Still more random econ

There’s a lot of BP-flavoured haterade being guzzled lately, chiefly directed at the Gulf of Mexico oil spill.  Now, I understand that conspiracy theories are awfully compelling, but I’m not quite sure why we’ve come to assume that this spill is some sort of nefarious corporate plot to… uh… generate a shit-ton of bad publicity while spraying money into the ocean like neutrinos from a neutron star.  “Hey, uh, Jim?  I was thinking… how about we have an oil spill this spring?  Just to piss away all the environmentalist goodwill we’ve built up with our biobutanol programme.  I mean, fuck the hippies, right?”  “Say, Bob; that’s a great idea!  I bet we’d get sued all over the place and lose a lot of fucking money.  Our shareholders would shit bricks! Draw up a memo and have it on my desk by end of day.”

I bet this one’s gonna come down to unforeseen mechanical failure (“Holy shit, that part’s under torsional stress too?“) and result in a bunch of hasty but quiet upgrades to the rest of the oil-rig fleet.  But if I was a conspiracy theorist, I’d point my directional mic away from the oil company with the most to lose and towards the government that exults in crises.

Alex Tabarrok wouldn’t blame the government, of course.  He knows damn well that the feds aren’t nearly competent enough to blow up an oil well and keep it quiet for more than about ten seconds at a time.  And he illuminates some curious thinking by Paul Krugman:

First, Krugman on Milton Friedman’s notion that tort law trumps product safety regulation:

In the wake of last month’s catastrophic Gulf Coast oil spill, Sen. Lisa Murkowski blocked a bill that would have raised the maximum liability for oil companies after a spill from a paltry $75 million to $10 billion. The Republican lawmaker said the bill, introduced by Sen. Robert Menendez (D-NJ), would have unfairly hurt smaller oil companies by raising the costs of oil production. The legislation is “not where we need to be right now” she said.

And don’t say that we just need better politicians.  If libertarianism requires incorruptible politicians to work, it’s not serious.

So, uh… wait, what? Granting (out of charity) that Krugman’s right and that Sen. Murkoski is in fact an utterly corrupt shill for the oil companies, this sort of despicable corporatism is precisely what pisses libertarians off about Krugman-style big government.  But whereas I’d be likely to go off into a semicoherent tirade about regulatory capture, Tabarrok calmly and incisively argues the point:

In other words, libertarianism can’t work because government sucks. I am tempted to comment further on this creative line of reasoning but that is unnecessary since Paul has misunderstood the facts of the matter.

The Oil Pollution Act of 1990 (OPA), which is the law that caps liability for economic damages at $75 million, does not override state law or common law remedies in tort (click on the link and search for common law or see here).  Thus, Milton Friedman’s preferred remedy for corporate negligence, tort law, continues to operate and there is no doubt that BPs potential liability under common law alone would be in the billions of dollars.

Thus, Paul now has only (N-1) reasons why libertarianism doesn’t work.

The rest of his post involves the peculiar scene of Alex Tabarrok defending the institutions of the United States Government from Paul Krugman.  It’s worth reading for novelty value alone.

Next, Ross Douthat points out that we’re being sold more of what we don’t like as a solution to what we didn’t like in the first place:

From Washington to Athens, the economic crisis is producing consolidation rather than revolution, the entrenchment of authority rather than its diffusion, and the concentration of power in the hands of the same elite that presided over the disasters in the first place.Consider the European situation. For a week after Greece’s fiscal meltdown began, all the talk was about the weakness of the European Union, the folly of its too-rapid expansion, and the failure of the Continent’s governing class to anticipate the crisis.

But then the E.U. acted, bailing out Greece to the tune of nearly a trillion dollars, and dictating economic terms to Athens that resemble “the kind of thing a surrendering field marshal signs in a railway car in the forest at the end of a bloody war,” in the words of the Washington Post columnist Anne Applebaum. If the bailout succeeds, the E.U.’s authority over its member states will be dramatically enhanced — and a crisis created by hasty, elite-driven integration will have led, inexorably, to further integration and a more powerful elite.

“It’s not working!  Do it harder!”

Finally, and speaking of the Euro, Nick Rowe sees a watershed moment in macroeconomic orthodoxy:

I am not ashamed to say that this made me giggle:

There are two types of macroeconomist.

The first says “What do you mean you can’t increase aggregate demand? You run out of paper? Ink? You scared of inflation?”

The second says “But monetary policy won’t work at the zero lower bound. And there are limits on fiscal policy, because we daren’t let the national debt get too big.”

More to the point:

I think we are witnessing the biggest silent shift in macroeconomic thought since the Second World War. For 70 years we have taught, and believed, that we would never again need to suffer a persistent shortage of demand. We promised ourselves the 1930’s were behind us. We knew how to increase demand, and would do it if we needed to.


The orthodox haven’t lost hope. They hope that monetary and fiscal policy will be enough to get us out of this recession, and that the limits on monetary and fiscal policy will not be binding this time around. And they are probably right. But they have lost faith that monetary and/or fiscal policy will always be enough – that there are no limits.

I’d better stop there, or I’ll end up quoting the whole damn thing.  Go, read.


1 Response to “Still more random econ”

  1. May 18, 2010 at 09:51

    It is discomforting to find that one is currently guilty of heterodoxy.

    Vivat academia!
    Vivant professores!
    Vivat membrum quodlibet
    Vivant membra quaelibet
    Semper sint in flore.

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