Arlie Russell Hochschild\u2019s Strangers In Their Own Land profiles residents of deeply conservative parts of Louisiana, pondering why they are so opposed to government environmental regulations even as they suffer from environmental catastrophes that stricter regulations could have prevented. I don\u2019t wish here to dive into the many reasons why that is. Instead, I\u2019d like to look at one popular belief that pops up in the book that is very easy to believe but also very wrong. When Hochschild talks to people about the 2010 BP Deepwater Horizon oil spill, she discovers that they are all strongly opposed to Barack Obama\u2019s temporary moratorium on deep sea drilling, even though they were also appalled by the spill. One of the interviewees says the following: <\/span><\/p>\n\u201cIt\u2019s not in the company\u2019s own interest to have a spill or an accident. They try hard\u2026 so if there\u2019s a spill, it\u2019s probably the best the company could do.\u201d <\/span><\/p><\/blockquote>\n I think it\u2019s easy to see why people believe this. There\u2019s actually a persuasive-sounding logic to it. Many libertarian economists believe it entirely. The argument, expanded a bit, goes: The fact that corporations pursue their own financial self-interest means that regulation is not needed. A company that causes disasters is certainly not helping its own profits. BP didn\u2019t want to spill all that oil in the Gulf, obviously. BP has every incentive to avoid oil spills, because they want to keep the oil! Accidents happen, no company is perfect, but ultimately profits and safety coincide. A corporate executive who bungles like this is not actually pursuing the self-interest of the company, and so when corporations produce environmental catastrophes it is not because they are pathologically self-interested, but rather because they were not pursuing their self-interest well enough. Greed is still good.<\/span><\/p>\n\u2026\u2026\u2026<\/span><\/p>\nIt\u2019s true that accidents themselves are not in a company\u2019s self-interest, in that no company gains anything from a horrible accident that destroys their equipment (and possibly their employees\u2019 lives, though from a company\u2019s perspective employees are fungible). But \u201cthe behavior that produces accidents\u201d can absolutely be in a company\u2019s self-interest, and accidents don\u2019t always sufficiently damage a company\u2019s self-interest to make it worthwhile to avoid them. Eating the cost of a few accidents here and there might end up being more profitable than extreme precaution.<\/span><\/p>\n\u2026\u2026\u2026<\/span><\/p>\nA Friedmanite, i.e. sociopathic, company only has incentives not to hurt people to the extent that there are strong external institutions, in the form of government, media, consumer groups, and labor groups, that can create those incentives. If hurting people doesn\u2019t cost money, then it isn\u2019t in the interest of companies to avoid cheap, risky practices. The \u201cexpected return\u201d on a dangerously risky move might be high enough that it is \u201ceconomically rational\u201d (not to be confused with being \u201cactually rational\u201d).<\/p>\nIt\u2019s also important to remember that just because a gamble doesn\u2019t pay off, doesn\u2019t mean it was the wrong move. Even if there are strong coercive external institutions that punish toxic cloud emission, and mean that if you emit the toxic cloud your company will be severely hurt, a company might still take the gamble on Method A, because the potential rewards are so high. If there\u2019s a 99\/100 chance that by pressing a given button you get a billion dollars, and a 1\/100 chance that you\u2019ll be instantly killed, \u201cself interest\u201d doesn\u2019t necessarily dictate that you\u2019ll stay away from the button. It depends on whether you\u2019re feeling lucky. The 2008 financial crisis was like this. People made piles and piles of money of risky investments, until they didn\u2019t. They weren\u2019t necessarily \u201cfailing to pursue their own interest\u201d just because they took risks. For many of them, it was probably a smart move that turned out well. Every company takes risks. What if playing dice with people\u2019s lives actually turns out to be good for BP, on the whole? It might go wrong once or twice, but what if overall they make out pretty well from putting quantity of oil over safety, because the oil makes up for the accident costs? Then what?<\/span><\/p>\n
\u2026\u2026\u2026<\/span><\/p>\nBP certainly wants to convince the ordinary Louisianans that Hochschild talked to that the company is a partner and friend. Why would we want to hurt you? We\u2019re all in this together! We\u2019re bringing you jobs. We\u2019re cleaning up the spill, and we certainly don\u2019t want another. Don\u2019t believe them. Milton Friedman was quite clear: All they want is money, and if they can convince people that \u201cbig government\u201d is bad and regulation is unnecessary, then environmental destruction is costless. (The companies tearing down the Amazon rainforests, and displacing native populations, are behaving precisely as Friedman would have wanted.) Doing harm is only bad for business if we make <\/i>it bad for business.<\/span><\/p><\/blockquote>\nI am beginning to think that if corporations are legal people, then most of them need to be committed to a hospital for the criminally insane.<\/p>\n","protected":false},"excerpt":{"rendered":"
One of the incessant tropes of the draw-by-crayon libertarians is that doing harm to the public is simply bad business. To quote the Bard of Baltimore, this ,”Is an answer that is clear, simple, and wrong.” It tuens out that there are many ways in which a business can profit from doing harm, and streets …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[365,392,504],"class_list":["post-177640","post","type-post","status-publish","format-standard","hentry","tag-business","tag-economy","tag-philosophy"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177640"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=177640"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177640\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=177640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=177640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=177640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}