President Obama should be credited—albeit cautiously—for his announcement yesterday that he will open some U.S. coastal waters to offshore oil drilling. The fact that this is an interesting political reversal on Obama’s part has been treated extensively elsewhere.  But what of the substance of the president’s drilling proposal?

I and other free-market advocates have spoken for years of the potential energy benefits of allowing this drilling, so I won’t devote too much space to repeating myself. The best encapsulation of my own thinking on the subject is this piece I wrote for the LA Times in 2008.

A few points worth adding:

Obama’s press conference at Andrews Air Force Base yesterday did indicate a welcome new direction for U.S. energy policy. But in an absolutely perfect world, the government would not be in the business of allocating scarce resources—in this case, the offshore oil fields—to competing user groups. The market would play that role.

Hence, the best policy would be to divest this land via auction and allow environmentalists, recreationalists and preservationists to compete with oil and gas companies for the rights to those resources.

It is not at all inconceivable to me that those opposed to drilling, whatever their reasons, might well out-bid extraction industries for rights to some of these fields. Unfortunately, there seems to be limited political support for privatization, so President Obama’s initiative is probably better than the status quo.

We need to remember, however, that if governments could intelligently allocate scarce resources across the economy without recourse to market information or institutions, then the North Korean economy would work swimmingly.