The article linked below made me ponder that wonderous concept in neo-classical economics; externality.
That is is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit. The cost is called a negative externality or external cost. A simple example is say, you buy new carpeting. The price does not include the potential health cost to you or an insurer of the carpet's out-gassing. Most pollution is an externality, economically speaking.
Biz folk are speculating (literally?) now on BP declaring bankruptcy then merging....externalizing the spill costs to....American taxpayers.
http://www.nytimes.com/2010/06/08/business/08sorkin.html
When some read something like this, they are prone to think, "They can't do that!". Well Bucky, they probably can.
BP America is a publically held corporation officed in Texas.
Strangely enough, corporations are "creatures of the state", for those of you having an archaic interest in republics & the like. not that it matters anymore. But I digress...
Under the law now, the only duty to the public a corporation has is to obey the law. Within that, their only duty is to maximize the return on investment of its shareholders. Period. Acting for another purpose by management or the board, subjects them to the possibility of suit by the shareholders.
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Jay,
Thanks for the post. I am keenly interested in the institutional arrangement of our goverments and policy structures- specifically related to how the "public good" is valued, upheld, and protected. Coming from a background in planning, this is not surprising. Unfortunately, what BP could do is also not surprising.
What is crazy to me is that corporations really have very little accountability, and yet the almighty 'private sector' is worshipped so reverently by many. Yes, government has its problems, but at least its purpose is to carry out the public good - in a manner in which its citizens (through it's 'corporate' laws) dictate. If government is not living up to its end, it is likely because we have not gotten the rules right. But if a corporation overlooks the public for the profit of its share holders, it is simply doing its job (it's only job- other than to follow the law).
We should be drawing down our oil consumption so these inncident simply cannot occur, but I digress. When was the last time an oil spill, or an economic depression, was caused by "excessive regulation"? Just as the housing bubble and credit crisis was caused, in large part, by ineffective institutions and regulation, so too is the gulf oil spill (and the Big Branch mine explosion before it).
I certainly agree that undue and poorly structured regulation and stifle otherwise sound economic development, but what happened to the precausionary principle? What happened to planning?
Josh C
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