Comment by potato3732842
Comment by potato3732842 3 days ago
It comes down to the amortized cost of insurance vs amortized cost of not. Say nothing about how incentives get fucked all to hell by breaking things across many parties (principal agent problem) and the money distorts things.
And this isn't just insurance. Just because someone who work is being made for by law or by rule says that their work output reduces the failure rate from X to Y doesn't mean that the cost of their work when applied to everything isn't a massive loss compared to just not paying for that and cleaning up the mess X times instead of Y times.
You can appeal to emotion all you want but it's a very simple calculation. Heck, health insurance (in the US) serves a pretty obvious counterpoint.
Costs to clean up a mess from an underregulated industry can be bigger then the whole industry causing it. This is not even untypical.
Examples: Leaded gas, tobacco, CO2 emissions, dam breaks, reactor meltdowns, air pollution (really pollution in general; river/groundwater contamination for your septic tank example)...
If you underregulate, you end up with frequent cases where not even imprisoning and dispossessing everyone remotely involved/culpable is gonna get you sufficient compensation; this is extremely undesirable.
Companies are frequently gonna steer towards such scenarios, too, because they can allow them to externalize costs.