Economics, not apathy, exposes chemical plants to danger

We’ve come across similar things here, with respect to nuclear power plants. It makes little to no sense for such things to be managed by the market, but I’ve yet to see any evidence that I should trust our governments, given their records in such affairs (hint: terrible, as that linked-to-post discusses at length). Chemical plants are not dealt with much more competently.

Over in Wired magazine’s Security Matters section, it is the chemical plants being given consideration.

Toxins such as ammonia, chlorine, propane and flammable mixtures are constantly being produced or stored in the United States as a result of legitimate industrial processes. Chlorine gas is particularly toxic; in addition to bombing a plant, someone could hijack a chlorine truck or blow up a railcar. Phosgene is even more dangerous. According to the Environmental Protection Agency, there are 7,728 chemical plants in the United States where an act of sabotage — or an accident — could threaten more than 1,000 people. Of those, 106 facilities could threaten more than a million people.

The problem of securing chemical plants against terrorism — or even accidents — is actually simple once you understand the underlying economics. Normally, we leave the security of something up to its owner. The basic idea is that the owner of each chemical plant 1) best understands the risks, and 2) is the one who loses out if security fails. Any outsider — i.e., regulatory agency — is just going to get it wrong. It’s the basic free-market argument, and in most instances it makes a lot of sense.

We taxpayers pay for airport security, and not the airlines, because the overall effects of a terrorist attack against an airline are far greater than their effects to the particular airline targeted. We pay for port security because the effects of bringing a large weapon into the country are far greater than the concerns of the port’s owners. And we should pay for chemical plant, train and truck security for exactly the same reasons.

In effect there is no chance of a market solution. We’ve also seen Ronald Coase pop up a lot, here: the idea being that, yes, crappy corner-cutting by owners of nuclear and chemical plants put us all (either directly or, via the environmental consequences, indirectly) at risk. However.

So there’s a market for securing a chemical or nuclear plant. Consumers, producers, and an equilibrium level of security, bought at an equilibrium price. For the market to work, the two sets of people affected have to form the demand – either directly, or via a Coasean after-market (it doesn’t matter). The owner of the plant – easy. The rest of us? Not so easy. How much do you know about securing a chemcial or nuclear plant against entropy or exogenous attack? Because I know bugger-all. Not nearly enough to go working out how to negotiate purchasing extra security either with or from the plant’s owner.

That’s the whole problem (this is similar to why market solutions for health care are daft – unless we’re all trained Medical Doctors as well as patients, it just won’t work: we just don’t have the information required to participate effectively). It brings us, of course, back to the old politics vs. government problem. We need government to handle this/these things for us. That’s why we invented it. Trouble is, we don’t have it.

I don’t know what we have. We have politics, we have debates over John Edwards’ haircuts, how black Barack Obama is and the truly asinine discussion of whether Giuliani spent time at ground zero (less than he spent at Yankees games, if you’re interested – but I refuse to believe you’re surprised), but we don’t have government.


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