Can we, from an economic viewpoint, say anything useful about the implosion of OceanGate’s submersible, and the death of its four passengers as well as of its pilot, the founder and CEO of the company? My co-blogger David Henderson beat me to that topic, but here are a few other, complementary ideas that I had started putting on electrons.

A first, basic, point relates to consumer choice and sovereignty. Four adult consumers paid money (rumored to be $250,000 each) to participate in the unique adventure of seeing the wreckage of the Titanic two miles deep in the North Atlantic. The adventurous passengers certainly knew the risk, as the Wall Street Journal notes (“Prior Submersible Passengers Recount Thrilling Experience: ‘Pretty Extreme’,” June 21, 2023):

Past travelers who climbed into the minivan-sized tube that is the Titan deep-sea submersible knew they might die.Risk of death is mentioned at least three times on a waiver they signed before boarding.

The passengers still decided to buy the service because each judged its expected cost, including risk, to be lower than the expected subjective benefit of the adventure. When a market demand exists, supply follows. No entrepreneur would mobilize resources to create the sort of service that OceanGate offered if he didn’t think he would have paying customers. “Consumer sovereignty” means that consumers decide through their demand where scarce resources are allocated.

The second idea is related to the eclectic way in which most economists look at the non-economic concept of “human nature.” Human nature is seen as the way biological and social evolution influence individual preferences (see notably Friedrich Hayek on this topic). In the human species, “nature” leaves much room for diversity in individual preferences, as advanced societies demonstrate. Not all individuals would pay to dive in the ocean imprisoned in a metal tube. But there are more adventurous individuals who love that. Wherever individual preferences come from, in their commonality and they diversity, they motivate action, and economics takes it from there to analyze society.

A third idea lies in the benefits of a free and rich society, the second feature flowing from the first. It is only in a free and rich society that it is possible for ordinary individuals—not just great rulers and great criminals—to live great adventures according to the preferences, and of course the constraints, of each. There is no OceanGate company in North Korea nor, for that matter, in Russia or China, even if some of their institutions sometimes partly succeed in simulating freedom by simple imitation. This applies equally to lots of smaller adventures that are accessible to individuals with private cars, boats, trailers, cabins in the woods, and guns for self-defense if needed. Even the prices of more involved adventures in space or undersea should, ceteris paribus, decrease with time and entrepreneurship.

A fourth idea, which cannot but pop up under our Nanny State, in our society which is a mix of liberty and government control, is whether adventure and risk are sufficiently regulated. A Wall Street Journal story notes (“Rescuers Follow Banging Noises in Search for Missing Titanic Submersible,” June 21, 2023):

The vessel is owned and operated by a little-known company called OceanGate Expeditions, whose founder and chief executive is on board, and has put a spotlight on a niche and generally unregulated part of the tourism industry, typically for wealthy people. …

Submersibles operate outside the boundaries that regulate other vessels, said Salvatore Mercogliano, who teaches maritime-industry policy at Campbell University in North Carolina. The irony, he said, is that the sinking of the Titanic inspired laws that governed maritime law, including requiring certain safety procedures and distress signal requirements.

Many calls for regulation have been heard.

If we accept normative values consistent with the economic way of thinking, not only the rich should be entitled to make their own choices and take their chances. More regulation of adventurous and risky activities would, on the one hand, increase their costs. On the other hand, by reducing risk, regulation would also increase demand from less adventurous segments of the market. The effect of a reduced supply (because of higher production costs) and increased demand is a higher price. If supply diminishes more than demand increases, regulation could reduce access to adventure.

We should be suspicious of government imposing anything over very basic safety measures, which should anyway be largely in the interest of the suppliers to adopt. Indeed, testing of new products is often voluntarily contracted to third-party laboratories, but the process may have been bypassed by OceanGate when it changed the material used for the hull of its submersible. (See notably “Submersible Passengers Died in Implosion,” Wall Street Journal, June 22, 2019.) On the other hand, it’s pretty clear that the entrepreneur at the origin of the tours to the Titanic wreckage literally had skin in the game: he was on board when the submersible sank.

Voluntary safety rules sometimes fail, especially in the case of new and extreme adventures. But so do coercive government regulations in ordinary cases. It should be sufficient that candidates for extreme adventures be informed of whether or not the safety measures recommended by the government or by private verification laboratories were or were not implemented. Avoiding new coercive regulations is even more clearly desirable in a general situation where, as nowadays, regulation is already pervasive after increasing non-stop for several decades. And as pointed out by David, new products, services, or activities, which “the legislator” has not even thought of, are of necessity unregulated.

Moreover, as much as adventures such as submersible expeditions could be regulated, they will never be perfectly safe. For adventurous individuals, less risky adventures would be less attractive. The Peltzman effect suggests that risk-seekers and extreme adventurers would move to non-regulated or less-regulatable risks, which may include crimes. As Francis Fukuyama argued, bored people can be dangerous. And, of course, the goal of regulating all risks of life entails reducing many of its pleasures.

A last point is the argument that taxpayers, many of whom are not themselves risk-seekers, should not be on the hook for rescuing adventurers and participants in risky activities, who should make their own insurance arrangements. This ideal should certainly be encouraged or not discouraged, but with the understanding that it can never work perfectly for a reason of moral hazard that is inseparable from a rich society with governmental institutions: everybody knows that risk-seekers and adventurers will be rescued by public agencies if they haven’t purchased insurance. It also appears that many private or semi-private organizations helped the rescue effort for the OceanGate submersible. A more challenging idea comes from a contractarian perspective à la Buchanan-Tullock, but is not incompatible with private rescue contributions: it may be that all individuals in society agree on rules establishing public rescue services in emergency situations, a sort of public insurance.