The MMS: Epitome of a Captured Regulatory Agency
Friday, May 7th, 2010The U.S. Minerals Management Service (MMS) is the regulatory agency in charge of safe operations of our offshore oil industry. Yes, these are the guys who were supposed to make sure that British Petroleum and others drilling for offshore oil follow procedures to keep our environment safe. This is just one example of what economists call “government failure.” With the recent oil spill, as with Katrina, we often trust the government to keep us safe. When we do, however, we are bound to not only be disappointed, but also to be anything but safe.
In class recently, I talked about how regulatory agencies are sometimes captured by the industry they are supposed to regulate. According to recent news stories, the MMS has gotten very cozy with the oil industry. Here is a story from Salon (warning: the relationships involved are sometimes sexual in nature, and the story mentions specific acts) about that cozy relationship. The relationship between the MMS and the oil industry painted in the Salon story and elsewhere is one where the regulatory agency has become the agency’s, well, handmaiden.
Of course, the truth is that BP wasn’t trying to do something its managers thought was particularly risky. This was the sort of event no one had any experience with. BP did not think that their efforts would cause a major oil spill with a horrible loss of life of their employees and those of its contracted partners.
Still, the point is that we cannot rely on regulations to get firms or anyone else to do the right thing. If firms cannot make money by getting around the reglations, they will try to do just that. And if we cannot trust a firm’s management to have strong moral and ethical character, how can we be so sure that the regulators themselves will have strong moral and ethical character and will be above taking bribes? If the profits from subverting the intent of regulations are enough to pay the regulators to look the other way, then we are deluded into thinking that the regulators are keeping us safe.
MC
