The Declarer (Floyd McWilliams' Blog)

Sunday, February 08, 2004

I have been doing a fair amount of blogging over the weekend, but it has taken place over at Aaron Haspel's blog. Aaron and I and another commenter engaged in a not-too-friendly debate on corporate regulation. Here is an excerpt from my final comment:

Chemical production is inherently dangerous, but the benefits of chemicals are enormous. Therefore any business that manufactures chemicals must choose processes that are reasonably safe but also reasonably efficient.

How do we determine what is "reasonably safe"? Libertarians contend that if a corporation knows that it can be sued for unsafe behavior, that they will choose to modify their behavior to avoid a massive liability. Let's call this "liability avoidance." Other people contend that the government should set rules for industrial production, and verify that corporations follow them. This of course is "regulation."

I contend that liability avoidance is superior to regulation. Liability avoidance is forward looking; regulation is based on the experience of the past. Liability avoidance can be used when dealing with new processes and technology; it is impossible to craft regulation to anticipate future advances.

Liability avoidance is performed by the people who are on the spot and intimately involved with the manufacturing process. Regulation is performed by someone who works in a government office. Liability avoidance is performed by people who have much to lose if they get it wrong; regulators are never punished for stupid or evil or lazy behavior, and are mostly concerned (if they are concerned at all) with public appearance.



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