The Gulf Spill and Compensation for Disaster Victims | Jeffrey A. Miron | Cato Institute: Commentary

The Gulf Spill and Compensation for Disaster Victims | Jeffrey A. Miron | Cato Institute: Commentary: "In many instances, the threat of disaster is widely understood, so property values in these areas are lower by the amount of expected damages. Crop land in flood plains, for example, is cheaper than similar land elsewhere, as is beachfront property at risk from offshore drilling. So property owners in at-risk areas get a financial bonus — cheap land — in years when disasters do not occur."

"compensation can reduce private incentives to avoid disaster. While no part of the country is entirely immune from these risks, some places — flood plains, and coastal areas, in particular — are far riskier than others. If property owners expect an outside party to mitigate their losses, they will live or locate their businesses too often in these areas."

"Other oil companies are watching BP's stock price plummet, which should make them more cautious about their own operations, and regulations are difficult to enforce (again, as the current situation illustrates)."