Monday, October 25, 2010
BP Oil Spill= Government Failure
I agree with the fact that the BP oil spill was not a market failure, but indeed a government failure. Oil drilling was not causing any harm to the community around itself until the machinery actually burst open. Because of this spill, liability rights are taken into account and BP pays for its damages to society. If BP is responsible for providing the right amount of compensation to the fishers and fish markets in the gulf, and all who were harmed, a market failure has not occurred. It is only a negative externality when harm is being done and not fully compensated for. The reason I believe that the spill was a government failure is because the government obviously thought the marginal cost of making sure BP was abiding by its regulations was much larger then the benefit of making sure they were. However, the cost for providing compensation to all who were affected by the spill is actually much larger now than the cost of making sure BP was abiding by the law and regulations placed on them. This cannot be a failure by the market but by decisions of the government. Because drilling was not directly affecting the environment such as pollution does, it seems that the right amount of precaution was not taken because the effect of an accident was not as obvious such as that of pollution. According to Inhabitat, “A new report by Member Scholars of the Center for Progressive Reform on the principle cause of the spill concludes that the spill was entirely preventable and points blame at regulatory agencies, BP and the oil industry for not being vigilant about warning signs. The study points its biggest finger at incredibly lax oversight by the now defunct government agency in charge of regulating offshore drilling, the Minerals Management Service (MMS).” In conclusion, the BP oil spill was a government failure, not a market failure.
Sources: “Study Shows that BP Oil Spill Could Have Been Prevented by Regulation” Inhabitat. 30 September 2010. WEB. 25 October 2010.
Sources: “Study Shows that BP Oil Spill Could Have Been Prevented by Regulation” Inhabitat. 30 September 2010. WEB. 25 October 2010.
