Before I get into my thoughts in that regard, I want speak to Karl's thoughts in his last post because they bear on where I want to get to. He says he intentionally links liberalism and communism, maintaining that liberalism is simply communism-light. I don't know who it was who said something like "you could not be a progressive in the early part of the 20th century and not be a communist, and that you could not be a progressive in the middle of the 20th century and be a communist." I would agree with your quote that "Capitalism is not a perfect system -- but its the best we have." To expand on that: what seemed at one time [to some at least] an alternative, namely a planned economy, has not worked: not from an efficiency perspective; not from a human rights perspective; and not from an environmental perspective.
So, broadly speaking, we are left with two alternatives: one is to say that although there are problems in capitalism, they are not serious, and that our best path to the future is to keep capitalism as pure as possible. Anything else is a move toward communism. We have seen the evils of communism and we must utterly guard against going there. I see you as being squarely in that camp.
The second alternative is to recognize that fundamentally, capitalism is here to stay, but if unfettered it will destroy all of us. So it is the task of government to recognize where the free market functions well, and leads to desirable results, and where it does not lead to desirable results and needs to be controlled. In some areas, the appropriate debate, according to this alternative, is not whether controls are needed, but which controls are most appropriate. No doubt I am in this camp. If that makes me a liberal, light communist so be it.
The first label I comfortably apply to myself, together with progressive, but the second I would not. But if it fits, . . .
So back to your last post Karl under the thread "Is Global Warming a Hoax". Your point there was that because the price of oil has not gone up, relative to people's wealth, there obviously is no crisis. The flaw in your argument is that it is entirely based on price. There is no doubt (do I need to post a graph) that consumption of oil has gone up during the time period you are referring to. It was Kenneth Boulding who said “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” If a particular good is manufactured without the input of any finite resource, price will give a fair accounting of its value. We know that we have already exhausted all readily available forms of oil. The oil we are consuming now, is the oil that is harder to get at, and the oil that is harder to get out. The amount of energy going into the extraction of one unit of oil from the oil sands is way more than the energy that was needed to get the oil out of earlier oil fields. It stands to reason that we first use the oil that is the easiest to get at, and progress (regress) to that which is harder. The very fact that we now need to use the tar sands whereas before we did not indicates a progression - or [more correctly] regression. As I said before, price is an indicator of the cost of extraction, it is not an indicator of the cost of replacement.
You said that solar is now cheaper than oil in California and many other parts of the world. Am I to infer from that that California will be oil free in 10 years time? That would be fantastic (not only because your investments will have paid off well). I don't see the trends.
My argument is that government has a role here, and the more simple the role, the better. Government needs to create bias that will encourage renewable energy, rather than the exploration for more oil (as it currently does). My information is that there are still more subsidies going to big oil than to renewable energy innovators. This is so, of course, because big oil has more money, and is acting in its own interests as it lobbies Washington.
Government needs to create bias that our limited oil supply will be used for productive purposes, rather than frivolity. The marketplace says that if a rich man wants to use oil to power his Lear jet on a holiday week-end in New York, that this is a more appropriate use of oil than using it to build [say] a wind generator. What about going to the moon to discover there is water up there?
As a people we need to move to a less energy wasteful lifestyle. The cost of energy needs to go up to encourage that. In my view a progressive government would increase taxes on the consumption of non-renewable resources and reduce taxes on income. The sooner we begin to move in that direction, the less painful it will be.
I draw the analogy of the Winnipeg Floodway. Had Duff Roblin (a Conservative Premier) waited for the flood waters to reach Winnipeg, the ditch would never have been build, and Winnipeg would have been devastated in 1996, as was Grand Forks. The cost would have been massive. But the actual price to Manitobans of the ditch was minimal. What kind of consumption did we forgo because of the construction of the ditch? In the same way, an aggressive policy designed to reduce fossil fuel based energy consumption would cost little (although there would be winners and losers), but the reduction in future pain would be huge.
It's bedtime
U. Eric you make me laugh, "it's bedtime"
ReplyDeleteThis should not be a burden or any pressure and I say this because I know exactly what you mean, I too want to respond quickly.
This should be an enjoyable thing to do when one has time. So having said that I will think about what you said and reply if I have anything to contribute, for I know most of this is for KH, anyway.
I would first say that your view that capitalism is here to stay I believe is optimistic. For example, nearly 50% of Americans pay no income tax. When 50% of the public can vote bigger government programs, without paying for it, you have the destruction of a society as the recipients of money are pandered to by politicians. So I think this is a much larger threat to society, as we are quickly moving to governments - not parents or religion governing behavior.
ReplyDeleteI do believe it is undeniable that pricing is the best indicator we have to judge near and future supply/demand (given you can also purchase futures contracts on prices in the future). Pricing does account for the cost of replacement (amongst many other future metrics to judge supply demand) because if the depletion rates are too large, pricing will naturally go up. You seem to describe a world, where there is a risk where people will one day wake up and realize there is only 5 or 10 years of oil left, and the market neglected to forecast that. You can buy a futures contract, and if you think the replacement value is quickly depleting, one could become fabulously wealthy by buying futures contracts on oil, and people are constantly doing that analysis as a result. Do I think oil can fuel the world for another 200 years? I don’t know, but would concede perhaps not. But that should not concern anyone, as there are plenty of substitutes for oil, and prices will spike and cause substitutes to quickly become more economical well in advance if need be.
So to your question as to the government role, I think it should be minimal. What happens when the government gets involved? Typically chaos. Lets look at the massive subsidies ($80billion) that the US government put into ethanol production a couple of years ago. Not only has ethanol usage not achieved any sustainable boost given it is not market ready, but the artificial stimulus has caused perhaps millions of deaths around the world from hunger, as it caused a diversion of corn crops to ethanol usage and away from food. Most consider Germany the model of government and industry working well on sustainable energy. . There has been a massive injection into renewable by subsidizing the solar industry the past 10 years. However, solar is now close to economical without subsidies (as their has been a long term trend of solar manufacturing costs coming down 10%+ per year, which the German subsidies did not accelerate by my analysis). Given solar costs today, thousands of Chinese companies have just been created in the past 4 years, and they far more profitable than the equivalent German companies. In fact, the Chinese can and will price so low (given their lower cost structure) that it is my prediction that most of the German solar companies will go bankrupt within the next 3 years. Therefore, big picture, what has the German government accomplished? They sank billions of dollars into an industry that will no longer exist in their country (unless they continue to subsidize, which would be foolish as they could buy foreign solar panels far cheaper).
So net, I largely see failure when government gets involved. I do agree that society is wasteful, and American culture is amongst the worst. I would like to see that changed, but artificial pricing adjustments by the government, appear to have unintended consequences, so I am happy to let the market rule the day.