The Liberty Papers

Commenting on the efforts in Congress to increase the statutory liability cap that oil companies enjoy for damages caused by offshore drilling accidents, John Cole makes this point:

Here’s a revolutionary idea- why don’t we get rid of the limit altogether! If BP or Exxon cuts corners and makes a hash of things, and they cause 60 billion dollars worth of damage, they are on the hook for the whole 60 billion dollars! And if they can’t pay for the whole bill, the company is liquidated, the shareholders get wiped out, and the company ceases to exist.

Why don’t we give that a shot? And don’t tell me it is because no one will then undertake oil drilling. Of course they will! They’ll just pass on the costs to the consumer. And should being really careful and safe cost too much money, then it might just make other forms of energy look cheaper by comparison, and spur investment in those energy types.

So how about it? No more immunity, no more corporate welfare, no more subsidizing industries that don’t even pay a damned penny in taxes in the US anymore.

Cole is coming at this from the left, but I think he’s absolutely right from a free-market perspective.

If a company causes damages to others as a result of their activities — and in the case of something like offshore oil drilling the question of negligence wouldn’t even be an issue because of the inherently dangerous nature of the activity — why should their liability for those damages be capped in any amount ? And how can we really say that we’ve factored in all the costs of any activity when the consequences of the damages it might cause are shielded ?

Lift the cap, make BP pay.