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A twin failure
May 24, 2010 - Jim Anderson
It’s too early to find “BP oil disaster” discussed in economics textbooks. I sought one out over the weekend to brush up on what some economists call the “social costs” of capitalism.
It remains to be seen how much of the social costs of this spill will be paid by BP. My guess is that it will be a fraction.
Two things are clear. BP took risks to maximize its profits. And BP was poorly regulated.
It’s hardly a shock that BP took risks. Social costs are a vague threat to a company’s bottom line. Actual costs, such as those incurred through meticulous safeguards, are readily apparent.
(I’m not trying to defend BP. I’m only noting that its actions were somewhat predictable.)
The fact that BP was poorly regulated is a shared judgment. The oil industry wants to be weakly regulated. And that creates tension between government oversight — nearly always depicted by industry as burdensome — and the government’s obligation to help protect the public.
While BP’s risk-taking was always in the cards, the government need not have been a blind partner.
We can expect corporations to put profits ahead of social costs — that’s a known factor in capitalism. The lengths to which government will go to prevent social costs is a huge variable.
In this case, BP failed. Government failed. That’s not a blame game. It’s just the facts.
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