Chicago Boyz

                 
 
 
What Are Chicago Boyz Readers Reading?
 

 
  •   Enter your email to be notified of new posts:
    Loading
  •   Problem? Question?
  •   Contact Authors:

  • Blog Posts (RSS 2.0)
  • Blog Posts (Atom 0.3)
  • Incoming Links
  • Recent Comments

    • Loading...
  • Authors

  • Notable Discussions

  • Recent Posts

  • Blogroll

  • Categories

  • Archives

  • Obama’s Hypothetical Problem

    Posted by Shannon Love on August 7th, 2008 (All posts by )

    Obama stated that we didn’t need to drill for more oil domestically in currently taboo areas because we could save the same amount of oil by getting everyone to properly inflate their tires and tune their engines. I think this minor issue neatly encapsulates a systemic fault in the thinking of Obama and leftists in general. 

    To whit: They believe that the mere hypothetical existence of a good means that one can enact real-world policies to reliably accomplish that good. 

    Or, more succinctly, if you can imagine it, you can do it

    Someone in Obama’s campaign noticed that, hypothetically, if we had perfect auto maintenance for every car in the country, we could save enough oil that we would not need to drill in taboo areas. (Whether the actual estimates are valid or not does not matter for purposes of this discussion.) Obama then announced the hypothetical 100% perfect maintenance as policy, apparently without giving thought to any of the practical concerns of reaching the hypothetical oil savings.  

    For those on the Right, hypotheticals are a dime a dozen and uninteresting. Instead, they zero in on nuts and bolts of the real-world implementation of any particular hypothetical. When a rightist hears,  “we can save ‘X’ amount of oil by tuning up ‘Y’ number of cars”, the rightist thinks, “How do we actually go about tuning up millions of cars? How do we educate, convince or even force people to tune up their cars? Obviously, they won’t do it on their own or they would have already done so.” 

    Everyone who does not live in an ivory tower understands that in the real-world we never see anything close to hypothetical performance. Back during the “Energy Crisis” of  ’73-’83, the government tried to get people to tune up their cars and inflate their tires. They only saw an improvement of at most 5% in overall oil consumption due to improved maintenance, and most of that improvement came from fleet vehicles. If we get the same outcome today, Obama’s plan will save only 5% of the oil that’s provided by drilling in taboo areas. (Realistically, we will most likely see far less than 5% savings because modern cars do not benefit from tuneups as much as did the cars of 30 years ago.) Getting even 10%-20% of the cars tuned would be an enormous achievement but still fall far short of the savings needed. 

    Think of the practical issues involved. First, you must educate everyone who owns a car of the necessity of tuning and inflating. Given that many people don’t even understand the concept of under-inflation or tuneups, such education faces an up hill battle. Such an education campaign will cost tens of millions, take years and history suggests it will produce lackluster results at best. Obama offers no details for implementing such an education program and making it effective.

    Second, someone must pay for the tuneups. Which cars benefit the most from tuneups? Older cars. Who drives older cars? Lower income people. Who can least afford to pay the cost of both the mechanical work and the cost of alternate transportation? Lower income people. If the individual fuel savings alone would induce people who don’t have a spare $50 to tune up their cars they would have already done so. In the end, most of the cars that most need tuning won’t get tuned. 

    Does Obama plan on some kind of voucher system, with accompanying bureaucratic overhead, to pay for tuneups for the cars of lower income Americans? Does he plan on making the failure to tuneup one’s car a crime? Again, Obama offers nothing concrete. 

    Thirdly, improved gas mileage due to improved maintenance most likely won’t save any oil on net because people will simply drive more. Obama’s simplistic model assumes that people drive a fixed number of miles regardless of the cost of doing so. In this cartoonish model, improving efficiency automatically reduces oil consumption.  In reality, history shows that improved efficiency in energy use increases net consumption. People tend to spend roughly the same percentage of their budget on fuel. When the price per mile goes up, they drive less to stay within their budget. When the price per mile drops, for any reason, they tend to drive more. On net, they consume as much or more oil as the did before. So, even if we did manage to implement polices that resulted in the perfect maintenance of every car in America, history shows that we would not see any significant oil savings. Obama does not explain how he plans to escape this historical conundrum.

    Obama addresses none of these nuts and bolts concerns. He merely voices the hypothetical method of saving oil and expects everyone to act as if he has already solved the problem. Nobody on the Left seems to even notice the disconnect between the hypothetical and real. They seem to honestly view the hypothetical oil savings as equal to actually creating more oil by long proven means. For the leftist, the idea of oil saved equals the reality of real oil in the economy. 

    Most of Obama’s policies are based on treating hypotheticals as concrete reality. Hypothetically, we can negotiate with murderous autocrats to reach a mutually acceptable and just solution to our antagonisms. Therefore, Obama will base his foreign policy on doing just that. Hypothetically, we can provide cost effective, innovative, universal health care to everyone using a top-down, centrally controlled socialized system. Therefore, we will. Hypothetically, we will have the technology to provide 25% of our electricity from “alternative” sources by 2020. Therefore we will set national policy based on that hypothetical instead of relying on proven, existing technology. 

    Obama and his supporters have a shockingly naive and simplistic model of the world. He lacks any intuitive grasp of the vast gulf between the ideal and the practical. One cannot even credit him with a “Field of Dreams” build-it-and-they-will-come vision. Instead, he seems to have an imagine-it-and-they-will-do-it vision. He can imagine an America with a fleet of hundreds of millions of perfectly tuned vehicles, so he bases his policy on the idea that tens of millions of Americans can and will alter their behavior just because Obama said so. He offers no concrete, practical and proven mechanisms for making his hypothetical a reality.

    Presidents must deal in the concrete and specific. Hypothetical results do not cut it. 

     

    26 Responses to “Obama’s Hypothetical Problem”

    1. fred lapides Says:

      I am not here interested in arguing about Obama but the idea that If you can imagine it etc is in fact a saying (I forget who had said it) that suggests that humans are capable of wondrous things but first must imagine them.
      An interesting aside. I believe that McCain is right when he says we need to go nuclear. But please note that in France they get 80 percent of energy via nuclear, recycle waste!, and have not had an accident to date. The problem? anti-govt types in the US will note that nuclear is all controlled by the govt rather than run by private enterprise. Would McCain go for that?

    2. Methinks Says:

      Fred, aren’t all power companies regulated monopolies? The Nuclear power plants would be owned and controlled by them.

      The problem? anti-govt types in the US will note that nuclear is all controlled by the govt rather than run by private enterprise.

      a.) to the extent that this is a problem at all, both McCain and Obama would face the same problem.

      b.) This is not the argument against nuclear energy – hysteria over safety and nuclear waste is the standard anti-nuclear argument. I’ve never heard the argument you’re putting forth.

      Personally, I’m all for nuclear power and I’m willing to live near a nuclear plant. The new generation of plants are perfectly safe – as France has proven (as much as one can “prove” such a thing).

    3. Shannon Love Says:

      Fred Lapides,

      I am not here interested in arguing about Obama…

      Then maybe you shouldn’t post on a thread about the faults of Obama’s energy policy.

      … but the idea that If you can imagine it etc is in fact a saying (I forget who had said it) that suggests that humans are capable of wondrous things but first must imagine them.

      Yes, but the problem is that a vast gulf exist between imagination and reality. People first imagined going to the moon using rockets in the 1600’s but we didn’t actually accomplish the feat until 400 years later.

      In the case of Obama, were talking about basing immediate concrete national policy on an imaginary benefit. It’s as if he purposed fighting crime by, “getting criminals to choose to stop committing crime.” Yes, we can imagine how neat it would be to have such a society but how do you actually get criminals to not commit crimes?

      I find it both amusing and disturbing how leftist venerate imagination. They act as if only a tiny elite (themselves) ever thinks of anything new. In fact. dreams are a dime a dozen. It’s getting the to work that the real trick. As Edison said, success is “10% inspiration and 90% perspiration.” Many, many people imagine innovations but only a tiny handful make them work. We should be venerating those practical people, not the ineffectual dreamers.

      The problem? anti-govt types in the US will note that nuclear is all controlled by the govt rather than run by private enterprise.

      Can you provide even one quote from an “anti-govt type” to back up that assertion? Frankly, I find your perspective on the issue of nuclear power in the U.S. bizarre given the decades long history of hysterical anti-nuke rhetoric coming from the left. As far as I can tell, 99% of those advocating increased nuclear power in the US today are on the right 99% of those who oppose it are on the left. If you have evidence to the contrary I would love to see it.

    4. david foster Says:

      The distinction between “business” and “government” isn’t always as sharp in other countries as it is in the U.S. France’s nuclear reactors, along with the rest of its power network, are operated by EDF, which is a Société Anonyme with 70% ownership reserved for the state and up to 30% for private shareholders.

      I believe Areva, the French company which makes nuclear equipment and provides services, has a similar ownership structure.

    5. Boonton Says:

      From what I understood Obama didn’t say his plan was to have all tires properly inflated to replace McCain’s oil. He said McCain’s proposal would produce such a marginal amount of oil that even a trivial policy of inflating all tires propery would produce an equal amount. Also the inflating tires came not as a gov’t mandate but in response to an individual’s question about what could he do personally to conserve.

      But the inflation tussle raises an intersting question imo about collective vs. market action. From what I read, inflating tires will produce maybe 1-3% savings on gas consumption. Say 1%. At $4.00/gal that would be like the price dropping to $3.96. For most people that savings may not be worth the effort even though inflating tires takes a trivial amount of time and effort. A 10 gallon gas tank would produce $0.40 savings. If your gas station charges $0.50 to use the air machine the cost benefit doesn’t look so good for you.

      But I’ve also read that the gas/oil market is inelastic. A 1% increase or decrease in demand will be meet with a more than 1% increase/decrease in price. So imagine if everyone (or a lot of people) inflate their tires gas prices will fall by 9% due to decreased demand….

      Then the equation changes quite a bit. A 10% cut in fuel expense is significant. The problem, though, seems quite a bit like the tragedy of the commons. You inflate your tires hoping everyone else does to make the 10% savings but if they don’t then you only get 1%. You figure human nature is such that many people will. The optimum solution would be for everyone to inflate and enjoy 10% savings. The likely result will be almost no one inflates and the few suckers who do get 1%.

      It seems like any solution involving gov’t mandates will carry a cost with it. For example, mandating tires that tell the car’s computer they are under inflated may achieve the 10% drop in gas prices but half of that benefit may be eaten up in higher car/tire costs.

      I’m not sure there’s any market solution to capture the 10% potential savings in this hypothetical. Maybe a company can sell vouchers that entitle a person to cheap gas but they forfeit the benefit if they fail a spot ‘inflation check’… I don’t know but I imagine this question must have some literature around it…

    6. Shannon Love Says:

      Booton,

      From what I understood Obama didn’t say his plan was to have all tires properly inflated to replace McCain’s oil.

      Thats a matter of interpretation, I suppose. I will note that Obama’s website list calims he will save energy by, ” Deploy the Cheapest, Cleanest, Fastest Energy Source – Energy Efficiency.”

      He said McCain’s proposal would produce such a marginal amount of oil that even a trivial policy of inflating all tires propery would produce an equal amount.

      My point is that McCain’s proposal will produce real energy, reduce prices, boost the economy and save jobs. The degree to which these benefits will occur is a matter of guesswork. However, some benefit will occur without a doubt. Obama’s counter point by contrast will produce no net benefit.

      I wanted to contrast the concrete benefit offered by McCain versus the ephemeral and and most likely nonexistent benefit of Obama’s plan.

      But the inflation tussle raises an intersting question imo about collective vs. market action.

      The question you raise has been long studied. In many cases, the energy savings for the individual are to small to justify the cost of reducing them. However, the accumulated savings across the the entire population can be significant.

      The “energy star” program is based on this concept.

      You can save energy by coercing manufactures to create more “efficient” products and hide the cost of doing so from consumers by making any competing less-efficient technology illegal. That is why some of your electric devices may sleep or shut down unexpectedly. It is also why it is now illegal for you to buy a newly manufactured front loading washer. This system works, despite its totalitarian overtones, because the government can force a small number of people to comply or face the loss of their livelihoods and investments.

      Obama’s plan, however, would require altering a product when it was in the consumers hands. As I noted, we tried this 30 years ago and it failed.

      In the end, Obama offered nothing but a fantasy in response to McCain’s concrete benefit.

    7. Methinks Says:

      Shannon,

      When “Hope & Change” is your platform, fantasy is concrete logic. Now, let’s sit back and enjoy Boonton’s arm-length post screeching about who is a liar and who isn’t and how Rev. Wright is just some dude that Obamessiah knows and that this Orwellian nightmare is the man for Hope & Change, and anyone who says anything different is a liar.

    8. Boonton Says:

      Thats a matter of interpretation, I suppose. I will note that Obama’s website list calims he will save energy by, ” Deploy the Cheapest, Cleanest, Fastest Energy Source – Energy Efficiency.”

      That’s reading a lot into it. To date I’m not aware he has put forth any program to inflate tires beyond ‘moral suasion’.

      The question you raise has been long studied. In many cases, the energy savings for the individual are to small to justify the cost of reducing them. However, the accumulated savings across the the entire population can be significant.

      What I’m interesting in, though, is if there’s a market mechanism to capture the accumulated savings from inducing people to make small changes in behavior.

      A few days ago NPR had a guy on about Progressive Insurance. They are launching a pilot program to put a GPS receiver in customers’ cars and bill them auto insurance based on mileage (as well as counting how often they do sudden accelerations/breaking). He said they found that on average miles driven fell by 8% when such a pay by the mile was implemented.

      I can see how the insurance company can promote this program. If miles fall by 8% I’d imagine accident claims would fall by a similar amount. The insurance company would implement the program by sharing the cost saving with the consumer.

      But how do you pull off something like the tire inflation savings using market mechanisms? I’m trying to think of something like a company will buy a contract to sell gas at a certain price in the future using money from subscribers. If inflating takes off and the market price falls, the company will return the subscription fee to the subscribers and pocket the profit on its contract. If inflating doesn’t take off the contract is worthless and the company keeps the fees. In effect everyone who buys the subscription has an incentive to become inflation activists…..

      But it seems such an enterprise would be pretty shakey…I’m not sure this seems like a rare case where the free market equilibrium can be slightly less optimal than one with a well designed gov’t incentive.

    9. Methinks Says:

      Or…instead of twisting ourselves into pretzels trying to make central planning work (“well designed gov’t incentive”. LOL!) we could lift the government ban on creating more supply.

      remove oil E&P restrictions and nuclear power plants. Voila, market solution. Seems too simple and logical for the leftist mind to grasp, though.

    10. Methinks Says:

      They are launching a pilot program to put a GPS receiver in customers’ cars and bill them auto insurance based on mileage (as well as counting how often they do sudden accelerations/breaking).

      Is it any surprise that a leftist favours a big brother solution? Fits nicely with his Orwellian candidate’s Marxist ideas. So, at least Boonton is consistent. No doubt the “well designed government incentives” will amount to a severe tax on anyone who does not “voluntarily” sign up for such a GPS program and tax breaks for insurance companies that push them. No threat to liberty there.

    11. Shannon Love Says:

      Boonton,

      But how do you pull off something like the tire inflation savings using market mechanisms?

      I don’t think a market solution exist. You have to use coercion. The saving for the individual are very minimal. Providing an incentive larger enough and administering it would be so costly that you could better use the money in other ways, such as buying poor people newer, more efficient cars.

      Think about all the practical difficulties in creating such a system. How would you measure the inflation on millions of vehicles? How would you ensure that the incentive money actually went to people who kept their tires inflated? Even using coercion, I doubt one could create a system of monitoring and punishment whose benefits outweighed the cost.

      Just because you can measure a phenomenon doesn’t mean you can affect it. That is one of the systematic faults in leftist thinking. They’re to prone to latch onto hypothetical results i.e. things that look good on paper, without examining the ugly details of the implementation. Those on the Right by contrast, tend to worry about such details which is one reason why the left and right disagree so often.

    12. boonton Says:

      Well, what I’m thinking about with the subscription idea is that large numbers of people would have an incentive to bug them and their neighbors to inflate their tires. Of course you wouldn’t achieve 100% compliance but that wouldn’t be necessary. Say inflating would cut consumption by 3%. 50% compliance would reduce overall consumption by 1.5%. Compliance could be measured by a 3rd party using a random study so you wouldn’t need to measure every tire in the US….

      Still I see what you’re saying. Even though everyone inflating would achieve benefits that outweigh the cost there’s no easy market incentive to pull that off. The use of coercion, though, could pull it off. The question then is are there coercive policies that nevertheless have minimal cost so as to achieve the benefit? Possibly….but I suspect this one will be left to ‘moral suasion’ for the most part….maybe some car company will come out with an easy to handle dashboard based tire pressure monitor.

      Here, though, I don’t think there’s much disagreement really between left or right philosophies….it’s between left and right partisans. AS far as I can tell Obama’s ‘inflating policy’ is limited to speech making which might do some good but is hardly coercive. McCain’s drilling policy is being sold as an immediate solution to high gas prices which, of course, it isn’t. It isn’t even a long term solution. (Yes no one really knows how much oil any particular well will yield but nonetheless the best estimates we have tell us maybe we will see 1% of US demand from drilling every possible place we have left in 10 years or so You are free to assume zero environmental costs if you insist but even if that is correct it isn’t a ‘solution’ to high gas prices and by selling it as such you are encouraging the idea that a price spike is a breakdown in the market system rather than a signal that behavior must be modified)

    13. Methinks Says:

      Let’s see those sources that give such paltry numbers, Boonton. Let’s examine those sources.

      Oil and gas companies haven’t been able to do any exploration on those off limits areas. How is it that without any research, your experts have such reliable estimates?

      It is possible that had those areas been open to oil companies ten years ago, we would have the oil now. It’s possible that we wouldn’t. However, if you don’t allow exploration, how can you even make an estimate about how much production could possibly flow from unexplored fields? What solid data do you have behind your aggressive assertion that “it’s not even a long term solution”?

      The price spike is not a breakdown in the market system any more than the price collapse in 1998 was a sign of market failure. The wrench in the market system is the central planning government engages in by prohibiting oil E&P.

      The question then is are there coercive policies that nevertheless have minimal cost so as to achieve the benefit?

      Yes, after all, what’s a little less liberty here and there? So what little losses accumulate to destroy large chunks of liberty. It’s all for the common good.

    14. Shannon Love Says:

      Booton,

      Well, what I’m thinking about with the subscription idea is that large numbers of people would have an incentive to bug them and their neighbors to inflate their tires.

      Would they? Remember the return to the individual is very small. Simply group together a large number of small incentives will not raise the rate of individual return.

      The use of coercion, though, could pull it off.

      Well, in principle you can use the threat of violence to alter any human behavior. Beyond the moral question of destroying peoples lives over their non-violent actions, you still have the pragmatic cost/benefit hurdle to overcome. It cost resources to threaten people. You have to have a mechanism for identifying the scofflaws and then you have to have a mechanism for capturing, trying and punishing them. You have to pay someone to kill the people who absolutely refuse to comply. All that takes time and resources.

      I don’t think there’s much disagreement really between left or right philosophies….it’s between left and right partisan…

      No, there are profound differences on deep levels. Left and Right differer on matters of unvoiced intuition. Why do think the same people line up on the same side on many different wholly unrelated issues?

      In this particular case, we have a rather textbook example. Leftist like neat, clean hypothetical solutions whereas conservatives like ugly but concrete solutions. Obama’s solution will produce no energy whereas McCains will. You see the same pattern across issue after issue.

    15. Boonton Says:

      Yes, after all, what’s a little less liberty here and there? So what little losses accumulate to destroy large chunks of liberty. It’s all for the common good.

      In keeping with the inflation hypothetical, assume if one person alone inflates their tires the savings is 1% but if everyone does (or a good portion of people) the savings is more like 9-10%. If liberty is defined as the ability to do things, then that is more liberty since you are free to enjoy the 10% savings either by driving more or spending your money on other things. OPEC gets a little less liberty but I’m not going to worry so much about their liberty balance. Saudi princes seem to have few constraints. The question, then, is does the policy to get more people to inflate cost so much liberty that it exceeds the gain.

      I can imagine lots of examples where the cost would outweigh the gain (such as having cops shoot the drivers of underinflated cars execution style on the side of the road). On the other hand, imagine a 2% gas tax the proceeds of which are used to fund random awards of $100 to drivers with properly inflated tires. If this achieves a cut in prices more than the tax you still have net positive liberty.

      Let’s see those sources that give such paltry numbers, Boonton. Let’s examine those sources.

      http://www.time.com/time/politics/article/0,8599,1829354,00.html

      The Bush Administration estimates that expanded offshore drilling could increase oil production by 200,000 bbl. per day by 2030. We use about 20 million bbl. per day, so that would meet about 1% of our demand two decades from now. Meanwhile, efficiency experts say that keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%. Many drivers already follow their advice, but if everyone did, we could immediately reduce demand several percentage points.

      The price spike is not a breakdown in the market system any more than the price collapse in 1998 was a sign of market failure. The wrench in the market system is the central planning government engages in by prohibiting oil E&P.

      As in the other thread, you seem to have difficulty telling the difference between what people actually write and what you imagine them writing. I didn’t write that the recent price spike (which seems to be retreating now) was a breakdown on the market system. In fact I wrote the exact opposite. Price changes are the market’s way of signaling changes in behavior are necessary. There has been no recent change in gov’t policy in the oil market. The price spike is a natural reaction to changes in the market including (IMO most importantly) the dramatic fall in the dollar, increased demand, and fears on the supply front. Selling drilling as a ‘solution’ to the price spike may sound good as a way to fool the voters into adopting a policy you want today but people will fairly wonder why the ‘solution’ does not immediately generate the results you are promising by implication. When that happens the new ‘solutions’ that will be put on the table will not seem so attractive.

      Shannon
      Would they? Remember the return to the individual is very small. Simply group together a large number of small incentives will not raise the rate of individual return.

      Well I got the cost side of the incentive, if people don’t inflate they loose their subscription…If the company is buying a put contract with the money, the profit would go up as prices sell. The incentive could be to pass along a portion of those profits to the subscribers. I think it could be done but I suspect the bigger issue is how do you incorporate the non-conservation factors….people may do a great job conserving but if a huge war breaks out on the middle east prices could spike anyway. I don’t know, I still think there’s a maybe in there.

    16. Methinks Says:

      If liberty is defined as the ability to do things, then that is more liberty since you are free to enjoy the 10% savings either by driving more or spending your money on other things.

      If liberty were defined as cost benefit analysis performed by a central planner, then by some twisted logic you might be halfway correct in your “analysis”. But that’s not the definition of liberty. Liberty is defined as the freedom of an individual from outside coercion or compulsion. It is not defined as “doing things”. I can enact a law that prevents you from working more than a set number of hours so that you have more time to “do things” and that would not be an expression of liberty but of tyranny.

      OPEC gets a little less liberty but I’m not going to worry so much about their liberty balance.

      Of course not. I’ve never known a leftist who can even define liberty, much less worry about its “balance”. Your reference to OPEC and Saudi princes have to do with anything is a mystery in this context. You’re going to have to explain your reference.

      On the other hand, imagine a 2% gas tax the proceeds of which are used to fund random awards of $100 to drivers with properly inflated tires.

      I think Shannon already did a bang up job of explaining to you the enormous cost of such a program. For every $100 you collect in taxes, you will spend $0.99 in the administration of such a program, if the inefficiency of all other government programs is any guide (and there’s no reason it shouldn’t be). Assuming we live in a parallel universe and costs of administration were not an issue, you would redistribute wealth based on this arbitrary metric of tire inflation and you would arbitrarily call this “liberty”. Did it occur to you that those without properly inflated tires are already choosing to pay the additional cost of under-inflated tires and the people with properly inflated tires are already getting the benefit of proper inflation? But that’s not enough for you, you also want to rob the people who are choosing to pay for more gas usage. Based on your logic, we should tax high school drop outs for being less productive and weighing down the economy and give the money to college graduates as a reward for their hard work and achievement.

      Thanks for providing the source. However, I don’t consider the Bush administration a reliable source either. The only reliable source would be an E&P company that actually did the exploration work necessary to get anything approaching reliable estimates for those fields. After covering the petroleum industry for years, let me assure you that even with our best methods, it’s difficult to determine how much recoverable hydrocarbon lies beneath the ground. Without it, it’s impossible. Any claims to the contrary is just political pandering. The exploration needed to determine expected oil production from many new fields is not available because oil companies have been prevented from doing such research. Therefore, estimates are made based on old data from the wells that were drilled before the industry was kicked out of places like offshore (shallow water) California.

      As in the other thread, you seem to have difficulty telling the difference between what people actually write and what you imagine them writing.

      As in the other thread, you seem to have difficulty with logic and telling the difference between what people actually write and the product of your vivid imagination. At no time did I claim that you said the price spike was a breakdown of the market system (market failure). If you think I made such a claim, point to it.

      Selling drilling as a ’solution’ to the price spike may sound good as a way to fool the voters into adopting a policy you want today but people will fairly wonder why the ’solution’ does not immediately generate the results you are promising by implication. When that happens the new ’solutions’ that will be put on the table will not seem so attractive.

      By “solution”, I gather you mean a drop in oil price to some price that you arbitrarily decide is the right one. Markets price in future expectations. For some reason, expectancy is the hardest concept for people to grasp. Markets will instantly price in changes in expected demand as well as changes in expected supply. How much? Who knows? That all depends on a lot of variables. What we do know is that we would have had more oil had we not prevented drilling for so many years. How much of a difference it would have made in today’s price depends on how much more oil we would have and we can debate that all night long, but it would have had an effect. The past and present prevention of drilling partly caused the spike in oil price – it is the “central planning” that I was talking about. Corn ethanol is another central planning scheme that even the far left understands is a sad joke. The threat of an even worse “solution” is typically Orwellian response of (usually) leftist central planners. “Do as I say or I’ll break the other kneecap and chip a tooth too.”

    17. Methinks Says:

      Well I got the cost side of the incentive, if people don’t inflate they loose their subscription. If the company is buying a put contract with the money, the profit would go up as prices sell. The incentive could be to pass along a portion of those profits to the subscribers

      I understand this is directed to Shannon, but you so badly garbled derivatives that I have to respond.

      First of all it’s “lose”, not “loose”.

      Second, prices go up and down but they don’t “sell”

      Third, you only win if the price declines and the only way to hedge against price moves is to be long oil.

      Fourth, your scheme won’t work even if you understood futures and options contracts. Here’s why:

      a company will buy a contract to sell gas at a certain price in the future using money from subscribers.

      A company wishing to sell gas at a certain price on a certain date is a seller of a gas future contract. The buyer is the person/entity who needs the gas. So, your subscribers would be the buyers and your company will be some downstream petroleum company. No buyer of a future is going to pay the company more than cost + carry – certainly no subscription fee.

      If inflating takes off and the market price falls, the company will return the subscription fee to the subscribers and pocket the profit on its contract.

      That implies that there’s an arbitrage in the futures contract. Futures markets are very liquid and futures are the easiest derivative to price. The only profit the company will have to pocket is if the price of gas falls and it has no incentive to give that profit to the buyer of the futures contract. If demand falls for any reason (any conservation method will do), the price of gas will fall. The seller of the contract wins and your “subscriber” (buyer) loses because he agreed to buy oil at a higher price than he can buy it in the market now.

      We can go through the scenario with options too.

      The seller of gasoline buys a put to sell gas by a certain day at a certain strike price. If the price of gasoline is above the strike price, the seller (or “company” in your example) will allow the put to expire worthless. If gasoline sells below the strike, the company will exercise the put. To the extent that you think individuals are in the habit of writing naked put contracts, you may have a plan (they are not, by the way) but your “subscribers” are put sellers who are not going to pay an additional subscription price to anything because they’re already taking the price risk on the put. However, if you get enough people together to form a consortium of buyers of gasoline who use options and futures contracts to hedge against price risk, then you would have a business. In fact, you would have exactly the business that already exists today – and with no coercion necessary too boot.

      I know that you’re a big fan of the college student analogy, so what kind of grade to you think I would give you for your scheme?

      But how do you pull off something like the tire inflation savings using market mechanisms?

      Here’s the painfully obvious answer: higher fuel prices. You’d be surprised how quickly people adjust their behaviour when faced with higher prices. Given the injections into oil storage rather than the expected draws that typically occur at this time of the year, this is exactly what has happened and why oil price fell so sharply. AND people did that all by their little lonesomes without a threat to anyone’s kneecaps from either nosy neighbours or Big Brother or tarring and feathering speculators! Amazing how little central planning is really needed when you get right down to it.

    18. Methinks Says:

      AS far as I can tell Obama’s ‘inflating policy’ is limited to speech making…

      Well, if we can’t rely on what he tells us about himself and his policies in his own words, how do we decide what he stands for? How do we differentiate between “speech making” and policies he intends to implement?

    19. Boonton Says:

      Liberty is defined as the freedom of an individual from outside coercion or compulsion.

      If you take $1 from me, I am less free. If you give me $1 I’m more free. How much freedom? Only by what I can purchase with $1.

      If some policy makes gas prices drop 10% I’m more free. I’m less compelled to limit my choices due to my budget constraint.

      I can enact a law that prevents you from working more than a set number of hours so that you have more time to “do things” and that would not be an expression of liberty but of tyranny.

      The problem with your silly attempt to mimic my analysis is that you are just demonstrating how much you don’t get it. In the above example, you can’t even cite a real benefit to a cost benefit analysis of the policy. I have as much time as I did without the policy. Last I checked, a day is still 24 hours, a year 365 days and so forth. I have less freedom because I have one less thing I’m allowed to do with my time (work a paying job). This would be a pretty big cost to my liberty which could not be justified unless you could demonstrate to me some very amazing benefit.

      Of course not. I’ve never known a leftist who can even define liberty, much less worry about its “balance”. Your reference to OPEC and Saudi princes have to do with anything is a mystery in this context. You’re going to have to explain your reference.

      If the price of oil falls because people demand less of it, oil producers suffer. This is one reason OPEC does not fully exploit its monopoly-like power over oil production. I see no reason why you would get upset that a ‘leftist’ cares little for the well being of what are essentially socialized enterprises of Middle Eastern countries.

      I think Shannon already did a bang up job of explaining to you the enormous cost of such a program. For every $100 you collect in taxes, you will spend $0.99 in the administration of such a program, if the inefficiency of all other government programs is any guide (and there’s no reason it shouldn’t be).

      You know how big buildings have revolving doors as well as regular doors to accommodate deliveries and people with wheelchairs? Did you know the revolving doors save against a massive heat loss (or cool loss in summer)? I think some kids at MIT did the study on it, they took it a bit more….they found that the % of people using the regular doors was pretty high. When they posted a simple sign that said “Please use the revolving door” the usage went up dramatically. Sometimes you luck out and find a really stupidly cheap incentive that does an amazing job of altering behavior.

      I’m not sure how much the “inflated tires win $100” program would cost administratively. The point was to provide a hypothetical. If you like assume out of the 2% gas tax, 1% is spent on prizes and 1% is for administration. The fact remains it motivates enough inflating to generate a 10% reduction in the cost of gas.

      Did it occur to you that those without properly inflated tires are already choosing to pay the additional cost of under-inflated tires and the people with properly inflated tires are already getting the benefit of proper inflation?

      As expected you missed critical details. If you reread post 5 maybe you’ll understand it.

      However, I don’t consider the Bush administration a reliable source either.

      I suspect the ultimate source is not the administration but the US Geologic Survey or some similar department. Yes technically they are part of the administration but ideally they are non-partisan. I agree that estimates of oil production are only that but you’re putting forth an image that the only way to know if there’s oil somewhere is to drill. Oil wells are not just randomly set up but are located in places that appear to have good prospects for oil. I know whether any particular well will strike oil is pretty much a random shot but I don’t know if an entire region’s oil supply is so random. Nonetheless, we do need something objective to base a debate over the cost/benefits of opening up a piece of land to drilling. Just saying in theory any well placed anywhere could tap the next Saudi Arabia would make it impossible against drilling in Central Park NY…let alone the East Coast.

      By “solution”, I gather you mean a drop in oil price to some price that you arbitrarily decide is the right one. Markets price in future expectations. For some reason, expectancy is the hardest concept for people to grasp.

      People are not as stupid as you like to pretend. “Expectancy” is seen every day. Some crises happens in the Middle East and the next day gas prices are higher even though we all know the gas stations have the same gas in their tanks as the day before when it was cheap. This policy is being sold as a ‘solution’ to high gas prices. DOn’t ask me what I me by solution, I’m not the one selling it…your guy is. Ask him, he has already tried to claim the decrease in gas prices is due to just him putting the idea on the table! A marginal amount of oil coming onto the world market years from now alters the ‘expectancy’ only a slight bit at best. The erratic movements in oil prices show there’s a huge amount of guesswork in ‘expectancy’ variables and there should be….you not only have to forecast the technicals (how much oil is needed, who needs it, how much will wells produce, how many refineries will have additional capacity coming on line) but politics (local and global) as well as currency movements and lots of other factors.

      Futures etc.

      I know that you’re a big fan of the college student analogy, so what kind of grade to you think I would give you for your scheme?

      Very poor if I submitted it as a final paper. Fortunately I made it very clear I was trying to brainstorm the idea so I do appreciate the feedback on why it couldn’t work.

      Well, if we can’t rely on what he tells us about himself and his policies in his own words, how do we decide what he stands for? How do we differentiate between “speech making” and policies he intends to implement?

      Again an individual asked what he could personally do to conserve on gas and inflating tires was one of the things he responded with which is one of the standard pieces of advice given so much that it is almost a cliché. He has plenty of position papers available on his web site as well as numerous transcripts of his speeches published all over the web. If you think he is advocating a particular policy you should have no trouble demonstrating it.

    20. Boonton Says:

      We circle back to the same issue:

      If an individual does something, the benefit to him is very tiny so as to almost make it not worth the effort.

      If everyone does it (or a lot of people), then the benefit is more dramatic.

      Obviously the better place to be is in the 2nd situation. The problem is no one wants to do the thing because they loose unless everyone else acts with them. (Or my cynically they hope to score a free rider position, they don’t inflate but the suckers who do allow them to enjoy the drop in gas prices).

      This seems very similiar to the tragedy of the commons (where common ownership of an asset causes people to overuse it thereby making everyone worse off…in other words why the office coffee machine always has a caked on layer of burnt coffee making it the coffee of last resort). But the commons has a very market friendly solution…make one person owner of the asset and let him charge for its use. The asset is protected from overuse and preserved for everyone’s benefit.

      This scenero, though, seems to have no easy market solution. Shannon suggests it is just a fact of life. Even the most efficient market in theory would still leave some money on the table. Nonetheless, with money on the table people still want to try to grab it!

      Sometimes it appears people spontaneously start doing ‘the thing’ even though there’s no particular cost-benefit reason for any particular individual to play along. Ever notice in a crowded mall or supermarket how sometimes people start moving in regular lines almost as if they were driving cars and were staying to the right? Other times, though, the ‘thing’ is achieved through incentives (like the supermarket whose carts make you put a $0.25 deposit in them, you don’t get it back unless you return it to the stall…..I like to joke that Shoprite is making interest on all those quarters that are roaming around its aisles waiting to go back to the original customer at the end of the day).

      I think the incentives that would be applicable to gov’t would be generally mild. If you had a case where the benefit became very, very, large the market would probably start to grab the money first. To see what I’m trying say imagine inflating tires could cut fuel prices by 50% (note here I said prices, not fuel consumption whose savings I’m still keeping at 1% for the sake of the hypothetical…such a thing would be possible if supply was amazingly inelastic). At that point big consumers of fuel (shipping companies, airlines, companies that operate fleets of cars) would find it worthwhile to pay drivers directly to keep their tires inflated. Perhaps they would use insurance companies to offer low premiums to drivers who install computerized pressure sensors on their tires or to tire manufactures to make a tire that doesn’t want to drive unless it’s perfectly inflated.

    21. Methinks Says:

      If you take $1 from me, I am less free. If you give me $1 I’m more free.

      If you take $1 from me, I have been robbed. If you give me $1, it says nothing about my liberty but I have an extra buck. Why am I not surprised that a Marxist doesn’t understand the concept of “Liberty”?

      If some policy makes gas prices drop 10% I’m more free. I’m less compelled to limit my choices due to my budget constraint.

      On more time: prices say nothing about freedom. If they did, then the issue of slavery would be about wage rate. By your logic, we can institute price controls and make everyone “more free” and Zimbabwenomics would be working. “Freedom” is not defined by a cost benefit analysis performed by some government wonk on behalf of people he has never met and has no business dictating to. It is the ability of each individual to make his own decisions without coercion from you and your posse of tyrants. Have you ever taken a class in either economics or logic? You sorely need one.

      The problem with your silly attempt to mimic my analysis is that you are just demonstrating how much you don’t get it. In the above example, you can’t even cite a real benefit to a cost benefit analysis of the policy.

      The “problem” with my silly example is that it perfectly illustrates that socialist nitwits don’t understand “liberty”. Let me spell it out for you AGAIN (not this will likely help you). Cost: less money. Benefit: more time to “do things” (your words). Do I give a crap if you value the money more than the time? No. But, then, neither does your idiotic roadblock idea where cops check tire pressure to rob some and subsidize others. How is it you don’t understand your own arguments?

      If the price of oil falls because people demand less of it, oil producers suffer. This is one reason OPEC does not fully exploit its monopoly-like power over oil production.

      As I suspected, you assertion is deeply rooted in ignorance. Fully exploring this topic will divert from the main point. However, there are a few things that bear mentioning. OPEC does not have “monopoly-like power over oil production because non-OPEC production has been steadily rising over the decades. Second, OPEC fully exploits what power it has. Since most OPEC countries’ national budgets heavily rely on oil revenues (98% of GDP for Saudi Arabia), they must balance higher oil prices (good for them) with demand destruction resulting from higher oil prices (bad for them). OPEC loses any influence it might have over prices when prices fall sharply as they did in 1998 because cutting enough production to raise price decreases volume enough to decrease revenue significantly. When prices spike sharply as they have done recently, the propensity to cheat on production quotas escalates and OPEC countries tend to produce at capacity and encourages more non-OPEC producers to produce more because more fields become economic. Paradoxically (for you, that is), high oil prices also “hurt” oil companies because of demand destruction. And still, arbitrary re-definition of “Liberty” has nothing to do with any of that because money and liberty are not synonyms.

      People are not as stupid as you like to pretend. “Expectancy” is seen every day.

      Generally speaking, people are not stupid. They can make better decisions for themselves than you can make for them. You just don’t get that.

      This policy is being sold as a ’solution’ to high gas prices. DOn’t ask me what I me by solution, I’m not the one selling it…your guy is. Ask him,

      I don’t need to ask him. I’ve had the requisite supply and demand lecture. He’s saying more supply will decrease price. Shockingly innovative thinking for totalitarians like you, but not so shocking for people who understand how markets work. When and by how much is an unanswerable question but increasing supply by lifting arbitrary restrictions is an executable policy that doesn’t require Big Brother solutions. Hypothetically perfect car tuning and tire inflation is not an a.) a realistically executable policy and b.) attempts at execution would significantly reduce liberty.

      A marginal amount of oil coming onto the world market years from now alters the ‘expectancy’ only a slight bit at best.

      Again, you speak with authority about the amount of oil that will come to market and the effect allowing drilling today would have on the market, yet you are as ignorant about the oil industry and how much oil exists in off-limit locations as you are about derivatives. Neither you nor I have any idea how much but we know that more expected supply will put downward pressure on prices because it is basic, day one economics.

      Again an individual asked what he could personally do to conserve on gas and inflating tires was one of the things he responded with which is one of the standard pieces of advice given so much that it is almost a cliché.

      Nice tap dance. First of all, he was not asked what he would personally do but what should be done on a large scale basis. If Obamessiah had said “Well, I’d inflate my tires, tune up the car and carpool and I recommend this course of action to anyone looking to cut down on gasoline usage.” that would have been the end of it. But the point of the original post is that this is his POLICY answer. He asserts we don’t need to drill for more oil because, as all good Marxists know, additional supply decreasing price is mere fantasy. No, instead, we could all hypothetically inflate our tires. I’m not going to repeat the original post, just reread yourself the inanity of hypothetical solutions.

      People are not as stupid as you like to pretend.

      Let’s get back to this for a moment. I don’t pretend that people are stupid. I might think you’re stupid, but most people know exactly how to run their lives without government road blocks and socialist redefinitions of “Liberty” and “freedom” (yours, BTW, smack of Soviet and Marxist ideology). Neither you nor your messiah understand markets, liberty, freedom or people. I’ll just repaste from my previous post

      But how do you pull off something like the tire inflation savings using market mechanisms?

      Here’s the painfully obvious answer: higher fuel prices. You’d be surprised how quickly people adjust their behaviour when faced with higher prices. Given the injections into oil storage rather than the expected draws that typically occur at this time of the year, this is exactly what has happened and why oil price fell so sharply. AND people did that all by their little lonesomes without a threat to anyone’s kneecaps from either nosy neighbours or Big Brother or tarring and feathering speculators! Amazing how little central planning is really needed when you get right down to it.

      While you were busy redefining “Liberty” and dreaming up coercive solutions, the plebes in the market took care of things themselves. Dang plebes!

    22. Methinks Says:

      Boonton,

      “Loose” and “lose” are not synonyms. Why is a Russian immigrant teaching you English for the second time on the same thread?

      (Or my cynically they hope to score a free rider position, they don’t inflate but the suckers who do allow them to enjoy the drop in gas prices).

      Or, logically, the people who don’t inflate their tires use more gas, so what they gain in price, they lose in volume. Basic math.

      This seems very similiar to the tragedy of the commons

      You are an example of the tragedy of the illogical. If demand falls for any reason, those who did not curtail their usage will benefit from the price drop. That doesn’t make them free riders. any more than buyers of I-pods are free riders because they didn’t invent them. The Europeans are getting a free ride because they purchase pharmaceuticals from American companies at below market price and the companies then make up the price difference by charging higher prices in the U.S. The subsidy American consumers of pharmaceuticals provide European consumers of the same pharmaceuticals is a “free ride”. Free riders and tragedy of the commons are different concepts. It’s a good idea to understand a term before you pontificate on it. Makes you seem less stupid.

      This scenero, though, seems to have no easy market solution.

      Are you really this dense? When prices goes up, consumption goes down (we can complicate this with elasticity of demand, but even highly inelastic goods are not demanded in the same quantity at all prices). This has already happened – note the price drop in response to the demand drop. That is how the market dealt with the high oil price “problem”.

      Sometimes it appears people spontaneously start doing ‘the thing’ even though there’s no particular cost-benefit reason for any particular individual to play along.

      Just because you don’t understand why people are behaving the way they are doesn’t mean it’s not rational. There’s a very good reason people are using less gas – maintaining current consumption is no longer worth price to them. The fact that it’s a mystery to you and the congressional posse how that happened and why all of the sudden is proof that you don’t know enough to implement your central planning strategies.

      I like to joke that Shoprite is making interest on all those quarters that are roaming around its aisles waiting to go back to the original customer at the end of the day

      That’s dumb joke. You just flunked my finance class.

      The rest of your post is so inane that I don’t have the time or patience to unravel your web of ignorance.

    23. Boonton Says:

      Cost: less money. Benefit: more time to “do things” (your words).

      Notice the original state of affairs is available in my hypothetical but not yours. If the price of gas drops 10% you are still free to pay your gas station owning friend the original price. In your example of a limit on hours worked I lose the ability to choose certain combinations of work.v.lesiure that I had before.

      On more time: prices say nothing about freedom. If they did, then the issue of slavery would be about wage rate. By your logic, we can institute price controls and make everyone “more free” and Zimbabwenomics would be working.

      Prices are an expression of freedom, hence that’s why price controls are not free. In this example, you’re transferring freedom away from producers and consumers to a smaller class of people who are able to obtain goods at the controlled prices before the shelves empty (in the caseof Zimbabwe probably people politically close to the President’s party). Ultimately the end result is less freedom for everyone since the controls will produce fewer goods even for those in the priviledged class.

      If you take $1 from me, I have been robbed. If you give me $1, it says nothing about my liberty but I have an extra buck.

      Yes you’ve been robbed, your liberty has been infringed…by $1. A crime, yes, ethically wrong, yes but the harm remains $1. Law, culture, tradition and all of human history sees the distinction between this and robbing $10, or $100, or $100,000. Sorry to burst the libertarian bubble but there remains a huge difference between the tax man charging you $1 filing fee and being thrown into a Gulag and forced to mine coal.

      If you get $1 you do indeed have more liberty. You defined liberty as:

      Liberty is defined as the freedom of an individual from outside coercion or compulsion.

      Are not prices set outside of myself (assuming a pure competition model where my indivdual demand/supply is too small to alter the market clearing price)? Am I not compelled by law & social norms not to consume what I don’t pay for? If my ability to pay increases so does my liberty. Likewise if my ability to pay decreases so does my liberty. This increase/decrease may be just (such as my choosing to work an extra shift or choosing to quite my job and live as a hermit) or unjust (because I mug you or because you mug me) or morally neutral (I find a $1 laying on the ground).

      If they did, then the issue of slavery would be about wage rate.

      The wage rate is still an expression of liberty. I choose to work or not work for a given wage rate and you choose to pay me or not. Slavery, then, is simply taking that freedom away in the most extreme way possible…I can’t choose to work or not work.

      OPEC- all why I said ‘monopoly-like’. That being said, I remain unconcerned that an effort to conserve more here in the US will impact the living standards of OPEC or even non-OPEC members….or even domestic oil companies for that matter. When I turn off unneeded lights at home I shed no tears for the electric company.

      Nice tap dance. First of all, he was not asked what he would personally do but what should be done on a large scale basis. If Obamessiah had said “Well, I’d inflate my tires, tune up the car and carpool and I recommend this course of action to anyone looking to cut down on gasoline usage.” that would have been the end of it.

      YAWN, like the previous thread it is almost comic to hear Obama-critics say “it would have been ok if he said X” and then start tap dancing furiously when it turns out he really did say X….If only I could power my car with that I’d be set….anyway here’s the as direct a quote as I can find:

      “There are things that you can do individually though to save energy,” Sen. Barack Obama, D-Illinois, said. “Making sure your tires are properly inflated, simple thing, but we could save all the oil that they’re talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much.”

      http://blogs.abcnews.com/politicalpunch/2008/07/from-the-fact-1.html

      It is surprisingly hard to find transcripts of the Q&A sessions. If anyone knows a good site please let me know.

      Estimates and what exactly is being promised-

      I will yield to you on your technical knowledge of the oil industry nonetheless we must make estimates to evaluate policy. You can ascribe a level of uncertainity to estimates but that doesn’t alter the fact there is an expected value. I think even you would consider it surprising if after 10 years of opening the area to drilling, we discover 90% of our demand for offshore oil meet by it. Likewise it is also unlikly but not impossible that zero usable oil is discovered.

      But what isn’t in dispute is that the best case timeline for oil coming to market is closer to ten years than it is now. As you said, markets incorporate expectations but since there’s no way to know the exact amount of oil offshore drilling can yield the Bush estimates are better than anything else I’m aware of. If you have a serious case to make that the estimates are dramatically low balled…even by supporters of the policy, then please make it. That being the case a marginal increase in supply years from now is unlikely to have any serious impact on prices today and any impact it does have is likely to be swamped by the larger market forces that drive oil. This stuff isn’t futures markets but simple present value. An increase in the odds of war with Iran discounts to a lot more movement in today’s oil price than reserves coming online in 2020.

      What is clear, though, is that McCain is pitching this as a solution for right now….especially when you look at all the other proposals on either side that drilling is sharing company with. The ‘gas tax holiday’ and temporary freeze on purchasing more oil for the SPR are clearly policies meant to impact prices now from McCain’s camp as is Obama’s proposal to swap sweet crude for less friendly stuff in the SPR.

      Hypothetical vs reality
      Here’s the painfully obvious answer: higher fuel prices. You’d be surprised how quickly people adjust their behaviour when faced with higher prices.

      OK I think we have a major disconnect here. I think I made it clear the inflation hypothetical is just that, a hypothetical inspired by the real life dust up over the issue.

      I think I also made it very clear that I’m discussing the case when the reward for adjusting your behavior is not enough to justify the effort unless everyone else (or nearly everyone else) follows suit. I made it very clear when the reward increases market incentives clearly reward behavior that follows suit…which is why lots of people care about inflating tires today but only auto geeks did when gas was $1./gal.

      Or, logically, the people who don’t inflate their tires use more gas, so what they gain in price, they lose in volume. Basic math.

      Let’s take on basic math then.

      Let’s say you drive 500 miles a week, get 25 miles to the gallon so you purchase 20 gallons. @ $4 this will be $80.

      Let’s say with proper inflation you can use 19.8 gallons (1% savings). @ $4 this will be $79.20….again 1% savings.

      Let’s say you don’t bother to inflate but many other people do and due to inelastic supply prices fall 10% to $3.60.

      Again you buy 20 gallons but pay $3.60 for $72.00 Savings is 10%

      True, if you inflate you can save a bit more….you buy 19.8 gallons for $3.60 for $71.28 or 10.9% savings.

      The market punishment for being a free rider here is marginal. Your assertion only holds for unitary and elastic supply cases where a 1% drop in demand is meet with a less than 1% drop in price.

      Are you really this dense? When prices goes up, consumption goes down…

      The density is yours because you cannot see beyond your cheap ideological lenses (and they are the cheapest of cheap…not Wal-Mart but Kmart and a poorly managed Kmart at that). Shannon is able to see the distinct case I’m talking about, is she likewise dense?

      Just because you don’t understand why people are behaving the way they are doesn’t mean it’s not rational.

      Didn’t say that cases of spontaneous order appearing were cases of individuals acting irrationally. In fact, that example is a case where the behavior is rational but it’s only rational for a particular individual to start doing it if everyone else likewise does it.

      That’s dumb joke. You just flunked my finance class.

      Wow, well if they let Bill Ayers teach I suppose they can’t really say no to anyone anymore.

    24. Boonton Says:

      That doesn’t make them free riders. any more than buyers of I-pods are free riders because they didn’t invent them. The Europeans are getting a free ride because they purchase pharmaceuticals from American companies at below market price and the companies then make up the price difference by charging higher prices in the U.S. The subsidy American consumers of pharmaceuticals provide European consumers of the same pharmaceuticals is a “free ride”. Free riders and tragedy of the commons are different concepts. It’s a good idea to understand a term before you pontificate on it. Makes you seem less stupid.

      A free rider is someone who enjoys a benefit but hasn’t contributed to that benefit. The best example is probably a literal free rider…someone who rides the train without buying a ticket. I use the term descriptively, not judgementally. The person who doesn’t volunteer for the neighborhood watch nevertheless enjoys the benefit of less crime in his neighborhood. That’s not a judgement call, just a descriptive one. He might have very good reasons for not volunteering, or he might have stupid selfish ones. In some way we will all ‘free ride’ at some point in our lives.

      Your pharmaceutical example is trickier since the ‘market price’ is not so obvious. If Europeans were truely getting a subsidy one might ask why don’t the pharma companies simply refuse to sell to them instead of supposedly selling to them below cost and pushing the difference onto US consumers. The answer would be that if that was done European countries would refuse to honor patent protection. But as long as the patent violation is kept within Europe why should pharma companies care? Because pharma companies are profiting from Europe, just not as much per pill as they do from the US. Since the ‘market price’ is artifically created by the patent protection I’m not sure there’s any true objective measure of whether someone is getting subsidized or if the US is just getting suckered.

      The tragedy of the commons is a different concept but still incorporates the free rider. In the commons case the free rider is the one who doesn’t restrain his use of the common. He benefits from the restrait others show. Again the term is descriptive, not judgemental. The problem with the commons isn’t difficult to predict and any town that sets up a commons with a sensitive asset deserves what they get much more than the free riders who get as much as they can out of it.

    25. Methinks Says:

      Boonton,

      Notice the original state of affairs is available in my hypothetical but not yours. If the price of gas drops 10% you are still free to pay your gas station owning friend the original price. In your example of a limit on hours worked I lose the ability to choose certain combinations of work.v.lesiure that I had before.

      Are you really this stupid or is this an act? The 10% reduction in gasoline price is not free – it comes at the price of you and your stormtroopers holding a gun to my head and forcing me to pay for tune-ups and tire filling against whether I like it or not.

      After reading further, I’ve decided that you really are that stupid. I’m no longer willing to devote the time to unwind your nests of endless ignorance and rationalizations for tyranny.

    26. Boonton Says:

      If there are any sane readers left on this thread, perhaps they could be so good as to direct me to where I put forth stormtroopers forcing poor methinks to inflate her tires. I’d like to think that maybe this is just two different communication styles clashing….but that’s a pretty slim hope….