Friday, 3 June 2011

Should compensation be paid?

Nigel Hawkins writes at the Adam Smith Institute blog that
[...] Germany’s Chancellor, Angela Merkel, who confirmed that all 17 of the nation’s nuclear power stations would close by 2022.
and notes
However, this controversial decision has wide-ranging repercussions for the EU, whose common energy policy – Germany now being anti-nuclear and France being ardently pro-nuclear – is seriously frayed. Germany will become increasingly reliant on gas-generated power and an expansion of renewables. Both E.On and RWE, Germany’s leading utilities, are furious and may pursue the issue through the courts, unless very large compensation is paid.
The question is, Should compensation be paid to power companies who run the nuclear power stations? You may well say yes given that there previously legal business has just shut down by an arbitrary decision by the government. The utilities will suffer a very large loss because of the government's decision.

Now apply the same argument to a different case. Consider the situation of salve owners at the time the British government declared slavery illegal. The salve owners previously legal business was just shut down by an arbitrary decision by the government. The slave owners suffered a very large loss because of the government's decision. Should they have been compensated?

A third case. Should compensation be paid to businesses who are forced into bankruptcy when a government changes of a policy of protection to a policy of free trade? Again the businesses have suffered because of a arbitrary decision by the government.

So should compensation be paid by the government in all cases, none of the cases or only some of the cases, and why? Here is Steven E. Landsburg with his No answer to, at least, the trade case.


Tim Worstall said...

On hte slavery point, when the Empire abolished it, this question was indeed discussed. I think (although am not sure) that the "compensate the owners" argument won.

I also dimly remember that not much of it was ever paid.

On the trade argument, my response goes:

"OK, so you're now going to be disadvantaged by this new free trade. Hmm, so that means that I must have been, in the past, disadvantaged by the restrictions upon my own free trade. Were you compensating me for that? No, you weren't, were you? So I'll not you now."

Paul Walker said...

Tim: I also had the feeling that compensation was discussed, JS Mill may have been in favour of it, but I don't remember why I think this. I must have read something on this topic at sometime.