The BP failure in the Gulf of Mexico reminds us why regulating market based economies is crucial.

Last week Steven Pearlstein  penned an excellent article in  the Washington Post, and observed,

“The big flaw in the business critique of regulation is not so much that it overstates the costs, but that it understates its benefits — in particular, the benefits of avoiding low-probability events with disastrous consequences. Think of oil spills, mine explosions, financial meltdowns or even global warming. There is a natural tendency of human beings to underestimate the odds of such seemingly unlikely events — of forgetting that the 100-year flood is as likely to happen in Year 5 as it is in Year 95. And if there are insufficient data to calculate the probability of a very bad outcome, as is often the case, that doesn’t mean we should assume the probability is zero.”

Read his entire article here:  http://www.washingtonpost.com/wp-dyn/content/article/2010/05/25/AR2010052505154.html?sub=AR

Our history is filled with instances where business profit is privatized and business disasters are socialized. No doubt the BP spill will be yet another example.

OSF