Letter to Rand Paul

During the primary season, I had a decision with regard to which libertarian Senate candidate to put my limited financial support towards, Rand Paul or Peter Schiff. I decided on Schiff. Schiff is a successful investor, a well educated Austrian economist with a track record of successfully predicting market movements. All I knew about Paul was that he his his father's son... though I had no idea how close or far this particular apple fell from the tree.

I hope I am wrong about this, but some of his recent comments suggest the apple is not so close as one might have hoped. His stumbling and backpedaling on the question of the Civil Rights Act show he lacks his father's political acumen. And his seemingly reflexively pro-Business (with a deliberately capital "B") stance on the BP oil spill show him to be unreflective, at the very least. This isn't to say I wouldn't vote for him were I a Kentuckian... just that he recent performance is underwhelming.

The following is a letter I sent via the contact form on his website.

I just wanted to say I was disappointed by your handling of questions regarding the appropriate reaction to the BP oil spill. The comments you've been reported as making on this subject suggest, I think, that you are less the complete Libertarian your father has managed to portray himself as.

The case of the BP oil spill is, IMO, a case where the two feuding branches of the Liberal family tree (Libertarianism and modern "liberalism") should be able to agree on the appropriate outcome, and quibble only over the means. Indeed, the libertarian response to BP's spill should be even more radical than the Progressive response.

Yes, "accidents happen", but responsible people cop to it and do whatever they must to make it right. And if government has any purpose, it is to (via tort law) force those who impose costs on others, for whatever reason, to compensate injured parties for that damage. It's the same, IMO, whether some drunk accidentally rams his car into the side of my house, some kid sprays paint over the side of my house, some burgler removes objects from inside my house, some power company dusts the siding with soot on a continual basis, or some oil company drenches my house in oil.

And the damage from this spill is going to be enormous, quite possible enough to bankrupt BP altogether if they were made to pay for it all... and that's just the property recognized by The State. When one considers the effects on the "commons" of the gulf region in general, and the people who live and work there, the number is staggering (and beyond my ability to calculate). One may not be hearing about BP not paying... but they don't have to say anything about it. Congress has already capped their liability.

I honestly don't really care why it happened, though some do, and I wasn't even remotely surprised, having worked in a number of corporate environments lead by overreaching, short-term thinkers, to hear that BP has a record of a cavilar attitude toward safety and preventative maintenance. And it's not surprising that any company in that industry would have this kind of problem, given Congress' consistent record of subsidizing unsafe practices by capping liability in such cases. It's starting to become a cliche, but we really do need to stop socializing risk.

And even if BP did everything "right", perhaps the decision to drill as deep as they did with the particular technology they used was too great a risk. I don't have a problem with people taking risks, but I do have a problem with people taking risks, collecting the proceeds when they win, but making their neighbors pay for it when they lose.

Your response should have been something along the lines of "I don't think we should disallow drilling at any depth or in any place outright... but I do think we should remove (not merely raise it as Bill Nelson proposed) the liability cap established under the 1992 law. The oil companies themselves are in a better position than anyone else to judge whether the practice can be done safely, and holding them accountable for the entire consequences of taking this risk (something not done today) would give them a clear incentive to do so only if it could be done safely." In other words, yes, the oil spill is a tragedy and BP needs to dig as deeply as it can, up to and including bankruptcy, to restore the property of those harmed by this tragedy, The solution is not more bureaucracy, as a progressive would have it, but rather plain old justice, holding people accountable for their mistakes.

Your father seemed to understand this while he was writing The Revolution: A Mainfesto. You don't seem to, or at least you weren't able to think of it while under the harsh spotlight you really should have seen coming.

British Petroleum

Just some thoughts I had as I listened to the various radio stories on the big British Petroleum oil spill in the Gulf of Mexico.

There are a number of questions being asked in the media about this spill. Was it preventable? If so, whose fault was it? Does BP generally have a corporate culture that doesn't do preventative maintenance, a "fix it as it breaks" culture as one investigator in an earlier spill in Alaska put it? Is it the fault of bean counters at the top discouraging "unnecessary" maintenance? Is it the fault of lazy people closer to the problem? Is it BP's fault, or that of the subcontractor that operates the rig... or that of the manufacturer that made some crucial part? Or is it nobody's fault, they did everything they could, and it was really just an accident? Is deep water drilling just too risky? Should it even be allowed?

In my opinion, while the answers to all these questions are interesting, they are also irrelevant to anyone who is not in the business of offshore oil drilling. For no matter what the human contributions to the situation are, the solution is the same, in my opinion: make BP pay for ALL the damages caused by the incident, and for ALL cleanup efforts they are not directly engaged in, and if that bankrupts them, so be it.

If the spill is genuinely their fault, this is a no-brainer. Clearly, an organization responsible for a deep water oil rig takes on an enormous trust, and if they violated that trust by not doing everything they could to prevent such a spill, I think losing the business is getting off light, considering the magnitude of the disaster. A bankruptcy sale would result in the transfer of many such operations out of the hands of an organization that, in the event they're just not doing proper maintenance, clearly cannot be trusted at that level, and into the hands of other organizations that deserve a chance to prove themselves in exchange for some help reimbursing those affected by the incident.

Of course, if they can actually afford to pay out and continue doing business, and choose to continue offshore drilling in spite of the payout, clearly the value of the oil is greater than the risks involved.

If it's the fault of a contractor, BP is still the responsible party. If any part of the blame needs to be shifted off to the contractor, BP can do that themselves by suing the contractor, and getting some of the money from them that needs to be paid out to the various wronged parties. BP should not be able to wriggle out of its responsibilities by offering up the contractor as a scapegoat, able to go bankrupt with minimal damage to BP. For even if BP did EVERYTHING "right" from the perspective of the industry...

That only proves that there was one initial decision that turned out to be a very, very bad decision: the decision to drill at that location in the first place. I honestly don't care what the government has to say about it. Just because it's legal, it doesn't make it right, and people, even ginormous multinational corporations, should take responsibility for the consequences of their actions, even the unforeseen ones, even the unforeseeable ones... and if others are caught in those consequences and the responsible party attempts to dodge that responsibility--well, if that isn't a reason for having courts and governments, I don't know what is. We'd be genuinely better off without one, otherwise.

In the end, the bankruptcy of BP would send precisely the message to drillers and potential drillers that needs to be sent. For it is the companies involved in drilling and pumping who have the most direct interest in consulting scientists, engineers, and technicians, along with their accountants and lawyers, to figure out what the actual risks of drilling are relative to potential profits. Are the profits great enough to fund an insurance policy designed to handle just such a possibility while still being genuinely profitable? Was BP just a bad company, or are the risks simply too great, as revealed by this incident? The spill itself changes the information that goes into such considerations. And when justice is done, and done consistently, the consequences to the bottom line and the consequences to society become nearly synonymous... and the firms who will do the business become the most trustworthy assessors of risk.

Either way, the consequences to BP will be evaluated by BP, and by other companies according to the actual knowable facts. If companies don't believe they can get away with taking enormous risks (and this goes for drilling, the financial industry... everything, really), if they can't expect their pet politicians to shield them from the consequences, they WON'T take those risks. Mark my words: the Gulf oil spill and the recent financial crises are directly related to a common root cause.

Because the alternative is to let the politicians make the decision on this. They might consult scientists, engineers and technicians, but regardless of the answers they get from them, they will also be consulting pollsters and campaign strategists. The answer they will come up with will ultimately balance not risks to society (measured in financial risk to the firm in an environment where the courts can be expected to require reinbursement of wronged parties) against benefits to society (measured by how much more than production and risk management consumers are willing and able to pay for their product... demand), but rather which hurts their chances at the polls least: allowing drilling and therefore risking the ire of the environmental movement and the people affected, directly or indirectly; or banning it and losing the rather large financial contributions to their political campaigns oil companies provide.

Most likely (almost definitely, barring a deafening roar from the electorate), they'll try a third option: engage in some ineffective rhetoric, create a new bureaucracy or some new rules that fool people into thinking they are doing something about the problem but don't actually address the problem, and go home laughing.

Honestly, if that's all the government is good for, I'd rather live in a world where there's nobody to stop a more direct form of reprisal by the wronged parties.

Oil Supply: Is War the Answer?

I recently read a fictional scenario in which two countries were engaged in a war over disputed territory... which had oil under it. This border had been disputed for years, and in the latest round of border skirmishes, one had seized the oil territory from the other. This region was a major exporter to the US up until this point, and as a result of the conflict, the price of oil had risen 30% or so. It was part of a survey, and was followed up with a lot of questions about my opinion as to whether the US should send troops, why, the aftermath of a conflict, etc. It got me thinking.

My first thought is this: oil prices are rising? Oh noes. Big fucking deal. Yeah, it cuts into our standard of living... but violence for raising or maintaining a standard of living has another name when done at the individual level: theft. Its their dispute, the dispute is probably the result of an incorrectly drawn colonial border (and colonial borders cannot but be incorrectly drawn), and so probably the two sides need to figure out where exactly it should be, if anywhere. Such matters are often decided via warfare, unfortunately, and the US sending troops is not going to help them with that question, in the long run.

But what about the oil? Wouldn't the world be better off if this oil were available? And when an oil rich region is in a state of perpetual conflict, wouldn't it be better if someone brought an end to that conflict, making this resource available for extraction? I'm going to analyze the probable effects of leaving the conflict alone.

First, the higher prices remain at that level in the short term, and no signals are sent that the supply from this region is going to resume at any point in the near future. This higher price does curtail consumption, potentially impacting the standards of living of everybody dependent on oil, but it also stimulates production. First off, the potential profits of resuming production in the war torn region can tempt both governments to working out some arrangement by which production can resume. If not, they miss an opportunity, which is taken by others.

These others include other oil producing regions that are inhabited by people that do not engage in warfare every decade or so. In the short term, they reap greater profits due to the higher price. In the long term, these profits make available and/or attract additional capital into oil production. The result: the war torn region no longer has as great an opportunity for profits in oil production. Peace is rewarded; war is penalized; the market is the mechanism by which this occurs.... naturally.

Additionally, in that same long term period, it isn't oil that is needed specifically, but energy generally. The higher price of oil results in profits not only for oil producers, but for energy producers of all sorts. This would stimulate investment in non-oil energy sources, such as coal, solar, biomass, hydroelectric and wind, and possibly things most of us haven't even imagined yet.

Thus, the end result of non-intervention:

1. More oil produced in peaceful regions.
2. Less oil revenues available to the belligerents in question, and thus reduced capacity for violence.
3. More energy from non-oil sources.

All of this, not from expensive government programs, but from our government refraining from action. Thus, we have a #4:

4. Less loss of life for US soldiers, lower taxes, lower public debt, a better national reputation, etc.

Honestly, I count only positives in this scenario, and absolutely no negatives, not in the "common good" sense, at any rate. There are certainly people who lose out in this scenario, and I can even accept a demand that the attacking side reimburse those among our fellow citizens who had property destroyed in the conflict (oil rigs, wells, etc.).