein does not want to deal with the contradictions of environmental torts; they'll mangle his theory of property and prices as well as his theory of the State.....At least he realizes that they create problems for his notions of corporate governance.