BP a problem for the libertarian i.e conservative economic theories?

Another example of GDP silliness.

An "inherited" billionaire wasting money on frivolity? A net positive. Never-mind the long term effects of all the resources spent and consumed just to fulfill the lackadaisical whims of one man.

I don't understand what you are trying to argue with Gates and Warren though. I'm not trying to start some nationalistic slapfest that alleges other countries have superior morals or something like that. I'm merely saying that for all the talk of trickle-down and for all the resources spent on nothing, so much are still suffering.

What a waste.

As for an "Aristocratic" class inspiring people onwards to extravagance they could never afford to display, I cannot think of a more fitting example of why capitalism needs to be reigned in and why more meritocratic features have to be implemented.

 

Cocaine is God's inheritance tax.

 

Eventually it will run out if their focus is on lackadaisical whims. There will be those that benefit from the sweat of others but that is life.

Is it not possible that a substantial estate tax could dissuade people from creating great assets as they cannot provide for their future generations?
Though small as it may be, as is the differential of efficiently allocated resources between some trust fund babies that spend till it runs out in usually one generation except for some truly exceptional cases.

If people produce, I believe its their right to decide what happens to the funds and not up to the allocation ability of a government. I think a billionaire's son spending in the economy on sail boats and what not is not that less efficient than the inefficient spending by a government.

 

I believe that too to a degree but only because the government is beholden to the same system as the billionaire's son and has proven to be just as aptly wasteful as the next drunken idiot.

This is why eventually, someone's going to have to reframe the entire system so we have a gouvernment that is responsible with funds collected from people who are not. This is a sidebar, but economics should no longer be regarded as just the science of distributing resources...but also how to preserve these same resources. The whole sustainable growth talk is a reasonably good step but it is nowhere near enough. And as long as we have people who in fear try to stall technological progress at every step, we're going to have to either change our lifestyles and the system that sustains it or keep on fighting with human anxiety and catapult our ways out with ever-scarier and morally dubious technology.

Getting back to the point, what it comes down to is that I'd rather trust the gouvernment then who I believe are largely irresponsible individuals. Lesser of two evils. It would make my day the moment one of these governments start earnestly deficit-reducing and yes, applying libertarian principles to certain aspects of society (ex: pot. just legalize the crap already)...that hasn't really happened yet. All of the austerity measures have been forced upon us. Government still is the lesser of two evils though.

 

Like most of the time the laws were there but the effective operation of the regulations were not. If the government functioned as it was supposed to according to the laws already on the books VaTech killer, large financial failures, and this might not have happened. So saying we need more laws does not really fly with me when the laws we have do not seem to be the problem, just the execution by an inept bureaucracy.

 

Which laws exactly were on the books, were not enforced, and led to these two problems?

 

i think the question is how much worse/often would these disasters occur with no regulation at all.

 

I'd venture to say with almost certainty that it would be much worse without government regulations.

The thing about the Deepwater Horizon was that analyzing it from the perspective of BP, there is every incentive to self-regulate, yet they didnt.

BP's turnover on a completed project of that magnitude was going to be something like 300% of their investment. If you analyze breakdowns on the mainland, there's a general trend in which operations that have much lower levels of turnover tend to be more problematic. That's because there is more incentive to cut corners since your profit potential is just flat out lower.

Horizon Deepwater on the other hand had incredible profit potential and a huge investment from BP on top of it. You dont **** around with investments like that and a dose of common sense would tell you to put in safety precautions to protect your investment and because the profit potential is so high that any money spent on safety is a drop in the bucket.

And yet BP did exactly the opposite. They designed a blowout preventer that was way behind industry standards. (They have automatic BOPs that trigger on acoustics and rapid pressure changes instead of the manual BOP that transocean/BP put in) They put in place shoddy cement work that threatened the integrity of the drilling operation and the original explosion itself was triggered by a bozo that was dumping seawater instead of the normal mix of mud.

And that's the issue. Any free-marketer would tell you that this type of project would be a classic example of market based incentive to self-regulate but BP and Transocean just cut corners anyway and created a mess. The market doesnt always work in a predictable and rational manner and hence the need for government regulations. Libertarians tend to act like the free-market acts in a predictable manner when in fact the opposite is true and corporations arent always rational entities and do dumb stuff like this.

 

I generally agree with this. Part of having a free market though is people make mistakes and learn from them. Others as well as BP will learn from these mistakes. This is why BP is on the hook for billions of dollars now - do you think they will ever cut corners again? Will anyone dare to cut corners going forward?

The problem of course is when it comes to something like drilling for oil and gas, one screw-up can have severe negative externalities for not only the operator but also the general public. Will government regulation be enough to prevent this one incident from ever occurring? I certainly hope so, but don't have much faith in government regulation being anything but a drain on resources.

 

They're in the hook because the government put them there. In a pure free market, BP would be allowed to walk away without even trying to plug up the hole, and perhaps take the same risk again depending on cost vs risk factors.

What does the market dictate BP do if a new well is found which cost only millions to extract if they cut corners but has the potential for billions in profits. Assuming government regulations aren't a factor and BP has a few million to throw away?

The government introduces an artificial risk on the behalf of the people's welfare as it should in some cases.

Like I said earlier, public opinion doesn't really matter much because individual consumers that will consider there own interest over the general good (a reason why communism won't work either).

 

Two problems. First, of course BP wont do this again now but people are short sighted. I just explained in my paragraph earlier, people dont always act rational. Of course BP and other oil companies should learn from this but then again if they had any common sense they wouldve been protecting their investment in the first place. People are capable of being stupider than you think.

Second, this notion that regulations are a drain is ridiculous. You cant have it both ways. In this case there were no resources to drain since the government wasnt even enforcing its own regulations. Now if the government had properly inspected the rig and out of its own negligence just ignored things, then you'd have a point. Furthermore, take Exxon Valdez for example. Immediately afterwards the government ordered a phase out of single-hull tankers and mandated double hull tankers which effectively prevented future disasters of that sort. Are you telling me thats a drain on resources or a waste of time?

Bottom line regulations are fine if the government is enforcing them. In this case they werent and we saw the results.

 

but it would cost 10's of billions if safety features are used.

 

Companies that are not competitive (GM) or ones that made poor decisions should go bankrupt. The more the govt bails people out, the more it encourages moral hazard. A depression is the market's way of clearing out all the junk investments / economic decisions that have been made in the past years.

Yes you are right - I am a youngster.

 

I don't think the double hull tankers were a waste of time. That was a good move.

I generally agree with your points.

 

If all of those companies I listed, not to mention the hundreds of others that would have fallen after them, went bankrupt all at once you honestly think we would be better off? We are in the worst economic downturn since 1929 without all of those millions of people unemployed. GM for example is the largest health insurer in the US. Forget about the jobs for a minute but what about the 1.1 million people who would have lost their health insurance as well? There's another million people heading for Medicaid benefits in addition to UE.

This was not a moral hazard anyone wished to create but their wasn't much choice involved. Now it is time to reinstate Glass-Steagall or put in place whatever is needed to stop something like this from ever happening again.

 

Short term we would be far worse off. Long term yes I think we would be better off. The short term would be very painful indeed, but we need to take our lumps now in order to avoid greater pain later on is my view.

 

If you are against regulation, and you're president or governor, you appoint department heads whose sole function insures the agency fails at its appointed task.

You have lackeys re-write rules, policies, procedures, and practices of the agency to make sure employees can not accomplish their regulatory function even when they are good employees.

Now what administration or political party would have wanted an inept bureaucracy overseeing the regulation of the oil or banking industries?

 

As I said earlier, it's highly possible, and if their top exacts are compensated the way wall street execs are compensated, than I'd say it's highly likely unless more regulations are put to prevent this from happening (not just after-the-fact fines. You keep assuming execs make decisions based on the long term good of the company, when it is often in their personal interest to do the opposite (go for big short term gains for bonuses, even if they create a bust in the future).