The disaster in Japan is so disheartening. The Japanese are probably the kindest, most polite people on earth, and Japan is one of the wealthiest nations in the world and probably the most prepared, yet this earthquake-tsunami-nuclear meltdown is bringing it to its knees.

This tragedy inevitably makes one think about the U.S. nuclear industry. Nuclear power plants are in 32 states. Washington State has some as well as the Trident nuclear submarine base on the Olympic Peninsula at Bangor. Are we safe? And what’s a proper energy policy for America, especially regarding nuclear power?

Well, for starters, “energy” is not in the U.S. Constitution. So there really shouldn’t be any “energy policy” just like we don’t have a federal “grocery policy.” Let the market decide.

Ideally, the market should decide which energy type is used, whether oil, natural gas, nuclear, coal, water, wind, solar, etc. So the best energy policy is really no policy at all. But before we get to that, we must make the energy industry a free market, which it is not right now.

Remember, where there are subsidies or unequal tax breaks, there is no longer a free market. This is what we have now. So the oil and nuclear power industries, for example, should not get subsidies or tax favors. And with nuclear power, there should be no limited liability laws, which shield the nuclear industry from liability for environmental damage they cause. So there should be no subsidies, no tax breaks and no limits to liability or other corporate welfare for any form of energy. Then we’d have a proper free market in energy.

With nuclear power, this is not what we have now. In the U.S., we have a federal law, first passed in 1957, called the Price-Anderson Act. It was last approved and renewed by Congress in 2005. It artificially limits the legal liability of nuclear power companies for an accident through the year 2025; it is meant to encourage nuclear power. But this limit on liability acts as a subsidy, and could lead to environmental disaster.

Some nuclear proponents might say, “well, without limited liability, we couldn’t have nuclear power.” Good, that’s the way it should be. If private insurance companies won’t insure your business such that it can remain profitable, then you shouldn’t operate that business. That’s how a free market is supposed to work. If you can’t pay the costs that your operation imposes on the rest of us (pollution or radiation), and/or can’t get private insurance to insure you for it, then you shouldn’t operate that energy business.

The Price-Anderson Act distorts (an important word economists use) the market by making it so that more nuclear power plants are built than the true free market would allow. This is because since nuclear companies are being artificially shielded from liability, they’ll take more and more risks and build in unsafe areas, because they will be bailed out by the feds if there’s an accident causing death and damage above $12.6 billion. Privatized profit, but socialized loss; this is not a free market. If you didn’t like the bank bailout, you shouldn’t like this, much more subtle, nuclear bailout.

So nuclear power should be allowed to be produced by the private sector, but with no socialized shields of limited liability. Same for other forms of energy. Level the playing field, end subsidies and corporate favors, and let the market decide. That should be America’s energy policy.

Jeff E. Jared is an attorney and political writer in Kirkland who writes from a libertarian and law-and-economics perspective.