This isn't going to be a long diary because the concepts underlying this catastrophe are simple.
The short summary of what happened is that entity X did not take appropriate steps to prepare for long tail risks, instead choosing to pass those risks on the public at large. This can be applied to so many situations in the past, present, and unless the mindset of the public can be changed, the future as well.
Anyone remember banks taking on riskier and riskier loans while housing prices were inflated to unsustainable levels? They thought to themselves "Prices on houses "never" fall and if they do we're all up shits creek anyway, so who cares. Our capital levels are sufficient for 98% of potential scenarios and that's good enough for us" Guess what, that 98% estimate was really like 50% or even lower given that the housing run-up from 2002-2006 was essentially out of sample compared to the historical data used for modeling. The bank's balance sheets (and the economy as a whole) crated and was bailed out at extensive cost to the public.
Deepwater Horizon? Why spend the money on appropriate safety measures when we can go with the bare minimum and hope for the best!
We don't know all the details on the cause of the accident yet but the details don't really matter. From a high level perspective deep water oil extraction is drilling a hole in the ocean floor to access reserves of oil. If a potential outcome of this process is that the oil may leak uncontrollably into the ocean in large quantities, and if that outcome is extremely undesirable and costly to fix, well then you shouldn't be drilling unless
- you have systems to make sure the probability of that outcome is 0%, or
- you have the resources to pay for the cleanup
This really all comes back to the economics of externalities. If you run a business where profitability depends on the avoidance of costs related to long tail risks, then you don't really have a business. I think we can bury and pronounce dead the idea that free markets will lead to efficient outcomes. You think that corporations will take actions to maximize long term shareholder value and avoid situations like this? Wrong! Everyone from the CEO on down is paid based on profitability as of today. This is where government needs to step in and make sure outcomes like this are minimized and costs are incorporated.
You can expand this line of thinking to the climate change debate. Today's oil-based economy produces widgets and gizmos without adequate incorporation of the costs related to the heating of the climate. Denizens of Earth circa 2100 may live in a objectively worse environment due to choices being made today. Humans, for whatever evolutionary reasons, do not prioritize dangers that are not immediate and visible. It's hard to convince someone sitting in their air conditioned home that the economy needs to be overhauled at some expense today to avoid having the American southwest become the Sahara desert circa 2075.
I say this is the best thing to happen in years because of the potential to use this as a lesson on government regulation. When future outcomes are unknown it is best to err on the side of safety given the huge cost of adverse outcomes. What happened at the Deepwater Horizon well is terrible, but what will be even worse is if we don't take this opportunity to show that human actions sometimes have very adverse outcomes and that we need to take actions now to minimize those risks.
And honestly, what better way to show people than to have millions of gallons of oil wash up on the beaches of the southern block of states that has for years enabled the Republican party to deregulate everything they could get their grubby little hands on.