In "Continuing Foolishness" I posed a question that many people seem to answer in the most unintuitive way. If I asked you "who will look out for your interests better, you or someone else?" you would instantly answer "me!" If I were to ask anyone "who will watch out for someone's interests better, himself or someone else?" almost anyone (except maybe liberals, see "Liberalism, Its Origins and Consequences - Preface") would say "he will!" And if I were to ask anyone other than a liberal or bureaucrat "who has your interests at heart, you or the government?" I can't imagine anyone would say "the government!"

But when it comes to "safety regulations", we suddenly imagine that the government is better at protection than individuals and companies.

Well, in part this is because people have a bizarre view of business (drawn from bad Hollywood movies, it seems) that imagines businesses exist to hurt people and not make profits. (As I described in ""Evil and Greed"", "Greed Versus Evil" and elsewhere.) They somehow think doing harm will make companies rich.

But that is not the case. Companies make money, very simply, by providing products people want more cheaply than anyone else, or maybe with a better quality, in any case, providing more satisfaction per dollar than their competitors. That is it. And to do so, they need to make things, employing a workforce. Despite the claims of labor agitators and Marxists, it is not in the interest of employers to "exploit" labor. Some do, perhaps, but they tend to lose to those who treat labor well. After all, labor, even "unskilled" labor, develops skills as they work, making training new labor costly. In addition, you know who is and is not reliable among old labor, but not new, another cost. So employers do not want to harm labor, poison consumers, or engage in any of those other "evil conspiracies" Hollywood and populist politicians would have us believe. ("Protectionism", "Fear of the "Big"", "Beware Populist Deception", "The Wrong Reform")

Companies make money by getting the most out of their equipment and workers while maintaining consumer loyalty through both producing a good product and maintaining a good reputation. Almost everything populists would have us believe companies would do, ignore safety, wear out equipment through unsafe use, poison consumers, pollute wildly, might produce some very short term returns, but would produce long term harm, very great harm*.

And that is what makes me so amused by claims that the government must oversee "safety". For instance, that BP's recent mishap was due to ignoring government safety regulations.

Let us look at the BP situation. How does BP make money? By providing oil. Do they make money by dumping oil into the Gulf, getting bad PR, protesters blocking their businesses, people refusing to buy their products, liability suits and government persecution? No. So they have no interest in a mishap. They want wells to produce without accident. They do not knowingly avoid any safety measure which provides more safety than it costs.

On the other hand, the government makes political decisions. It imposes safety rules without thought of cost. If a safety measure saves $1 at the cost of $10, the government might still mandate it, as it costs the government nothing, but it might prevent a future scandal should such a mishap arise. In fact, the only influence preventing the government from mandating absolutely every imaginable safety measure (to avid any criticism) is the fact that they cannot destroy the economy completely, as well as the pressure put upon them by the lobbyists for various industries.In short, they basically follow the pattern I described in "Absolute Values", assuming safety is worth any cost, limited only by periodic intrusions of reality.

Now, some may ask why we shouldn't pursue safety at any cost, as BP really did have a problem here. But that ignores the fact that we must always consider costs. (""It's Our Top Priority!"") Let us use you average economy car as an example. It can survive an accident at 35 MPH, let us say, but at 40 MPH fatalities rise. We can make it survive those accidents at a cost of $100. So, you say, do it! But then, what about 41 MPH? And 42 MPH? What about exposure to open flame? What about remote risks, like lightning strikes? Once you protect against every possible risk, you have a $500,000 "economy" car that no one will buy.

And that is what happens if you pursue safety "at any cost". We either make production impossible, by imposing requirements no one an meet, or we leave it possible in theory, but so costly in practice that we might as well make it impossible. Which leads "practical" minds to say "Well, then we need to strike a balance." And that is what I have been saying all along, we must strike a balance, and cost-benefit analysis is the tool which does that best. By computing the likely loss, and the cost, we an see which safety is efficient and which is too costly.

And that is what private firms do. And do regularly, as it touches on the profitability of their firm. And it is what the government (and government run industries) never does, as political concerns inevitably trump economic ones. ("Bureaucratic Management", "The Bureaucratic Mind", "Bureaucracy Revisited", "The Inevitability of Bureaucratic Management in Government Enterprises", "Bureaucratic Management and Self-Policing")

And yet, again and again, even conservative thinkers suggest we need to "make exceptions" for "sensible regulation" ("Et Tu, Town Hall?", "Smaller Government , Fair Weather Friends and Special Cases", "Government Quackery"), even though it is clear the government provides less safety than private industry does.

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* It is ironic that the companies which do engage in such looting activities are usually political favorites which seek to make "quick profits" from political patronage rather than maintaining a long term business. Those who spend time building up profitable businesses do not then destroy them in a few months to "make a killing". But those who have political connections can create shoddy firms and cash in on connections. Oddly, the free market often gets blamed for these misdeeds by political patronage "businessmen". See "How To Blame the Free Market" and "Bad Economics Part 17".

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POSTSCRIPT

For a related topic, check out my posts "Professional Education", "Licensing", "Business Licensing and Regulation", "Bad Economics Part 12", "Real Life and Regulation", , "Insider Trading", "Gun Control, The FDA and Regulating the Law Abiding", "How the Government Corrupts Relationships", "The Inherent Disappointment of Authoritarianism", "In Praise of Contracts ", "Greed Versus Evil", "Bad Economics Part 2", "Bad Economics Part 3", "Bad Economics Part 5", "Funding and the Corruption of Science" and "Government Intervention and the Purpose of Government".