Krugman and Libertarianism and Political Power

Paul Krugman has a post today titled “Why Libertarianism Doesn’t Work, Part N.” Maybe parts A-M were compelling, but it seems like there’s a big flaw in his logic today. Here’s the entire item:

Thinking about BP and the Gulf: in this old interview, Milton Friedman says that there’s no need for product safety regulation, because corporations know that if they do harm they’ll be sued.

Interviewer: So tort law takes care of a lot of this ..

Friedman: Absolutely, absolutely.

Meanwhile, in the real world:

In the wake of last month’s catastrophic Gulf Coast oil spill, Sen. Lisa Murkowski blocked a bill that would have raised the maximum liability for oil companies after a spill from a paltry $75 million to $10 billion. The Republican lawmaker said the bill, introduced by Sen. Robert Menendez (D-NJ), would have unfairly hurt smaller oil companies by raising the costs of oil production. The legislation is “not where we need to be right now” she said.

And don’t say that we just need better politicians. If libertarianism requires incorruptible politicians to work, it’s not serious.

Well, he’s got a point. Politicians do interfere in the tort system — by placing caps on liability, by stripping defendants of traditional legal defenses, and in other ways. As my colleague Aaron Powell notes, the problem here is that politicians have power that libertarians wouldn’t grant them. And:

Second, and more troubling for Krugman, is his admission that all politicians are corruptible. If that’s true (and it almost certainly is), then what does it say about Krugman’s constant calls for granting those same corruptible folks more power over our lives? Surely if Murkowski is corrupt enough to protect BP from tort damages, she’s corrupt enough to rig safety regulations in BP’s favor.

The libertarian system of markets and property rights is impeded when politicians interfere in it. But Krugman’s ideal system is that politicians should decide all questions — monetary policy, health care policy, product safety, environmental tradeoffs, you name it. Whose system is more likely to produce corrupt politicians, and more likely to fail because of them?