James Kwak says that if we want safer and more reliable products, factories, systems, etc., we have to be willing to pay for it:
Regulatory capacity is expensive. There are two ways to pay for it, either of which is fine with me. One way is through general government revenues, meaning taxes. Since that means individual income taxes in practice, this would be somewhat progressive.
The other way is by levying sharply higher fees on regulated firms. These higher fees would, of course, be passed on to customers in the form of higher prices. But that’s only appropriate, since proper safety reviews are a cost that the market should take into account when deciding whether or not a new airplane (or a new derivative) increases social welfare.
Either way, we have to pay for it. But as a taxpayer or as a consumer, I would be happy to pay more if it means that the airplane I’m getting on was reviewed and tested by someone qualified who wasn’t being paid by its manufacturer.
James Kwak makes sense to me, but he must not be a Texan. In Texas, it seems that most people not only don’t want to pay for it, they don’t want it. In the wake of the West, Texas, fertilizer plant explosion, we have learned that that barely-regulated plant was a disaster waiting to happen. Gov. Rick Perry has already toured the state telling people that the state’s light industrial regulatory regime wasn’t to blame for the disaster. Many Texans agree. From today’s NYT:
This antipathy toward regulations is shared by many residents here. Politicians and economists credit the stance with helping attract jobs and investment to Texas, which has one of the fastest-growing economies in the country, and with winning the state a year-after-year ranking as the nation’s most business friendly.
Even in West, last month’s devastating blast did little to shake local skepticism of government regulations. Tommy Muska, the mayor, echoed Governor Perry in the view that tougher zoning or fire safety rules would not have saved his town. “Monday morning quarterbacking,” he said.
Raymond J. Snokhous, a retired lawyer in West who lost two cousins — brothers who were volunteer firefighters — in the explosion, said, “There has been nobody saying anything about more regulations.”
Texas has always prided itself on its free-market posture. It is the only state that does not require companies to contribute to workers’ compensation coverage. It boasts the largest city in the country, Houston, with no zoning laws. It does not have a state fire code, and it prohibits smaller counties from having such codes. Some Texas counties even cite the lack of local fire codes as a reason for companies to move there.
But Texas has also had the nation’s highest number of workplace fatalities — more than 400 annually — for much of the past decade. Fires and explosions at Texas’ more than 1,300 chemical and industrial plants have cost as much in property damage as those in all the other states combined for the five years ending in May 2012. Compared with Illinois, which has the nation’s second-largest number of high-risk sites, more than 950, but tighter fire and safety rules, Texas had more than three times the number of accidents, four times the number of injuries and deaths, and 300 times the property damage costs.
As federal investigators sift through the rubble at the West Fertilizer Company plant seeking clues about the April 17 blast that killed at least 14 people and injured roughly 200 others, some here argue that Texas’ culture itself contributed to the calamity.
“The Wild West approach to protecting public health and safety is what you get when you give companies too much economic freedom and not enough responsibility and accountability,” said Thomas O. McGarity, a professor at the University of Texas at Austin School of Law and an expert on regulation.
Since the accident, some state lawmakers began calling for increased workplace safety inspections to be paid for by businesses. Fire officials are pressing for stricter zoning rules to keep residences farther away from dangerous industrial sites. But those efforts face strong resistance.
Paul Burka, senior executive editor at Texas Monthly, said he did not imagine that the West disaster would lead to much in the way of change. Tragedies rarely do, he said. “We’re not going to spend our money telling businesses what we should do with their premises,” said Mr. Burka, who grew up near Texas City, the site of the 1947 explosion.
Indeed, days after the accident near West, state lawmakers killed a proposal to provide $60 million in training and resources for volunteer firefighters. And a lobbyist for state firefighters, who backed Mr. Price’s effort, said the bill had little chance of passing because of resistance from the real estate industry.
“Businesses can come down here and do pretty much what they want to,” Mr. Burka said. “That is the Texas way.”