Why Power Companies Build Nuclear Reactors on Fault Lines: The Case of Japan
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J. Mark Ramseyer
Abstract
On March 11, 2011, a magnitude 9.0 earthquake and thirty-eightmeter high tsunami destroyed Tokyo Electric’s Fukushima nuclear power complex. The disaster was not a high-damage, low-probability event. It was a high-damage, high-probability event. Massive earthquakes and tsunamis assault the coast every century. Tokyo Electric built its reactors as it did because it would not pay the full cost of a meltdown anyway. Given the limited liability at the heart of corporate law, it could externalize the cost of running reactors. In most industries, firms rarely risk tort damages so enormous they cannot pay them. In nuclear power, “unpayable” potential liability is routine. Privately owned companies bear the costs of an accident only up to the fire-sale value of their net assets. Beyond that, they pay nothing — and the damages from a nuclear disaster easily soar past that point. Government ownership could eliminate this moral hazard — but it would replace it with problems of its own. Unfortunately, the electoral dynamics in wealthy modern democracies combine to replicate nearly perfectly the moral hazard inherent in private ownership. Private firms will build reactors on fault lines — but so will governments.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Article
- Introduction
- Governments as Investors of Last Resort: Comparative Credit Crisis Case-Studies
- Bank Nationalizations of the 1930s in Italy: The IRI Formula
- Crowding Theory and Executive Compensation
- Why Power Companies Build Nuclear Reactors on Fault Lines: The Case of Japan
- Corporate Governance under State Control: The Chinese Experience
- The Unintended Consequences of State Ownership: The Brazilian Experience
- Can Company Disclosures Discipline State-Appointed Managers? Evidence from Greek Privatizations
- Hidden Government Influence over Privatized Banks
- State Intervention in Corporate Governance: National Interest and Board Composition
- Hidden Costs of Mandatory Long-Term Compensation
- Global Investment Regulation and Sovereign Funds
Artikel in diesem Heft
- Article
- Introduction
- Governments as Investors of Last Resort: Comparative Credit Crisis Case-Studies
- Bank Nationalizations of the 1930s in Italy: The IRI Formula
- Crowding Theory and Executive Compensation
- Why Power Companies Build Nuclear Reactors on Fault Lines: The Case of Japan
- Corporate Governance under State Control: The Chinese Experience
- The Unintended Consequences of State Ownership: The Brazilian Experience
- Can Company Disclosures Discipline State-Appointed Managers? Evidence from Greek Privatizations
- Hidden Government Influence over Privatized Banks
- State Intervention in Corporate Governance: National Interest and Board Composition
- Hidden Costs of Mandatory Long-Term Compensation
- Global Investment Regulation and Sovereign Funds
