More on the Oil Spill

It turns out that Ryan Anderson has, with much greater knowledge on the subject, expressed something of what I expressed earlier as a concern that in light of the oil spill evangelicals who are calling for greater environmental sensitivity have not offered any specific directions about how to manage such concerns with the dangers of an expanding federal government.  (Actually, Anderson’s piece is not aimed specifically at evangelicals, but he does mention the arguments of religious leaders who have weighed in on the question.)  Anderson says it better:

What we’re seeing is an animus directed toward modern technology and industry, an unmodulated suspicion of the private sector’s motives, an unexamined belief that markets have failed, all coupled with an uncritical (and nearly unthinking) faith that, in the final analysis, only government and extensive regulation will save us from ourselves and protect Mother Nature.

Even I expressed in a comment I wrote yesterday (before I read Anderson) that we can’t expect companies to police themselves when it comes to restraining pollution.  But Anderson makes a point that I have never considered before, and it makes perfect sense to me: companies will police themselves when they have an economic incentive to do so.  Anderson’s main argument is that we should harness the power of economic incentive in order to protect the environment.  The market is far more powerful than arbitrary government regulation.

Although I have never made this connection with respect to the environment, I have thought in this direction with regard to healthcare.  Basically, there are two ways to get health insurance companies to change.  One is to force them through regulation.  If you force a company to do something it does not instinctively want to do (in other words, something that is not good for profits), then the company will make other changes that you don’t want it to make in order to compensate for the changes you forced it to make.  Case in point: under Obamacare, health insurance companies are now (or soon will be) outlawed from denying coverage to anyone on the basis of a preexisting medical condition.  Insurance companies have long avoided taking on clients whom they consider to be too risky to insure.  Insurance is about the management of risk, and in a business where you are trying to make money, it is in your best interest to manage the risk in your favor.  Now that insurance companies are being denied that option, through government regulation, they will make other changes to compensate, including raising costs on all customers alike.  Obamacare is going to drive costs up, not down.

So regulation is one way to change behavior that you want to change.  But another way to change it is to create conditions so that companies have an incentive to change.  In the healthcare world, why can’t insurance companies compete with one another across state lines?  If consumers have the power to shop from a larger pool of options, companies who want their business will have an incentive to lower costs and provide better service in order to get it.  The market can reduce health costs quite effectively if it would only be allowed to do so.  I think the same is probably true with environmental protection.  Instead of always pitting environmental concerns against economic concerns, what would happen if we tied them together so that what is good for one is good for the other?  Read Anderson’s article.  It is well worth your time.

[HT: Justin Taylor]

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5 Responses to More on the Oil Spill

  1. Diogenes says:

    I agree that the carrot is preferable to the whip in motavating but But the government is still neccessary in implementing the financial incentives, and the financial carrots are just a sham whip. They either accomplish the same job as the law or regulation or they are ignored and do nothing because the business finds some way to make more money by ignoring it.

  2. The government doesn’t necessarily have to provide the carrot. In fact, it is generally preferable that the government not do it. All the government has to do is enforce just laws so that market forces can operate naturally.

    This works best in environmental matters when someone has a sense of ownership of the land and the waters. Whoever legally owns the property that could potentially be polluted (whether an individual or a group) can press legal claims against businesses that pollute such property, thereby giving businesses an incentive not to pollute. Or the business and the owner(s) could reach an agreement whereby the business will pay such-and-such amount to the owner(s) depending on the level of pollution. The government’s role is not to provide a carrot in these scenarios. It is simply to enforce property to rights, which any good government should do anyway.

  3. Diogenes says:

    What about the land or in this case ocean that no one owns. Who is responsible for protecting that? The government is responsible for protecting property of the people through laws and regulations

  4. That is precisely Anderson’s point: what if someone had ownership of this part of the ocean? I’m not speaking of one individual here, and I’m not sure exactly what it would look like. But that is the point he is making: the less “public” property we have, the better it will be for the environment.

  5. Diogenes says:

    I understand but still disagree. Private ownership of land is almost always a road that leds to destruction of the environment. Without the government large portions of the country would be a wasteland or a gaudy tourist attraction. In a world filled with people who took seriuosly God’s command to tend the garden and keep it yes the government would not be needed unfortunately we don’t live in that world.

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