Promoted by Brendan
Blogs such as Dailykos are leftist. Our opponents call us Liberals, we describe ourselves as Progressive. But there are those who use stronger terms. Calling us Communists is simply the same as our calling Republicans Fascists. It is the epithet that is so emotionally charged that it is not really an opening for discussion. They have become "fighting words" devoid of actual political implications.
In this country, in most academic settings, Communism and Fascism are discarded relics of an era long gone. You don't get an academic assignment or a book deal, if you are even tainted with this extreme positions.
I just wrote this comment on why people buy large cars:
A larger car is safer and more comfortable. Just as those who can afford it buy a bigger house, that costs more to heat and cool, they buy a larger, more luxurious car.
The issue is more complex than this. While we like to believe in free enterprise, and the freedom to purchase what we want, we are more interconnected. While the wealthy can afford his 15 mpg car; as his cohort use these vehicles it affects the price for the worker who can barely afford gas for his old Honda Accord.
He is affected by the actions of the wealthy, and even though he uses less gas, the effect on him, based on his available income, is much more dire.
Conditions like we are seeing now, shortages leading to unaffordible prices of gas, and even worse, food are game changing events. It should elicit a rethinking of many economic and social verities that worked fine in the absence of these shortages.
It is a discussion that should begin pretty soon, if someone wants to really deal with what is happening now, and what will only be accelerating. For those in this country, price increases is largely a cause of deprivation; for the third of the world living on a dollar a day, it will mean starvation, and the social chaos it will engender.
The increase in the cost of oil, which leads directly to the sharp rise in the cost of everything else, including the most vital commodity, food; is more than an economic problem. The verities of free enterprise, articulated by Adam Smith to Milton Freedman ....happen to be based on sound logic. The invisible hand does, in fact, provide the most goods to the most people. But there is an important caveat, that we have not previously had to deal with. This only works in an environment of abundance, when the failure of the individual enterprise, what has been referred to by Joseph Schumpeter
as "creative destruction
" is self limiting, and not destructive to the society.
It turns out that venture capitalists are bidding up the infrastructure of food production--farmland, nitrate mines, etc. This article describes how this will add to the already accelerating cost of food. A good investment? Perhaps. As long as no one thinks about the social consequences. This is food, not gold mines. As food prices increase, even incrementally, more people die. Right now they are only in the slums of Africa---and we can, and have, been ignoring this.
As it spreads, which it will- if not this time, then next year, next decade, next generation-what exactly is to be done. Do we continue to tacitly trust in the free enterprise system that has been the all but universal intellectual underpinning of western civilization.
The owners of the now more expensive farmland will only make a profit if the price of food covers their investment. As long as no one cares who, or how many who can't afford are starving they will do just fine.
And if a Communist-Central planning mentality starts to grow, just who is to be blamed- an individual, a party, a feckless president--or history itself.
(Cross Posted to Dailykos)
__________________________
A large car
might be safer for the occupants, but large vehicles aren't necessarily safer overall
:
Not your main point, obviously, but I thought I'd throw that out there anyway because it's non-intuitive for me.
__________________________Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Larger = safer, sort of.
As usual it depends on what you mean by "safer." Larger cars get in accidents more often, even fatal accidents more often. The difference is it is more likely that the person who dies isn't the driver of the large car but the poor bastard he or she hit.
So yeah, they're safer, if you just don't give a *&^% about others.
__________________________I came. I saw. I posted.
Veni, Vidi, Bitchy.
Price gouging = good
According to some conservatives at Redstate in the aftermath of Katrina, anyway, who argued that it prevents hoarding and gets the food/water/gas into the hands of those who truly need it -- as evidenced by their willingness to pay the high prices.
When those prices are driven by speculation rather than (or in addition to) demand the argument kind of falls apart (or at least weakens).
We as a society have already made the decision that profit does not trump safety. Hence OSHA laws, child labor prohibitions, etc. These are mandates that directly interfere with business, curtail profit, and are centrally planned and executed -- and we don't give them a second thought.
We're in a mixed economy, and there's no point in pretending that free market principles are somehow sacred, instead of subservient to the greater good of society. Mostly they align, and admittedly the left is often slow to realize or acknowledge such alignment. But where they don't there is ample precedent and support for doing what is necessary to look out for people first.
Obviously a good practical start right here and now would be to eliminate the subsidies or tax breaks that contribute to the increased prices. That means rethinking the Farm bill, rethinking tax breaks for oil companies. Then we could consider addressing the supply side with stuff like this
.
I don't know that we can or should really regulate speculation, although there are proposal to limit margin on futures trading. Of course it would be good to eliminate outright market manipulation, but it's not clear to what degree, if any, that's occurring here. We can always target aid to those impacted by price spikes as a short-term fix, although this doesn't do anything to improve the situation long-term.
Anyway, thought-provoking diary!
__________________________Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
That argument always cracks me up
there is nothing I can think of that so ably proves the utter insanity of free market principles as people who earnestly argue that poor refugees who've just lost everything have better access to liquidity than a traveling salesman with his company card.
It's a very special kind of insanity, amusing except for how common it is, and how much credence it is given to actually set policy. Then it just gets depressing.
__________________________I came. I saw. I posted.
Veni, Vidi, Bitchy.
You're on the right track...
Maybe it is just me ...
but I don't really know what the bottom line point you are trying to make here is. Can you clarify you main point please?
I disagree with this comment. The free market is the best known method of allocating and managing scarce resources on a societal level. In other words, the free market automatically seeks out the optimal allocations based on societal needs as defined by society's willingness to pay in any given segment of the market. As such it seeks the most efficient (in terms of societal utility per unit resource) use of those resources on a societal level.
More over, the free market works best with respect to scarce resources rather than abundant ones (although it does work for both). In the case of scarce resources the going price will seek an equilibrium point based on the relative demand within the various market segments. This equilibrium point represents the optimal societal distribution of the resource in question.
__________________________Republican Maverick at Large
-4:Strongly Disagree; 0:Meh; +4:Strongly Agree
Not always the way it works in practice
This is what I was trying to discuss in my above comment about price gouging.
The theory is that in the event of a scarcity, increased demand drives up prices which means the goods go to those who truly need them, ie the people willing to pay.
Supposing we accept this as generally valid, there are still two situations where it doesn't work. The first is if that demand is coming not from consumers but from speculators; then the price is distorted and you do not get "the optimal societal distribution of the resource in question" because the speculators are tying them up to make money. There's not much we can productively do about this.
The second is if the market is being deliberately manipulated, for example if oil companies were collaborating to hold back supply. In this case the scarcity is artificial and while the oil made available might be efficiently distributed the overall resource is not, since some of it is just sitting there. I don't think that's actually happening, although I'm certainly not an expert.
(Edit: changed title to add "always")
__________________________Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Well, let's see ...
In the long run the speculators are a wash ... at least from the perspective of the distribution of the resources. They are simply middlemen. They may extract a mark up but ultimately they too need to sell the commodity and it is distributed according to the true demand at that point. They may represent a small percentage uptick in the price, since they are essentially parasites on the system, but they don't distort the distribution over the long run.
In which case we are not talking about a "free" market anymore. On the other hand if they hold back supply to the point where alternatives become economically viable or the barriers to entry into their own market segment become surmountable, then others will step in to increase the level of production. Again, over the long run such strategies don't truly impact things that much. Short term, sure they might affect things somewhat, but not in terms of the long term distribution of the resources.
Also, this approach is self-limiting in that everyone has some level of cash flow commitments. They will never reduce the supply to zero, for example, because they need some level of income over time. The best they can do is to try and game the system to find some artifical maximum which lies slightly above the optimal value. As the difference between the artifical maximum and the optimal value increases so does the probability that alternatives will be developed that will cap the price and that other competitors will spring up to eat their lunch. These are all examples of the "invisible hand" at work.
__________________________Republican Maverick at Large
-4:Strongly Disagree; 0:Meh; +4:Strongly Agree
If markets were free
then oil companies would not be receiving tax subsidies, and we wouldn't be using US citizens in Iraq to 'protect and capitalize' the flow of oil. Great deal for them, they don't have to pay taxes but they get to use tax money for their own profit.
__________________________It is the economy, stupid.
Here is a perspective on why commodity speculation is good.
In case you don't know, Walter Williams
is an economist and periodic guest host for Rush Limbaugh.
My sound bite summary:
Commodity speculators cause us to act like Ants rather than Grasshoppers. :)
Not that this is their intent, obviously.
__________________________Republican Maverick at Large
-4:Strongly Disagree; 0:Meh; +4:Strongly Agree
abundance, or equilibrium?
I was a bit confused by that also. Markets are definitely not based on the premise of abundance. Perhaps he was thinking of "equilibrium"--where everyone has had a chance to figure out what everyone else is doing and make the appropriate arangements.
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
appropriate arrangements for what?
You can hoard supply and it is an appropriate arrangement to drive prices up.
You can affect currency exchange, so your currency buys less.
You can have tariffs and duties for some, but not for others, forcing prices higher or lower at whim.
You can make all kinds of arrangements. The question is whose interest do they serve and are there any, or should there be any, ethical guidelines to these "arrangements."
__________________________It is the economy, stupid.
Huh?
I have no idea what those comments have to do with my previous comments.
Market manipulation is not trivial, and it is not part of how markets are "meant" to work (which is what we were talking about)
In case you really were confused, I was speaking of individuals making appropriate arrangements to manage their own economic affairs (i.e. figuring out what things cost and how to get them).
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
me confused......
never --- :-)
__________________________It is the economy, stupid.
Thoughful Diary, arodb
but a little flawed in some of points of reasoning.
Let's consider:
The higher price is based on world wide demand....not SUV's in the US. Moreover, less than 44% of the crude in this country goes into regular gasoline for passenger cars. The rest is industrial and non fuel-related...like plastics.
Bottom line: increased demand from developing countries in Asia is driving up demand. Singling out SUVs doesn't get to the problem.
First of all, technically, there are no "shortages". A "Shortage" is when there simply is not enough of something to meet demand at any price and must be rationed. The price control in the 70s on gas caused a shortage and gas was rationed on a gallon basis and by plate number on every other day. Willingness to pay played no role. You got your rationing and that was the end of it. The high prices we see now prevent a real shortage. Where by demand would not soften and production would drop due to a lack of incentive.
The verities are working just fine....properly understood. It's never about abundance...it's about scarcity and always is. Everything scarce to one degree or another. Abundance is an abstract idea based on a particular resource's quantity and price with respect to demand and uses.
As for the NYT link, that is a result of new incentives primarily spurred by an artificial premium on crops caused by ethanol subsidies.
In summary, free enterprise...in any shadowy form or to any degree and in any context operates within circumstances.... informal ones from social norms, formal ones from laws and contextually from problems created by these circumstances.
All this makes this above quote somewhat puzzling in terms of focus within a complex matter.
During Emergencies Free Enterprise is suspended....
In the midst of natural calamities or war it is understood that the pricing mechanism does not work. This is what I meant by saying that supply and demand only works during abundance.
And those who say there is no shortages, only higher prices, are not taking a global view. There is increased starvation in the most impoverished areas of the world due to the increase in the price of staples such as rice.
I tried to be careful in writing this essay, since this could have been written a hundred years ago and been absolutely wrong. The pricing system provided an incentive for the green revolution, where food production was increased keeping pace with the rising population. And commodities have actually decreased in price, adjusted for inflation, over the last century, as greater productivity and new means of discovery outpaced burgeoning demand.
This essay could have been entitled, "Is Malthus right, but two centuries late" What makes this a difficult subject is that our two party system does not promote serious public discussions of issues such as this. We promote dreams, that everyone can have an upper middle class existence, if only my parties policies are accepted.
Recent articles have shown that both parties would increase the national debt, each in their own way. And there are specific policies, such as the GI bill that are never discussed outside of memetics (pardon jargon, but it fits) Once the "support the troop" meme is universally accepted, it is a political football that both parties want to capture.
So, the GI bill, based, I would argue, on false premises are not discussed fully by either party. The Republicans have created the meme, and they are now stuck with affirming it.
I see democracy itself facing a crisis. Both parties of a two party system, which has a function of educating the population, have abrogated this in favor of "framing" memes, or slogans. In a global economy the loss of a third of the value of the dollar can be interpreted as a loss of national wealth.
Our political system, as it has evolved, seems incapable of even grasping the choices that should be considered.
Well
On your first point:
But it does work...even under calamities and war. It works exactly as planned in dealing with relative scarcity. What you mean is that it doesn't yield satisfactory results...but that's a supply problem from disruption, not a price mechanism problem. An olympic sprinter will beat us in a 40 yd. dash. If someone trips the sprinter, we may beat him but it's not because something is inherently wrong with the sprinter. Like the price mechanism, the laws of physics still hold here. ;)\
.
Of course I'm taking a global view. I understand that some people wind up not getting enough food but that's not a shortage by definition. Yes, there is no textbook shortage but there is still a problem. But let's be honest, it's not an "enterprise problem", it's a systemic and insitutional problem...mainly one of dereliction, corruption and instability that hamper enterprise. NO OTHER issue concerns development economics more than this.
If I have a perfectly functional car but can't get from point A to point B because there is no road because of corruption and despite honest efforts or that the road is hazardous to drive on, the car isn't the problem.
No he's still wrong. Natural disasters and artificially-created incentives that lead to supply problems and increased scarcity do not prove Malthus right. They simply show that natural disasters and artificially-created incentives that lead to supply problems and increased scarcity are problems in any context and cause short term pain and that will be exacerbated if mishandled or not corrected.
The rest of that paragraph from which that last quote was pulled is simply an example of misguided good intentions that are knocked back because ignored realities...aka...the "Fatal Conceit" in a manner of speaking.
I know. Hence my bar color.
Bit off a bit more than I can chew
Often I rue not getting enough thoughtful responses, this time I got a more, raising more serious issues, than I can answer responsibly.
Let me just say, it's good that we can talk about, and the conversation should be expanded among presidential candidates.
thank you as well
I appreciate your thoughtful responses. I don't how much good shifting the discussion to the candidates will do, however. Much of what they say simply posturing and rhetoric and little in the way of constructive policies. And it's a wishful and hopeful appeal to the same incapable entity. And for reasons I said elsewhere, truly helpful steps would seem unsatisfying and uncaring. There is no "bold initiative" in a proactive central sense and that's what people want to hear.
Arodb, I'm confused re: commodity price
Hi arodb,
This has a lot of good interesting thoughts, but it seems to have jumbled them all together. Just so you know, I saw three different topics in this post:
Finally, the conclusion mentioned central planning...but without any indication of whether you are for or against it. It almost sounded like you considered it to be the unfortunate outcome of a mismanaged market.
Are you advocating central planning? Are you advocating market reforms so as to avoid popular demand for central planning? If so, are you advocating any particular reforms, or just saying "we need to think of something!"?
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
Don't really have an answer....
So I was throwing the problem out for discussion.
Let's say, for arguments sake, that peak oil has been reached, as demand from China and India is increasing. Oil is part of most products and what allows food to be plentiful and affordable, since petroleum is part of fertilizer or is needed for producing food stuffs.
The free market would make such scarce resources only available to the wealthy. Just as the free market was curtailed due to the shortages of WWII, if we are entering into such a period, just what is to be done.
In emergency settings, profit maximization becomes Price Gouging, and it is illegal. I'm suggesting this is too major a problem for reforms, and we may be on the cusp of a historical change.
I'm suggesting that Communism (socialist central planing, really) should not be an epithet, but understood as an economic/political system that may be worth studying if the expectations of continued abundance is simply not to be obtained, either in this country, or the world.
I simply don't follow or agree
with this line of logic:
Let's say, for arguments sake, that peak oil has been reached, as demand from China and India is increasing. Oil is part of most products and what allows food to be plentiful and affordable, since petroleum is part of fertilizer or is needed for producing food stuffs....The free market would make such scarce resources only available to the wealthy.
It just doesn't add up to me.
Seems pretty straight forward
Demand increases, supply decreases or at best holds steady; prices soar. Hence when the price goes up astronomically it is only the best off economically that can afford the goods anymore.
Of course at some point the whole structure collapses.
__________________________I came. I saw. I posted.
Veni, Vidi, Bitchy.
proportional allocation of commodities
This seems to treat "the goods" as distinct units, and treat consumption as an "all or none" dynamic.
For resources such as energy, consumption is definitely a "more or less" dynamic, and the resource can be partitioned into tiny increments.
In such a simplified reality (absent the complications that affect demand for real resources) we might expect the resource consumption to be a function of income : a person with twice as much income gets twice as much of the resource.
A change in price should not affect this allocation equation: if there is half as much of the resource around, then both the rich and the poor may very well reduce consumption by 50%.
The assertion that the reduction will be disproportionately from the poor seems to rest on the assumption that the wealthy have some "excess" cash laying around that they will use to cover the greater expense -- but in reality, the wealthy are typically spending that "excess" wealth somewhere else -- either in consumption or investment. Either way, the only way that they could use it to supplement their personal consumption of energy would be to decrease their consumption of some other resource (or decrease the energy consumed by their investments).
In sum: the rich start from a higher level of consumption and have more flexibility in their consumption, but they still need to reduce consumption in response to price increases--just as much as anyone else.
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
high prices lead to higher income for owners
This dynamic would only happen if the income of "the best off" increases proportionally to the commodity, while the income of others hold steady.
If prices are rising due to a scarcity of labor, then the workers benefit (relatively). But if prices are rising due to a scarcity of other factors of production, then the people who own those factors end up benefiting.
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
Random thoughts on Peak Oil
Let's explore this a bit more then; I think I'm grasping your concerns and I'm willing to be blunt ;}
Let's say peak oil has been reached. The oil sellers will continue to price and sell their oil however they choose; the US (govt, businesses, etc) does not and will not have a say-so about prices. That price will continue to rise as oil becomes scarcer.
Oil buyers will continue to buy at whatever price is asked as long as they can then turn around and make a profit on whatever end product they create with that oil (e.g. make gas, plastics, etc).
Consumers will continue to buy that end product as long as they think they can afford to do so ("Afford" being the end result of whatever individual decisions and choices that consumer makes, not some arbitrary value).
In this (admittedly grossly simplified) global market, emotional concerns don't play a role. The oil sellers/buyers/consumers are not concerned with starving people in some far-off country and don't take that factor into consideration. That's normal human behavior. When you go grocery shopping, do you factor the homeless guy you saw on the streetcorner into your decisions?
So what's going to happen to the starving people in some far off land? They are going to continue to starve and die. More will probably starve and die. People weak from hunger do not revolt; corruption and bad governance is more likely to increase in such places than decrease. Wealthier emotionalists will continue to wring their hands from afar and bemoan the state of the world.
What's going to happen to the weathier people? We have to first admit that we (the collective American we) are among the wealthiest on the planet and pay the least amount for oil products. (Diesel in England is running over $17 USD a gallon *right now*. Imagine what that price will do to all products here, since we transport nearly everything we consume via diesel engines.) China, however, could also be thought of as a wealthy nation, as well as the EU.
The wealthier people have two choices. They can willingly accept a lower standard of living ---crappier homes, fewer choices in the stores, high prices for everything: something like a return to the 1960's when TVs and dishwashers and clothes dryers and airplane tickets were luxuries that most could not afford. Or they can seek ways to maintain their standard of living -- be they peaceful (internal conversion to alternate fuels, etc) or not so peaceful (empire, anyone? China in Nigeria. . . ). Many things are possible, but some take more time to develop than others and procrastination is common.
I think the idea of some form of "centralized planning" as saving us from these eventual outcomes is not just unworkable as an economic philosophy but also far too ethno-centric and a tad arrogant (although understandably so;}) --- it assumes that we (the US govt) can dictate to the world and that we (the US individual) knows what the rest of the humans on this planet want. Even if we were to get our own government to go for some form of "communism" as a fair and humane response to the upcoming shortages, would the rest of the world listen to us? And why should they? If we chose this route, it would be only because we felt it was the only way for Americans to survive, not out of some concern for the rest of the world.
We are a "superpower" only so long as we can wield either of our two "weapons" -- our money or our military. Thinking we can effect the rest of the world's decisions in when peak oil is reached is naive; well intentioned, noble, nice, etc., but naive.
__________________________don't ask me, I'm just improvising
Political Compass Score: Econ L/R -0.12 Social Lib/Auth -1.33
Communism isn't coming back,agreed...
And I like Purpleface's blunt words. More people will starve, and they won't revolt. There is no "revolution of rising expectations" only weakness and death.
What troubles me is that our political system, the American two party system, systematically makes the public less knowledgeable of the choices available.
America will decline. There will be an even larger income disparity, which will be ameliorated by the rise of the democratic party. But I don't see anything but mythology among democrats. And Obama, whatever may be undisclosed under the hood, so far, is selling illusions.
Without a multiparty system, there is a homogeneity of "memes" of what is discussed, that leaves out realistic options. Communism, a universal system devised by Marx, isn't an option.
But some type of trans-free market process, call it old fashioned New Deal liberalism on steroids, just me be needed.
problem is wealth distribution, not commodity prices
I think the core problem here is an issue of
wealth distribution, and not commodity prices. Attempts to keep
gasoline prices low ("to help the poor") generally have the effect of
helping the rich -- who are more likely to own cars and other
energy-consuming machines.
Attempts to control commodity prices require massive bureaucracy, while generating massive uncertainty and distortion in the markets (for example, we should have been shifting away from oil over the past few decades, but governments from the USA to India kept prices artificially low). In contrast, modifications to wealth distribution only require intervention at a single point.
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
We can't control commodity prices....
The demand for oil seems to be quite real, and the increase in prices is not a speculative bubble.
My concern is not so much the U.S, but the third of humanity that lives on a buck or two a day, and doubling of food prices means starvation.
Even before this new disaster, things were so bad that young men would get in a boat in Northern Africa knowing they had less than an even chance of surviving a trip to Spain, to live in the shadows of being an illegal immigrant.
Most of Western Countries have shut out the suffering of Africa, but morality aside, commodity price spikes mean lack of availability, an increase in death for larger numbers of people.
Right now I'm down on American Democracy since it really does not create a venue for open discussion of much of anything. And when the world is facing something as serious as this the triviality of American politics becomes even more pernicious, more lethal.
Sorry, while it may seem a cop out, I really am only posing the problem, not proposing a solution.
American Democracy is not the answer
to Africa's problem. Africa is. But Africa is also its own problem at the same time.
Africa is overwhelmed with civil wars, corruption and poor social institutions.
Help starts with Africa itself. But that self help is not forthcoming.
Development economists struggle with this all the time. I discussed one group trying to find answers here
. Granted they are struggling with the most basic of basic improvements for the worst of the worst off but it goes to show how deep the problems are.
If and when any of their governments ever shape up and put first principles of economic activity above their own selfish interests of power and control, basic improvements will leap forward in giant steps and private initiative will move in with confidence and act in direct interaction with the people. But until then, the system of corruption through world organizations and crony deals between corrupt economically clueless dictators and extraction industries will be the norm.
Corrupt dictators
in Africa are getting rich. They are serving their own self interest.
__________________________It is the economy, stupid.
No $h!t
and they are doing it by ruling others because they can and nobody who's trying to stop them as any different idea if they could get control.
Frame it terms of demand for energy
Oil does not have to be our sole source of energy.
Has the cost of producing oil in Saudi Arabia increased dramatically? No! Absolutely NOT!
So what are the Saudi's doing with the enormous profit taking due to higher prices? They are taking the profits and centralizing them in Sovereign Wealth Funds available to those who need pools of capital.
The increase in oil prices IS a speculative bubble, in part due to the extreme weakness of the dollar and in part to speculation by Wall Street and in part due to increased demand. This whole 'oil crises' is the final result of years of stifling market forces. If this crises is mismanaged it could bring the US economy to it's knees.
The auto industry and the oil industry combined have colluded against increased energy efficiency in fuel consumption for decades. The failure of GM to foresee and capitalize on the need for fuel efficient cars is the failure of market forces to work in any sane fashion. These two industries have pooled their resources to stifle innovation for the sake of maximizing profits.
If central planning, such as the power of the Federal Government were brought to bear on any of these institutional monopolies we would not be facing the current price spike in oil, and the utter failure to be able to cope with it.
An example of smart energy planning would be Brazil, where the govt made a decision to wean itself off of dependence on oil decades ago.
__________________________It is the economy, stupid.
To extend your points....
Market forces have been stifled in countries that were giving subsidies, which they have just discontinued. But the demand, based on artificially low fuel prices have been institutionalized, and is not so easy to reduce.
And how rational it would have been only a decade ago, when gas was selling for a buck, to institute a 50 cent federal tax to develop alternate sources of energy, as well as decrease sales of fuel guzzlers. When John Kerry proposed this it not only failed, years latter it contributed to his losing his Presidential bid.
Too many Americans do not have the capacity for long term thinking, especially if it entails the least bit of sacrifice. And as a rule in a democracy, the political class can not transcend the mentality of the electorate. Too bad about that.
Now the Sovereign Wealth Funds. If we were invaded by Saudi Arabia we would defend our country with any means possible. But as our assets are being bought out to be controlled by other countries we do nothing, but actually applaud the infusion of funds to prop up a collapsing dollar.
The people get outraged by Mexicans who want to come here to build our houses and clear tables at restaurants,allowing us to live well. We are blind to railroads, banks, highways and technological industries being owned by other countries, which will deny us of the very sovereignty----not now, not completely--that we fear losing to impoverished Mexicans.
Of course Americans have the capacity
for long term thinking. Folks for years have been coming up with innovation to conserve, improve gas consumption, and look for alternative fuels. They have been systematically dismissed, silenced, and stifled by big money interests.
The most obvious solution is biofuels, from something that grows like a weed and needs almost no care or water. Its known as hemp. It was Henry Ford's original intention for his cars to run on bio-fuels. Standard Oil (Zappata Oil) made sure that that never came to pass in the interest of pursuing oil as the main fuel source. I suggest they got a little carried away.
The point is that there has been a relentless campaign by those that pretend that 'pure' free markets are the answer to all (the oil and auto industry), that have over a period of decades brainwashed people.
Yes Americans have vision.
That is part of the reason why this whole 'oil crises' is so infuriating. It was totally predictable, and people have been screaming about it for decades. Those with vision (liberals) have been mocked and derided in an effort to get people to think they are 'crazy'. I say whose crazy now...... as the US economy teeters on the brink of it fatuous excesses promoted by the 'conservative intellectual elite'.
__________________________It is the economy, stupid.
I would put it in a different frame...
than the "big money interest" v. "the people."
Crude oil, only being used for energy for a little over a century, was close to the surface and cheap to exploit. Biofuels, even now take energy to produce, and with oil at 10-30 per barrel which it was for most of the 20th century, it didn't make financial sense.
Yes, big money interests became even bigger money interests by taking advantage of this. But there was no public support for Kerry's tax proposal or Carters effort to conserve. I can't blame this on any special interest, even though they may have wanted this.
The American people have been obsessed by low taxes, and any government intervention in what has occurred leading to the peak oil crisis would have entailed short term sacrifice of the public.
We can disagree over the root cause, but the public was not accepting any pain for the promise of long term benefit.
American PEOPLE have this capacity
American GOVT. does not. Our democratic process simply cannot cobble together a consistent and coherent PRO-ACTIVE plan on this matter. Never has and never will.
As has often happened in the past, you inadvertently contradict yourself from one posting to the next when the murky and hazy topic of "free markets" comes up. No offense.
Whether "Free" or Free-ER markets are, honestly discussed, in fact part of the solution is one matter. What I'm about to say is another matter entirely.
There is an attribution or analytical error/confusion of subtly different arguments when you say this:
after having said this:
and this:
Both of these are powerful deviations from an honestly portrayed free market position...regardless of whether that honest position has merit.
IMO, the governments proper role in supporting a long term view on energy is simply to support the integrity of markets forces by AVOIDING the flawed, short term temptations of distorting or influencing or coaxing market forces in favor any particular interest...sadly, this short term meddling is exactly what they do. They make entrenched status quo interests comfortable at the expense of natural forces that would be working against the interests of these status quo interests in a continuing cycle of innovation and competition. IOW, they should not pretend to know where to guide the ship or whom to encourage or subsidize (corn ethanol anyone?). They should simply allow innovators equal treatment and protection from self-interested cronyism from competitors via government mandate.
Every subsidy, every tariff, every special case loophole and every coddle is a deviation from the sometimes unfriendly and inconvenient market forces and a comforting hand for those who would resist change (oil).
I highly doubt oil would still in its comfortable position vs. alternatives if energy markets had been more "free" over the last 30 years. Instead oil has been treated like a special case to be "taken care of". That's not free markets, that's centrally planned cronyism as are corn ethanol subsidies. The realities from these interventions and foolish planning are not normal market forces I will defend in any way. Neither should those realities be used to condemn the very idea that fights against them. The irony is simply too much. There is simply nothing more contrary to vibrant, honest and dispassionately fair free markets where innovators and alternatives are not inhibited from the market place ideas than government mandated subsidies and special treatment.
Central planning
by the govt in Brazil has created a system that is not held hostage to oil prices. Central planning put an emphasis on avoiding being held hostage to a future oil crises.
I doubt if an uninhibited market place would have had the motivation to get away the immediate gratification of profits from oil. It is an added value of good government which can in fact act to counter market forces that are seen as potentially damaging to a civil and free society.
__________________________It is the economy, stupid.
No "rec" button like dailykos.....so "good point" n/t
:)
People that hate government shouldn't be running the government. If you hate the government that much, why would you chose to serve? What's the motivation? Spite or profiteering? (See Dick Cheney)
__________________________It is the economy, stupid.
to stop it from being "abused"
Love it or hate it -- when it comes from a politician's mouth it typically means nothing.
__________________________"You have seen how a man was made a slave; you shall see how a slave was made a man." --Frederick Douglas
If anything taxes should have been higher...
This was the case in Europe and Canada, so they drove smaller cars. I wonder if they are handling the present spike better than we are.
I find this post to be about....
.....as wrong-headed on the notions of free-enterprise and, more basically, why people do things, as one can get.
It turns out that venture capitalists are bidding up the infrastructure of food production--farmland, nitrate mines, etc. This article describes how this will add to the already accelerating cost of food. A good investment? Perhaps. As long as no one thinks about the social consequences.
To the contrary. If commodities are actually in or about to be in short supply, the bidding up of their prices is unlikey to result in additional hardship beyond the fact that they're about to be, well, in short supply. This is why price controls during a time of scarcity generally result in shortages, empty shelves, long lines or, worst-case, starvation. Let us be clear; the consequences of a bad harvest, a disaster or under investment in relation to demand are already baked in. If the price of grain is artificially held down, all it means is that the buyers/users with greater immediate means will buy up the stuff at the artificially low rate and "disappear" it.
The only signal that works to produce more of something is the price signal. I, to be frank, don't much worry about what will happen in Africa tomorrow. I do worry about my profit margins and my investment options. If the price of grain goes up in secular fashion (and more rapidly than the costs to produce it), I invest in making grain. Or I buy grain, which induces others with a better idea of how to make more grain to do so. That is the entire idea embodied in Smith's "invisible hand".
I'm not even going to get into how you're misinterpreting Schumpeter....
Lots of ifs
If the price of grain is artificially held down...
What if it's being artificially held up?
If commodities are actually in or about to be in short supply, the bidding up of their prices is unlikely to result in additional hardship beyond the fact that they're about to be, well, in short supply.
What if commodities weren't in short supply relative to demand until speculators tied them up hoping to drive up the price?
The only signal that works to produce more of something is the price signal.
What if producing more of something leads to lower profit because it wrecks the artificial scarcity that drove up prices? (Like with diamonds, for example.)
Let's boil this down to a thought experiment: I have a drug that can save your life, and under scenario (a) my goal is to maximize profit, while under scenario (b) my goal is to maximize life-saving. IIUC, your argument is that following (a) will lead to (b), right? More specifically, if I price the drug as high as I can find people to buy it, then only (mostly) people who need it will buy it. But there are "better" ways to accomplish (a) than simply meeting demand. For example, I bet if I let a few people die in a particularly gruesome fashion then the remaining victims would pay whatever I wanted. Or hey, let's think outside the box -- I could deliberately infect more people with the disease! And by now you're saying tsk tsk, such a contrived and silly example, typical liberal boogeyman misunderstanding of how markets work... but I'm not wrong, you're just assuming those kind of arguments don't apply because you're assuming that the market is (mostly) not manipulated. No?
__________________________Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
I suppose you opposed rationing durring WWII
And limits on prices during national emergencies.
You describe classic economic theory, which I am positing in this essay only holds under certain, rarely articulated, conditions.
Communism has major structural failings that we mostly are aware of. However the limits, the conditions, when capitalism fails, and when the cost of the use of price for the "allocation of scarce resources" is rarely taught, or even discussed.
If you disagree that the conditions now exist, you certainly have an argument. If you feel that they are unlikely ever to exist, that is also reasonable. If you believe such conditions could never exist when the capitalist system starts to approach the "evils" of communism, then we part company.