More regulators is the wrong fix

The BP oil spill has prompted calls for more federal regulatory power. Yet the behavior of the federal bureaucrats who were supposed to prevent this type of disaster provides no reason to expect better outcomes with more bureaucracy.

The Minerals Management Service was the Interior Department agency responsible for regulation of offshore drilling, and for leasing federal land and waters to natural gas and oil companies. Interior Secretary Ken Salazar reorganized MMS and renamed it the Bureau of Ocean Energy. The name change followed a string of embarrassing revelations.

Congressional investigators are looking into the unusual speed with which MMS gave BP approval to modify its oil well, making alterations that may have contributed to the accident. According to the Wall Street Journal’s analysis, BP requested three permit changes a week before the explosion. Regulators signed off on the requests with unusual haste, approving one change within five minutes.

Many people consider the spill clear-cut evidence of BP’s guilt and proof that the federal government needs more powers over energy companies. This is ironic because the spill occurred on the government’s watch. BP was not operating in a laissez-faire environment. federal bureaucrats subjected its every move to regulatory approval.

The typical case for government regulation of private business simply assumes that more bureaucrats can only help. The default position is that private companies engage in all manner of reckless behavior – behavior that can actually cost them a great deal of money – unless noble government regulators rush to the rescue.

Whenever a disaster occurs, despite several layers of bureaucracy, this is taken as evidence that we need more bureaucrats. People rarely entertain the possibility that maybe bureaucrats are the wrong way to tackle the problem of product safety.

Economists have long discussed the problem of “regulatory capture,” in which government agencies cozy up to the very corporations they are supposed to be disciplining. What often happens is that experts in a particular industry will spend time in a regulatory position, granting preferential treatment and sweetheart deals to favored companies. After they leave their government post, these same people are “taken care of” through revolving-door jobs, plush consulting contracts, or other means of repayment.

Whether in private industry or government, there will always be corrupt individuals who place their narrow interests ahead of public safety. Yet the free market contains built-in checks on this antisocial behavior. After such a gross failure of the MMS in its basic duties, the public should oppose giving federal regulators more power over the vital energy sector. If the Deepwater Horizon disaster isn’t a strike against the case for bigger government, what would be?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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