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July 05, 2007

Unclean Politics Means Unclean Energy

Don Boudreaux

In today's Washington Times, my friend and co-blogger at Market Correction, Andy Morriss, nicely exposes the foolishness of the misnamed "Clean Energy Act of 2007" (which the U.S. Senate recently approved).  Here are Andy's final few paragraphs.

There is a way to improve energy security: unleash entrepreneurs. Refiners have been solving America"s energy problems since the start of the 20th century. When the U.S. faced a major gasoline shortage in 1910, entrepreneurs revolutionized refining technology and doubled gasoline yields. For the last 30 years, they"ve been boosting output from refineries, making it possible for our total capacity to rise even as older, less efficient refineries were closed.

In short, American refiners have regularly increased the quantity and quality of gasoline from each barrel of crude, and done it without Congress" advice.

If we want to increase our energy security, we"ll stop changing the rules every time a politician needs an issue for his next campaign ad. Refineries, pipelines, and oil fields are all multibillion-dollar investments that take years to earn a return. The constant shifting of government rules undermines the certainty investors need before making such a large-scale capital commitment.

If we want to make America more secure, decrease gasoline prices, have cleaner fuels, and increase the reliability of supplies, we need to get the government out of the way of the entrepreneurs who can deliver those things.

Posted by Don Boudreaux in Energy, Environment, Politics | Permalink

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Comments

From what I understand the clean energy act simply gets rid of all the subsidies given to the oil industry putting it on a more equal competitive basis with renewals. IMO the cost of gas is controled not by the market but by the worst collusion possible between government and corporations involving massive subsidies and even placing the issue as number one above all else in foreign policy. The oil industry is IMO an example of a means of production controled by the state that has little to do with free markets.

America past peak oil production in the 1970's and no amount of subsidization of the industry will change that.

And certainly economist who like to argue their profession has arrived at consensus on how the economy works based on their models are left in the akward postition of having to hand wave away the scientific consensus on climate change and their models that suggest the "free market" and oil geniouses have no way to correct for such externalities.

Posted by: Muirgo | Jul 5, 2007 1:13:30 PM

To Muirgo:

What makes you think that Dr. Boudreaux and the majority of people visting this site agree that oil companies should be getting subsidies? You've been on here long enough to know that's not true, so why bother including it as part of your arguement supporting the energy bill? Why not address the points that the article says are the problems of the energy bill (energy independence/security and price gouging)? Did you fail to address these points because the author is 100% correct?

P.S. The word "simply" does not belong in any sentence describing any sort of legislation written by congress.

Posted by: Chris | Jul 5, 2007 1:47:55 PM

Chris the bill basically gets rid of subsidies for oil. That's something I assume a liberal economist supports.

I find the claim,
"Political talk about "energy security" is Washington code for consumers paying higher prices for more expensive domestically produced fuels."
dubious when the externalities we pay for supporting the oil industry are not considered.

Now certainly the bill does support redirecting the savings towards renewables which I fully support for the same reason I spported the Manhatten Project, The Apollo Project and the governments developement of the Internet....that being I believe the free market does not stand alone. I write to you in good part on this computor, this internet having prevailed the cold war as much an product of those government programs as of anmything the market came to bear.

Posted by: Muirgeo | Jul 5, 2007 2:56:24 PM

You said:
In short, American refiners have regularly increased the quantity and quality of gasoline from each barrel of crude,

where can I find any evidence to support this supposed fact?

In other words when did the number of gallons of gasoline in a barrel of oil change?.

Posted by: spencer | Jul 5, 2007 3:50:28 PM

Spencer --

Crude oil is a mixture of a variety of petrochemicals. The change has come from the development of enzymes that are able to convert heavier petrochemicals into gasoline. In effect, it means that you may trade-off heating oil, asphalt or kerosene for gasoline.

HowStuffWorks.com has an excellent article on refining. The original article is alluding to the "Chemical Processing" that occurs.

(I am not the same Chris as the one who posted above, but I think I was here first.)

Posted by: Chris | Jul 5, 2007 4:03:29 PM

No offence, but you, muirgeo, have single-handedly diluted the quality of comments on this otherwise excellent blog as readers have been forced to humour your trite and poorly formulated (and spelled) comments. Frankly, the lack of research or thought put into your comments makes my brain hurt. There are other blogs where your drivel is gladly accepted, please comment there.

Posted by: Concered Reader | Jul 5, 2007 4:09:55 PM

A fine article and on target. The "Clean Air Act". What a fine piece of political claptrap that little piece of by-partisan bullshit is! It's like watching the Soviet central planners in action.

Funny how the tariffs on Brazilian sugar ethanol remain in place so that we can spin our wheels tossing resources down the corn ethanol. Nothing like a central planner allocating resources! It would take Stephen King to write something more frightening.

Posted by: methinks | Jul 5, 2007 4:48:36 PM

Muirgeo,
As I beleive I have laid out before, the so-called "subsidies" given to big oil are tax breaks for domestic drilling. It is not like there are government checks arriving at corporate HQs. Just because Uncle Sam decides to steal less from someone does not make it a "subsidy." The general consensus among thoughtful people who know and study the industry is that Uncle Sam gets much more out of the oil industry than he puts in (whatever it is that he puts in).
Your point about collusion is unfortunately dead wrong. We know from game theory and experimental economics that collusive agreements among even a very small number of people (like two) are: (1) nealry impossible to set up in the first place, and (2) practically impossible to maintain. Sure, I am sure they can happen but only in the sense that nothing is impossible. Your conviction that there is a conspiracy afoot is sadly all too commmon. People seem to use it as a heuristic when the complexities of the market confuse them. Anyway, that's the economics behind collusion--that is if you are still here to learn stuff.

Posted by: The Albatross | Jul 5, 2007 5:18:55 PM

I write to you in good part on this computor, this internet having prevailed the cold war as much an product of those government programs as of anmything the market came to bear.

Huh?

Concered (Concerned?) Reader: good call.

Posted by: ben | Jul 5, 2007 5:38:27 PM

Hmm A president who's father is a member of the Carlyle group, a president who's father gave him oil companies to run while he grew up and the family has close ties to the Saudi Royal family, A Vice president bouncing between government and the private sector of the oil industry and a secretary of State previously a CEO at Chevron with an oil tanker named after her.

A President who's initial plan on entering office was to figure a way to invade Iraq. An energy policy done under the veil of secrecy. One thing known to come out of the initial disclosure was a map of Iraq with the main key features to be the locations of the prime oil reserves in Iraq, A president who's pre-invasion message to the people of Iraq is to paraphrase, " your fate will depend on your actions, do not destroy oil wells". A post invasion plan that allowed rampant looting of the entire country with the exception of massive forces to protect the ministry of oil buildings.

And currently the war drags on while these corporate raiders and our government continue to look for the final step to allow withdrawal of our troops...that being "negotiated" contracts for the Iraqi peoples oil sending almost all of the revenue to multinational corporation with little left over for the Iraqi's. All wall squashing an attempted labor movement among st the Iraqi oil workers.

No you are right their is no conspiracy. It's in fact all out in the open. Call yourself a supporter of free markets and myself a conspiracy nut. But IMO I'm far more a supporter of free markets then a dunderhead such as yourself.

"We know from game theory and experimental economics that collusive agreements among even a very small number of people (like two) are: (1) nealry impossible to set up in the first place, and (2) practically impossible to maintain."

And yet it happens under your very nose!

Posted by: Muirgeo | Jul 5, 2007 5:53:21 PM

I suppose it is only fitting that if I criticise another's spelling, I am fated to misspell something in that critique. Alas.

Posted by: Concerned Reader | Jul 5, 2007 6:10:53 PM

Concered Reader,

They use force to make you read and reply to my comments? Surely you're a supporter of both the free-market economies and a free markets of ideas? But some how I wonder about you on both counts. Presuming the oil industry is a result of a free market economy and suggesting how ever subtly that maybe I be banned. And free market people I thought always put quantity above all else. 250+ post on an anecdote. I think I deserve some credit for stimulating "the market". Sorry for your "brain hurt" but I bet its as much about content as it is about my poor quality.

Posted by: Muirgeo | Jul 5, 2007 6:21:39 PM

Muirgeo still has yet to name a specific "subsidy". Really, this isn't fun anymore. I was hoping we could get to the question of how material said subsidies are sometime before we actually run out of oil. That gives him a few hundred years, but I wouldn't bet on him...

Posted by: Brad | Jul 5, 2007 6:25:55 PM

All I do is point out that Uncle Sam gets more from big oil than big oil gets from Uncle Sam and that it is difficult for producers to collude on price, and I get the full DailyKos treatment? All that is missing is the part about the world being ruled by the Pentavirate, who as we all know consists of the Queen, the Vatican, the Getty's, the Rothchilds, and Colonel Sanders. The facts remain:
1. The "subsidies" targeted in the bill are merely tax breaks for domestic production--as in no where near Iraq.
2. Big oil is more often the target of government action and predation than it is the beneficiary of its largess.
3. Conventional economics tells us that it would be very, very difficult for the big oil companies to conspire and fix prices.

All relatively known and uncontroversial to people who know the industry and economics, and definately not deserving of me being called a "dunderhead". Guess you are more interested in "teaching us a thing or two" about our own business, than seriosly learning anything about the oil industry or economics.

Posted by: The Albatross | Jul 5, 2007 6:58:37 PM

The Albatross:

Mention the Pentavirate again, and you'll find your access to delicious fried chicken SERIOUSLY diminished.

You've been warned.

Muirgeo, IMO you can post where ever you can find willing hosts.

Posted by: Scott Clark | Jul 5, 2007 7:26:37 PM

The conspiracy I'm really interested in is the one that graduated Muirgeo from medical school.

This knot of confusion has told us that he/she is a doctor.

Posted by: methinks | Jul 5, 2007 8:36:31 PM

I was thinking exactly the same thing, methinks! Great call.

Posted by: ben | Jul 5, 2007 11:32:33 PM

And free market people I thought always put quantity above all else.

Actually they put individual freedom above all else, I think.

Posted by: ben | Jul 5, 2007 11:34:53 PM

If I were of a mind to respond to Muirego's lunacy (which I'm not, since I'm over her trolling), I would point out that so-called "peak oil" didn't occur in the '70s, and hasn't happened yet. If the envirowieners would pipe down and quit acting like infants with poopy diapers, we could get on with the process of finding more petroleum reserves. Further, I personally think that the theory of abiotic oil has merit, for reasons that don't fit this thread. We aren't even close to running out of oil...or near monomaniacal moonbats who salivate at the thought of ejaculating whatever socialist meme is in vogue at the moment. Hell, some of those idiots still cling to memes from decades ago. I think you know what I mean.

And "consensus" among economists is rare. There are very few abstractions on which there is agreement. You can find "educated" economists like Krugman who rarely opine on anything and describe the scene playing out in front of thier eyeballs. I've read articles of his that deny the basics of Demand and Supply. It is laughable for a "physician" to generalize all economists into one lump.

Gadzooks. Sam can get upset because of incivility by the readers here, but how about recognition of the fact that Muirego is incorrigibly ignorant and a troll? S/he/it (an apt description) is only here to agitate.

Posted by: skh.pcola | Jul 6, 2007 3:27:40 AM

http://www.theoildrum.com/uploads/44/cera_figure_1.jpg

Posted by: muirgeo | Jul 6, 2007 7:02:57 AM

skh,

The United States hit peak oil production in 1972 (see: Hubbert's Peak). Since then, oil production has been declining. However, you're right that we're not ever going to run out of oil. You can go to your back yard, dig up some dirt and extract hydrocarbons from it.

We run out of oil at a given price, and even then the cost of finding and lifting it can be reduced by advances in technology which can make previously uneconomic oil economic at the same price. You don't even need to consider abiotic oil to consider that we have as many hydrocarbons in the ground as there is ground. Tar sands are economic at current prices but weren't even close at $20/bbl. There's more oil in the shale of the Rocky Mountains than there is in Saudi Arabia - but it costs $40/bbl to lift (10 years ago - it may cost less now), so it wasn't economic until recently.

Most of the "research" and scare books I've seen are written by people who may be scientists but have no knowledge of oil economics. In fact, they seem to be completely ignorant of the basic facts of the industry. They assert that because we have a limited amount in reserves now and we are not finding it as fast that we must be running out. They completely ignore price and technology!

Posted by: Methinks | Jul 6, 2007 8:12:35 AM

Methinks,

Just thought I would update you--the viability of shale oil is down to $26/bbl as of a year ago. As Andy alluded to in his article the shale oil projects have no trouble innovating. They are more concerned about the government changing the rules of the game--like with The Clean Energy Act of 2007. Also, since nearly all of the shale is on public land, then that creates even more problems and uncertainty. If people are going to flip out about drilling in a "wildlife reserve" that makes the Ice Planet Hoth look like the Garden of Eden, then they are hardly going to take shale oil projects in Colorado and Wyoming sitting down. Anyway, the innovation in shale proves Andy's point, but the question remains, will we let them?

Posted by: The Albatross | Jul 6, 2007 10:21:44 AM

Hmmm,
Crude oil at 72.67 a barrel as I type this. Where are those free market miracles from the tar sands or oil shales? I can remember discussions of these resources back in the 60's and 70's. Must be those nasty gobermint regulations.

Posted by: blue collar troll | Jul 6, 2007 11:49:57 AM

Thank you, Albatross. That's an amazing! I think you also described very well the reason that most American petroleum companies are looking abroad for E&P opportunities.

Posted by: Methinks | Jul 6, 2007 11:50:18 AM

Well, my experience of muirgeo's participation in the forum is that it has actually gone donwhill.

I still don't think incivility is a useful response as it has failed to get muirgeo to go away...perhaps the most desired outcome.

However, let us give no troll the satisfaction of rising to whatever bait they may dangle around here.

Reaction usually results in reaction.

Muirgeo, like so many people, suffers from a mind-jam packed with collective paradigm as evidenced by statements indicating supreme faith in "democracy", the "will of the people".

IOW, muirgeo gives all the appearance of having been successfully indoctrinated by the political-corporate sponsored educational system. That's what can happen to your brain on collective education. Mythology becomes fact.

When you get down to it, muirgeo is a prime example of partisan political alignment. This often results in bi-lateral thinking, where the worlds is defined by the us v. them dynamic.

Let's face it, such individuals, unless they experience a radicalizing emotional experience, are immune to information that does not support their ideological position.

The problem for proponents of tranformational ideas, is to find those who have not got so caught up in the partisan politic that they have developed this ideological immunity. IOW, fertile ground.

Posted by: Sam Grove | Jul 6, 2007 12:02:47 PM

"Let's face it, such individuals, unless they experience a radicalizing emotional experience, are immune to information that does not support their ideological position."

Now there's a winning platform-must be The Tooth Fairy Theory it only works if you believe. Call it faith based economics. Facts on the ground have no meaning.

Posted by: blue collar troll | Jul 6, 2007 12:27:05 PM

"Where are those free market miracles from the tar sands or oil shales? I can remember discussions of these resources back in the 60's and 70's. Must be those nasty gobermint regulations."

The oil sands work in Canada is proceeding with output expected to rise from 1 million bb/d to 5 million bb/d. This would have happened earlier but there were concerns that Canada's signature to the Kyoto Protocol would scupper the whole project. The other major heavy oil/tar project was in Venezuala which has unfortunately encounter severe government predation, which has also cost that country about 1m bb/d in ordinary crude production (at least last time I checked). The preliminary shale oil projects are tied up in the leasing process as they are on government land (again last time I checked-might have changed). Those are the facts on the ground and when you combine them with the fact that both coasts and huge tracts of Alaska are off limits to drilling I think we can agree that there "be gobermint regulations aplenty."

Posted by: The Albatross | Jul 6, 2007 12:50:33 PM

blue collar,

Excellent! You beat me to it. Lets put "faith in democracy" and "will of the people" to a vote against methinks support for corporate rule. Then all can understand methinks distrust of democracy.

Two words!

Posted by: muirgeo | Jul 6, 2007 12:51:09 PM

See, the bi-polar outlook cannot recognize 3+ options. If you are not left or right, in their view, you're nowhere.

It's either democracy or corporate rule. No other possiblity can exist for them. Unthinkable; literally. It's amazing how well our educational system works at intellectual disablement.

Posted by: Sam Grove | Jul 6, 2007 1:25:18 PM

Muirgeo convinced me to send more money to the Ron Paul campaign. Nice work.

Posted by: The Dirty Mac | Jul 6, 2007 1:26:52 PM

I'll take Ron Paul over any of the other Republicans. Especially the scary 3 that think the Earth is 6,000 years old. YIKES!

BTY; 15 of my 20 years of eduction were Catholic. Those nuns were brutal!

Posted by: muirgeo | Jul 6, 2007 1:40:06 PM

"Let's face it, such individuals, unless they experience a radicalizing emotional experience, are immune to information that does not support their ideological position."

Now there's a winning platform-must be The Tooth Fairy Theory it only works if you believe. Call it faith based economics. Facts on the ground have no meaning.

Posted by: blue collar troll | Jul 6, 2007 1:59:47 PM

apologizes firefox reposted as i was leaving.

Posted by: blue collar troll | Jul 6, 2007 2:11:53 PM

Facts on the ground have no meaning.

AKA, politics as usual.

Posted by: Sam Grove | Jul 6, 2007 3:31:21 PM

Here's how you get the government to serve "the people", that mythical, monolithic block of everyone who has the same values and priorities:

The poltical process caters to monetary influence and votes.

In order to have the government serve the people, that mythical group mentioned above, everyone has to be made equal so that their values and priorities are the same. That way there are no special interests to seek special favors from government.

As it has been demostrated that government is unable to make everyone wealthy, it must therefore make everyone poor, in order to achieve poltical nirvana, the place where everyone has identical political values.

Unfortunately, while there are many who aren't too interested in being rich, very few desire to be poor.

I don't know where to go from there. There doesn't seem to be any way around that fact that different individuals have different values and priorities and if the political process become THE means to achieve goals, then it seems to me that society under political government must be rife with political process. The main advantage of democracy then is this conflict doesn't have to be menifested in great violence...unless there is conflict between governments.

I don't know how the political faithful can resolve these problems unless one side of the great divide manages to somehow get rid of the other side. Then all will be well.

BTW, one thing those partisans from the left/right arena don't get about libertarians, is that many of our rank are refugees from the left/right teams.
Once transitioned fully from left/right/uncertain domain, libertarians should no longer be troubled by the sentiments that cause members of one side to hate the other.

Posted by: Sam Grove | Jul 6, 2007 3:59:25 PM

rife with political process

meant to say 'rife with political conflict'.

Posted by: Sam Grove | Jul 6, 2007 4:01:05 PM

Albatros --

You forgot to mention that "mining" the tar sands only makes economic sense when the market price of oil is as high as it is now because of the difficulty in refining.

Muirgeo --

What exactly is wrong with the Carlyle group? They invest in a wide variety of businesses, some of which are engaged in bringing alternate energy to market.

Posted by: Chris | Jul 6, 2007 4:03:19 PM

Chris,
True enough, but I wanted to be brief. Furthermore, I think the biggest part of the story here is that it is innovation in these areas that have made these resources viable--oil prices can and do collapse. When I was studying oil sands for a project about ten years ago, the conventional wisdom was that oil had to be above $40 for the projects to be viable, what was $40 (1997 $) is now $28 (2007 $). The same is true of shale (2.6 trillion barrels worth in the USA), where we have gone from $40 viability to $26. Again I echo the point of Andy's article--we will have nothing to worry about as long as we allow people the freedom to innovate and more importantly reap the rewards of their innovation.

Posted by: The Albatross | Jul 6, 2007 4:42:42 PM

Muirgeo --

What exactly is wrong with the Carlyle group? They invest in a wide variety of businesses, some of which are engaged in bringing alternate energy to market.

Posted by: Chris

$54 billion of investment (nothing particularly wrong with that). About 1000 main investors (a little concerning/ huge concentration of wealth). Conflicts of interest. (key politicians and investors mixing/ extremely concerning). Political arbitrage ( power meets wealth/ poor kids fight the rich mans war/ guns, weapons, oil ad money are exchanged and even their media outlets do well hyping, propagandizing and reporting on the wars they start).

"Carlyle partners, who include Baker and the firm's chairman, Frank Carlucci - Ronald Reagan's defence secretary and a former deputy director of the CIA - own stakes that would be worth $180m each if each partner owned an equal slice. As in many areas of its work, though, Carlyle is not obliged to reveal the details, and chooses not to."

http://www.guardian.co.uk/wtccrash/story/0,1300,583869,00.html

If you're comfortable with all that Chris go ahead and make a funny comment on what a troll I am, how I'm paranoid and then something about how great free markets are.

Posted by: muirgeo | Jul 6, 2007 6:03:58 PM

No Cris you do not understand.

There are 42 gallons in a barrel of crude.

Out of that 42 gallons you can produce x gallons of gallons of gasoline, y galoines of heating oil, z gallons of diessel , w gallons of aviation fuel, q gallons of other thing lubricants, etc. But x+y+z+q = 42. If you produce more of x you have to produce ,less of something else. It is a matter of chemistry, influenced by prices. If you start withe west texas intermediate, or Venezuelan heavy crude, or north sea oil or
saudia arabian heavy sulpher c

Posted by: spencer | Jul 6, 2007 8:17:57 PM

Saudia Arabian heavy sulfurous crude you will prefer a different combination. In a free market the combination will change depending on prices. But the Communist in the old USSR were faced with the same chemistry and produced a combination of x+y+z+q=42. Sometimes it was different from what a free market would have produced and sometimes it was the same. But it did not have to be a capitalist system to distill one barrel of oil into 42 gallons of various petroleum products.

The way Boudreaux wrote it up he implied that because it was a capitalist market they were able to get more then 42 gallons of product -- a mixture of gas, diesel, heating oil, etc, --out of a barrel of crude oil. That is what I wanted evidence of and if you notice he did not try to defend his statement.
Hell, the Nazis in Germany actually were able to add coal to crude oil and get more gasoline and/or aviation fuel then the US did. Moreover, given the demand and the prices in their system it was exactly what the market said they should have done.

That is why I commented. It was a typical poor analysis by Boudreaux that said because something happened it was because of the capitalist system and completely ignored the fact that the achievement had little or nothing to do with capitalism. Non-capitalist systems achieve the same results. If you listened to Boudreaux the only reason the sun rises each morning is because of capitalism. But we know that the sun rises each morning on non-capitalist systems just as it does on the US.

That does not imply that non-capitalist systems are better then capitalist systems.
But it does not mean that capitalist systems are not always perfect as Boudreaux tries to claim.

Posted by: spencer | Jul 6, 2007 8:44:14 PM

capitalist systems are not always perfect as Boudreaux tries to claim

Straw Man.

Perfect is not an appropriate adjective to use with market, free market, underground market, capitalism, etc. I have never gotten the impression that Coudreaux was attempting to cast market processes or capitalist systems as 'perfect'. So you've built a straw man, in your own mind, no doubt, purely for the pleasure of knocking it down. In regards to markets, I have no idea what the adjective 'perfect' could possibly mean. Perhaps you can tell us.

Don's claim is that market processes are dynamic and that freer markets strongly tend to produce better results (more wealth for more people) than less free markets, because the dyanmism is less constrained.

And the excerpts above is not about comparing U.S markets to soviet, NAZIS, or other non-free markets, but about U.S. markets with and without "incentive management" by politicians.

That incentives exist in less free markets as well as freer markets is undeniable, as humans under any system desire to survive.

Posted by: Sam Grove | Jul 6, 2007 9:25:17 PM

Ok where to begin. First of all Muirgeo if you ever want to be taken seriously by anyone do not cite the Guardian. British newspapers are British newspapers--well known for their idiocy and partisanship. The Guardian is no more reliable than the Sun (a rightwing newspaper owned by Newscorp)(actually the Sun has a better record for accuracy and that is truly scary--hell at least we get the page three girls from the Sun whose fake bits are more real than anything you will see in the Guardian). I was born in the UK and spend much time there, so anyone citing the Guardian is prone to finger pointing and laughter--it is a little like quoting the National Equirer or News of the World as the basis of your facts. I once had to tell this to a student--he took a second look and agreed very quickly (he got an A anyway, because he had made a good initial argument). I know you will not believe me but even my left wing, socialist British born mother will acknowledge that the Guardian is an absolute turd full of Bolshy nonsense and better known for its spelling mistakes and fourth grade reading level in Britain.
Second of all, the Carlyle Group at $54 billion--that is it? You had me scared for a minute, I thought we might be dealing with some trillion dollar deal. $54 billion is nothing in a $12 trillion dollar economy. So the Caryle Group is a problem, but your enlightened friends (and they will eventually gain control) in government can be trusted with roughly $3 trillion? Not to mention their ability to indict, subpoena, and otherwise audit all those Americans who disagree with them (unlike the Caryle Group, which has no police or subpeona powers). Not to say that government run by Conservatives would be any better, but I think the power of the federal government (whoever controls) somehow overshadows that of the Carlyle Group--even if they were to pair with the evil Colonel Sanders and his beady little eyes and his delicious chicken that we all crave night and day.

Spencer,
You are correct there are only 42 gallons in a barrel of oil, but you get different outputs from different types of crude. Heavy crude tends to produce more diesel, asphalt, and petroleum coke. However, over time we have learned that through the process of cracking, which envolves the reaction with crude with different enzymes in a catayst cracker (or cat cracker as we used to say when I used to fix them as a teenager). Ergo, as you improve the process you can improve your yields of different petroleum products. Want more gasoline--then crack more of those heavy hydrocarbon molecules into something simpler. Sure you give up more of the heavy stuff--diesel, pet coke, asphalt, etc.--but you can produce more light stuff--gasoline, kerosene (jet fuel), pentanes (plastics). Anyway, you are right, but so was Andy when he brought up the fact that entrepreneurs had managed to get more gasoline from a barrel of oil. Although the number of US refineries has declined (along with their bb/d capacity), US gasoline output has still risen. The reason was outlined in Andy's article--we figured out how to get more gas from a barrel of oil (and less of other less valuable stuff). As I said, I think you are right, but then again so was Chris.

Posted by: The Albatross | Jul 6, 2007 9:42:25 PM

Sorry, I should mention the new shale oil exploration projects involve placing large heated coils in the ground which heat the rock--unlike the previous shale projects that involved mining and processing the rock in a plant. So in this system (unlike those tried in the 70s) up comes the bubbling crude, which also happens to seperate the kerosene (jet fuel) on the way up. Understandably with 2.6 trillion barrels down there the Airforce is very interested--I think we need not worry too much about national security.

Posted by: The Albatross | Jul 6, 2007 10:27:56 PM

I'll limit my comment to the fact that, after cracking, refiners derive *more* than 42 gallons of petroleum products from a 42-gallon barrel of oil. IIRC, there is ~21-22 gallons of gasoline after refining from each 42-gallon barrel. So, about half of a barrel of oil eventually ends up as gasoline. I'd go find the IEA webpage on it, but facts don't seem to work very well with the commie trolls here.

Methinks, you said (I think...apologies if not) that you worked in the petro industry for a while. I read your response vis-a-vis "peak oil." I think that you are incorrect. See:

http://www.csmonitor.com/2004/0129/p14s01-wogi.html

Also, environmentalists (an oxymoron, since the term includes "mental," which they ain't), have hamstrung exploration, production, and refining for at least 30 years. There's no way to really know what our proven reserves could be without going out and trying to find them. No other country has had the obstacles that the US has had. And, taking into consideration the size and scope of our geographic span, it is nigh impossible to draw conclusions about "peak oil."

Concerning abiotic oil, I think that the concept has merits on the facts of the location of oil itself. The oil being discovered is too deep, under miles of water in some places, and covered by rock that wouldn't have had time to form since the dinosaurs and flora died and formed "fossil fuels." I think the notion is absurd.

I do agree that we will never run out of oil, just as we never ran out of whale oil. It will become too expensive, at the margins, to extract the remaining [whatever] billions of barrels, and alternatives will be developed. I understand that on a basic economic level. I simply disagree that there is any concern that we will exhaust the supply anytime soon. If not for OPEC, who operates via a cartel that would be illegal if based here in the US, the price of oil would be half the price it is now. Oil is the second most plentiful liquid on earth, behind H2O.

I tipped too many tonight and have to rack out. Salud, and a hearty "Good night!" to all.

Posted by: skh.pcola | Jul 7, 2007 12:53:53 AM

Skh--thanks for the drunken sanity--21-22 gallons per barrels sounds about right--depending on the crude and the capital in place. You bring up a good point: whatever happened to those whale oil shortages and coal famines predicted a century ago? Well, John D, Rockerfeller saved the Wales and Viagra saved the Rhino--maybe big oil and big pharma aren't so bad after all--unless you hate wales and rhinos.

Posted by: The Albatross | Jul 7, 2007 1:20:39 AM

Albatoss,

First you spent a long paragraph discussing the poor quality of the Guardian and not ONE word as to the actual accuracy of the facts included in my Guardian quote. ( attack the messenger ignore the message).
Next you explain how people in the government control 3 trillion dollars suggesting they are the ones to be concerned with. Now go back and read the factual Guardian quote I gave and realize those people from the government are the same people on the board of Carlyle.
That's how it works in the real world Albatross. Now you're going to try and discredit me because of a source I used while denying or downplaying the interconnections of wealth and power in the world I'd suggest it's not me that has an issue with credibility.
The facts of power, money, government and corruption of policy and the markets by their intermarriage are unmistakable in my opinion. That should be an easy thing to agree on. That capitalism is the best economic system and requires a government to function should also be unarguable.
The questions needing to be answered are how best to set up society while preserving as much liberty and freedom for all and maximizing the mutual benefits to the individuals of the society. If you are willing to deny the problems that arise for society, for government and for the economy by mixing of wealth and power and governance then there is little to talk about. If such is your belief, that society has no rules and any thing goes then you have no right to complain of people voting for regulations and putting in corrupt politicians to impose the rights of the many on the few. If you give a green light for those with money to corrupt politicians you can't legitimately complain about democracy corrupting politicians because you are asking for a society that basically allows anything. In a dog eat dog world corrupting with numbers or dollars doesn't matter. But I believe neither should be allowed.

Posted by: muirgeo | Jul 7, 2007 2:26:09 AM

Spencer

But it does not mean that capitalist systems are not always perfect as Boudreaux tries to claim.

Either show a quote from Boudreaux to that effect, or retract and apologise.

Posted by: ben | Jul 7, 2007 2:48:42 AM

muirgeo:
"That capitalism is the best economic system and requires a government to function should also be unarguable. "

It's very arguable. You close your mind to the mere suggestion that anyone can even make the argument that the state is unnecessary for markets to fuction properly. You don't have to agree with it, but if you considered it openmindedly it would go a long way towards understanding where some of us are coming from.

"Lets put "faith in democracy" and "will of the people" to a vote against methinks support for corporate rule. Then all can understand methinks distrust of democracy."

Not only do I doubt very much that methinks supports corporate rule, but voting for or against democracy presupposes a democratic process. If democracy is is poor system of determining right or wrong, then voting for it would prove nothing at all, particularly when the alternative you put forth is a very weasely strawman.

You repeatedly mischaracterize others' arguments. I think it's because you are unable to think clearly. You're so emotionally invested in what you already believe that you don't even know what you're arguing against.

I gotta admit, though, that the irony of you supplying a link to a Wikipedia artical on Cognitive Dissonance was just laugh out loud funny.

Seriously, though, if you lay off the false dichotomies & respond to what others actually write, you might find that many of us really are open to new ideas. I see these blog comments as an opportunity to cooperate in uncovering the truth, but sometimes lately it just seems like you want to fight, & if you pick a fight, you'll get a fight, typically. Then no one learns anything.

Sorry if this seemed preachy.

Posted by: Hans Luftner | Jul 7, 2007 5:30:36 AM

Hans,

I'm reading , The Road to Serfdom, now and hopefully it will clarify your position. Can you at least understand that my position is not uncommon if not unreasonable? I think that the majority of people living in the developed world would have their heads spin if they were told government is not needed for capitalism to work. It simply sounds like anarchy. "Show me where" I think would be most responses.
The thing supporting my position is IMO the total lack of any system as you propose having ever existed or currently existing in any stable long term period. Sure Hans I may be missing the big picture and you may be totally right but 30+ mixed economy styled democracies argue against it.
Finally Hans I think your side of the debate is often guilty of false dicotomies. I've said over and over that I'm for regulated capitalism and that in general less regulation is better then more. What we need is good regulation. And I proposed my ideas which are based on use of a democratic form of government, a constitutional republic. But the mere suggestion of any utility of government or oversight gets you branded a socialist or a communist. Do you think that's reasonable coming from your side? Do you think the US of A is a socialist country? France? Sweden? I don't at all. And by any definition of the term they certainly are not. But likewise they are NOT free markets in the strictest sense so I do also have trouble with people like yourself pointing out the success of our countries and the success of the wests mixed economies as examples of the success your "ideology" because they are NOT the free markets you proclaim we need. That doesn't make your wrong but it does suggest you need to provide evidence for your claim.

Posted by: muirgeo | Jul 7, 2007 10:04:03 AM

If muirgeo is really a doctor, when the hell does he/she find time to treat patients with all the trolling done here?

I'm sure that the productivity numbers are down .... I wonder if he/she is part of a union which rewards mediocrity...

Now to deal with part of the issue at hand. Entrepreneurs are quite capable of knocking the big bad oil companies on their ass given enough time for research and a market with free, or very low-cost, entry.

You look at the world as it is and ASSUME that this is a market economy, it's not. Get that through your skull.

Posted by: Jon | Jul 7, 2007 10:50:05 AM

I think most refineries actually yield slightly more than 42 gallons of products per barrel of input. When you convert the oil to lighter molecules it has more volume. Also, it's not a closed system - there are other inputs besides the oil, and a portion of the energy in the oil is used for process heat.

Anyway, there's no question that the general trend in refining has been to get more and more light products from lower and lower quality crudes. It is an easily verifiable fact.

I'm not sure it's a particularly relevant fact in the grand scheme of things. More refining capacity and more efficient refining capacity has little impact but to lower refining margins. It would not make us "energy independent" to build more or better refineries because the crude would still come from elsewhere.

"Energy security" -- as it is typically franed -- is a highly dubious goal.

Posted by: dismal | Jul 7, 2007 10:54:10 AM

muirgeo:
"America past peak oil production in the 1970's and no amount of subsidization of the industry will change that."

Nonsense. Oil production does not equate to energy production. There are all sorts of factors that determine how energy production satisfies energy demand, and the only thing the U.S. production "peak" indicates is a moment in time at which it became economical to solve the energy problem by means other than expanding U.S. extraction.

Yes, there is a finite amount of oil, but we are not on the of cusp of any sort of energy "depletion" event. As our increaing ability to refine fuels from non-crude sources converges with the increasing difficulty of pumping "easy-to-extract" oil out of the ground, the known reserves alone are sufficient to meet our energy needs for at least two hundred years.

spencer:
"The way Boudreaux wrote it up he implied that because it was a capitalist market they were able to get more then 42 gallons of product -- a mixture of gas, diesel, heating oil, etc, --out of a barrel of crude oil."

No, that's not what was implied, and I was able to understand it perfectly the first time without questioning it. But, considering all the things you've been proven to understand incorrectly, I'm not surprised you needed it explained.

Posted by: cpurick | Jul 7, 2007 11:15:17 AM

Muirgeo,
Ok I will address your quote from Al-Guardian as some call it, but I went after the paper because it is notorious for exaggerations and half truths. It is not a good place to get information and can really distort your view of the world. You quoted (sorry the link to the Guardian story does not come up).

"Carlyle partners, who include Baker and the firm's chairman, Frank Carlucci - Ronald Reagan's defence secretary and a former deputy director of the CIA - own stakes that would be worth $180m each if each partner owned an equal slice. As in many areas of its work, though, Carlyle is not obliged to reveal the details, and chooses not to."

Fifty percent of the group is owned by the three remaining initial partners--none of whom are mentioned in your Guardian quote and are certainly not former deputy directors of the CIA. Another 5.5% is owned by the California state employees state pension system (CALPERS), and I doubt they would fit your criteria of being up to no good. I think this indicates that Messrs. Baker and Carlucci do not own the equal slices the paper assumes they have, so $180 million is likely an eggageration but vintage Guardian.
Anyway, it is not uncommon for defense contractors or owners of defense contractors to hire former government officials. The reason for this is because the defense industry is probably the most heavily regulated in the world. For example, the contractors shop floors have to use the same regulations as the Army Corps of Engineers, which is pretty thick. The only way to navigate the morass of government rules and regulations is to hire former government officials who understand them and who are good at cutting through the red tape. If you want to know more about this I would recommend Murray Wiedembaum's book The One Armed Economist. He is a former Economic Adviser to President Reagan and specilizes in economic analysis of the defense industry. Ludwig von Mises also had an article on this when he discussued managing bureaucracies vs. managing for profit. When businesses have to manage bureaucracies (or navigate them) they hire former bureaucrats. When they are left free to meet the needs of their customers they tend to hire more entrepreneurial types. Therefore, when you advocate giving government lots of powers and things to do, you should not be surprised that businesses hire former government officials to help them deal with it. You see corruption. I see businesses trying to manage their relationships with a bohemouth that has the power to destroy them. The solution--ratched down the size of the bohemouth. But if you advocate more and more government and regulation, then you are going to see a lot more former bureaucrats employed by business.

Posted by: The Albatross | Jul 7, 2007 12:48:05 PM

muirgeo:
Thank you for your response. I don't have time now to address everything you wrote as I'm leaving for work soon. But as for whether or not France & Sweden & the US are socialist, that would require us nailing down an agreed upon definition of "socialist" to work with. Until we do that, I suspect we'd be talking past each other. Labeling the countries themselves seems unimportant to me anyway.

But I'd hope you'd admit that there are strong socialist tendencies in these countries. It's these aspects of socialism that we have been arguing against. I don't think we need examples of 100% free market societies to demonstrate the superiority of markets over government, any more than than we need evidence of a society without any cancer to demonstrate that getting cancer is a bad idea. The presence a certain number of of mixed ecomonies does not demonstrate that mixed economies are good, any more than pointing to people with cancer who are still alive would show that getting cancer is a good idea.

Posted by: Hans Luftner | Jul 7, 2007 12:56:38 PM

Can you at least understand that my position is not uncommon if not unreasonable?

Oh, we all understand how common it is, that's why it's such a struggle to counter common misperceptions, heavily promoted in academia, media, and politicals, regarding how the market actually works.

Exploitation of human tribal instincts is the game. Grabbing a bit of power is the goal.

Posted by: Sam Grove | Jul 7, 2007 2:00:19 PM

"When businesses have to manage bureaucracies (or navigate them) they hire former bureaucrats. When they are left free to meet the needs of their customers they tend to hire more entrepreneurial types."

Posted by: The Albatross

I agree with you here and I believe my solutions take away power from the government. For instance I would suggest we make it illegal for a former defense bureaucrats to ever work the industry side because there will always be a potential conflict of interest. Likewise industries that profit heavily from government contracting should be heavily regulated. Don't like the regulation then go keep busy with private contracts.

Posted by: muirgeo | Jul 7, 2007 3:30:03 PM

But I'd hope you'd admit that there are strong socialist tendencies in these countries.

Posted by: Hans Luftner

Yes I would but it is important to understand we are talking about a continuum. If all the means of production are held by the state that's socialism. If there our no markets or free elections its communism. I wouldn't call our country r any in Europe socialist.MG

I don't think we need examples of 100% free market societies to demonstrate the superiority of markets over government,

Posted by: Hans Luftner

But here you just got rid of the continuum. How do free market economies fair compared to mixed economies? Is there an obvious trend of better economies when regulations are lessened?
Answering my own question in order. Since no free market economies exist this question is hard to assert. My guess is they don't exist because they are so unstable they turn into something else quite readily. For the second I'd argue that the more socialized economies of Sweden and Europe arguable have far better qualities of life. Much more time off for the average person and no being tied to a job just because you are dependent on the health insurance.MG

The presence a certain number of of mixed ecomonies does not demonstrate that mixed economies are good, any more than pointing to people with cancer who are still alive would show that getting cancer is a good idea.

Posted by: Hans Luftner

People living in mixed economies are better off then in any other economy past or present. Likewise the non-existence of free market economies does not prove or bode well for their superiority. Interesting stuff is coming out in support of more open economies in the former Balken states with flat taxes and less regulation. More time will tell.MG

Posted by: muirgeo | Jul 7, 2007 3:44:02 PM

For instance I would suggest we make it illegal for a former defense bureaucrats to ever work the industry side because there will always be a potential conflict of interest. Likewise industries that profit heavily from government contracting should be heavily regulated. Don't like the regulation then go keep busy with private contracts.

Posted by Muirgeo

I had a feeleing your solution would involve something like this. It reminds me of your surveillance idea for all government employees. Nothing like solving a problem with a little tyranny and telling people who they can and cannot work for. And, of course, when excessive laws and regulations create problems they probably cannot be solved with more laws and regulations. Then again if businesses face even greater regulatory pressures when contracting with the government and cannot have access to those who know how to navigate the regulatory environment best (former governemnt officials), then maybe the costs will be so high that no one will supply the governement with anything. On second thought, maybe you are to something here.

Posted by: The Albatross | Jul 7, 2007 6:12:57 PM

muirgeo, you are not an honest argumentor. Nobody expects a totally free market. We expect more or less free markets. More free markets produce more desirable results. I have told you this before. You are not being honest when you claim that the nonexistance of a totally free market means that a more free market is worse than a less free market.

Posted by: Russ Nelson | Jul 7, 2007 10:10:39 PM

Russ Nelson
"muirgeo, you are not an honest argumentor."

Someone who advocates theft will not feel compelled to be honest in his arguments.

Posted by: cpurick | Jul 7, 2007 10:51:44 PM

muirgeo:
"People living in mixed economies are better off then in any other economy past or present. "

That doesn't say much, though, when you realize that (1) the economies you compare them to are not necessarily free market economies, & there are likely much further differences between them economically to put it forth as a controled experiment; (2) the benefits compared to past economies could just as easily be attributed to the more free market aspects of these economies; & (3) better for whom? Better than what? Is it objectively better, or this just your own value judgement?

You don't need to compare one entire country's economy to another's to judge the merits. There are too many other factors involved anyway. Knowing what we know about supply & demand & incentives & opportunity costs & price controls, etcetera, we can pretty accurately predict what will happen if you regulate an industry or remove those regulations. You can't really say "Sweden has a mixed economy, & they do alright, so let's regulate things" & expect anyone who understands economics to accept that as an argument.

"Likewise the non-existence of free market economies does not prove or bode well for their superiority."

You could have said that about democracy a few hundred years ago. Not that I'm a fan, though it's probably better than monarchy, but somewhere I think I heard you say something about favoring democracy.

I think a far more likely explanation for the absence of free markets is that many people like to control other people, & in a free market that's very difficult to do peacefully. But the state doesn't have to limit itself to peaceful actions, & democracy gives individuals the illusion that they can control everyone else, so they ask the state to control everyone for them. But who says any of these people know what they're talking about? I see no evidence that they do. So the state gradually collects more power & the voters think it reflects their own power. Few wish to give it up. That doesn't make it a good idea.

This is why you don't see any purely free market countries. But that doesn't mean there aren't segments of an economy that are more regulated than others.

One last thing: I don't think I've pointed out yet in this thread that your system is predicated on violence against otherwise peacefully interacting individuals, so I'll do so now.

Posted by: Hans Luftner | Jul 7, 2007 11:32:53 PM

"You are not being honest when you claim that the nonexistance of a totally free market means that a more free market is worse than a less free market."
Russ Nelson

Russ,

Some comments made here suggest some people believe in free markets. I'm glad to see you agree that they are not a viable reality. Basically I believe the markets should be as free as possible but I think that somewhere along the spectrum unregulated markets and poorly controlled governments will corrupt each other. Thus we've come to agree that some regulation will be required. It obviously will need to fall with in the bounds of the constitution which is not always clear considering the vagaries of the "to promote the general welfare" clause.

But I guess my point is that once we admit we need some regulation that isn't specified in the constitution then the next question is who decides on the regulation. I say the representatives of the people who are elected outside of the influence of money interest are the best way to make additional regulations if we must. And again I think a reasonable argument could be made that such regulations should be made at the state level. Though my current impression is that this would really hurt our country and economy in the long run.

And again along the spectrum of the degrees of market freedom I'd argue that the post FDR years( 1940-1970) and more regulated economies of some European countries make the claim that less regulation is ALWAYS better somewhat uncertain.

Posted by: muirgeo | Jul 7, 2007 11:49:04 PM

Hans,

You're all over the map. I don't know were to start. Let's try this. You said,
"You could have said that about democracy a few hundred years ago. Not that I'm a fan, though it's probably better than monarchy, but somewhere I think I heard you say something about favoring democracy."

What in the world do you want Hans? Please describe what form of government you want.

Russ if you're reading this Hans here appears to be an example of one who believes that a free market economy can exist. Now we'll see if he can explain how it works.

Posted by: muirgeo | Jul 7, 2007 11:59:17 PM

They lie across the great moral divide.
If a majority votes for it, moral absolution for many crimes is achieved.

Posted by: Sam Grove | Jul 8, 2007 12:34:35 AM

muirgeo:
I'm not a fan of violence. I'll admit that there are times when there is no other option. In everyday life these are in extreme cases, few & far between.

Acts of government require violence. We could debate forever which cases necessitate calling upon the state to violently act in our favor. But in my opinion they'd better have a god damn good reason. "Most people think so" is a terrible reason. "Why not? It couldn't hurt" is an ignorant reason.

You've yet to give me any vaguely rational reason to support the violence you advocate. Since you're the one advocating state action, the burden of proof is on you that it's a good idea, & that it's remotely ethical, or that your solutions could achieve the goals you set.

"Now we'll see if he can explain how it works."

Until you acknowledge that what you advocate requires violence, I can't imagine how I could possibly convince you that the violence isn't always necessary. Secondly, I suspect that the idea of spontaneous order is currently beyond your scope, & that your faith in the existence of abstact collectives is unshakable.

You don't have to agree with these ideas, but you would have to able to grasp them. Until you do, my alternative would be incomprehensible to you, & a total waste of my time. When you do finally grasp these ideas, & even if you still don't agree with them, I'd be thrilled to discuss how the free market works.

Posted by: Hans Luftner | Jul 8, 2007 1:23:43 AM

"Acts of government require violence."
Hans Lufter

Absolutely Hans they do. But so do acts of getting a room-mate to share rent. It's a silly and mellow dramatic point IMO made by people who want all the benefits of living in a civilized society but none of the obligations. Likewise I guarantee you the form of government you would ascribe to also requires acts of violence. Anyway today again I would suggest you drive on the right side of the road less some government official commits an act of violence upon you.

Posted by: muirgeo | Jul 8, 2007 10:06:53 AM

Getting a roommate requires violence? What the f#ck?

Posted by: Hans Luftner | Jul 8, 2007 1:04:27 PM

Getting a roommate requires violence? What the f#ck?

Posted by: Hans Luftner

What now all of a sudden the use of "acts of violence " to describe the ultimate enforcement of mutual contactual obligations is absurd? You're the one who keeps bringing up the silly notion.

Posted by: muirgeo | Jul 8, 2007 1:56:24 PM

I say the representatives of the people who are elected outside of the influence of money interest are the best way to make
additional regulations if we must.

"Dreaming is free" Blondie

--------------------------

Why should there be laws that only apply to corporations?

What particular aspect of corporate behavior do you think requires this special legislative regulation?

If the regulation results in corporate failure, should the regulating agency then be responsible for bailing out said corporation(s)?

How about if we forbid government to subsidize, protect, or favor corporations/business an any way.

Do you think it would then be acceptable to refrain from applying special regulation rules as well?

Your boogie man in this regard always seems to be great concentrations of wealth.

Would you therefore suggest a limit on how much wealth people can have, or just that certain of their behaviors be 'regulated'?

Posted by: Sam Grove | Jul 8, 2007 2:25:18 PM

Why should there be laws that only apply to corporations?

Why should there be corporations?MG

What particular aspect of corporate behavior do you think requires this special legislative regulation?

Any behavior that infringes on others liberties or health and any corporation who contracts with the government or uses the commons needs regulation.MG

If the regulation results in corporate failure, should the regulating agency then be responsible for bailing out said corporation(s)?

Uh no. And if a corporation knowingly broke the law send the SOB CEO to the DOC. MG

How about if we forbid government to subsidize, protect, or favor corporations/business an any way.

Good point but not practical. Much needed research comes from government subsidies. Just need careful oversight for conflict of interest.
The mere fact that there are corporations is subsidizing them. But I believe in corporations and I also believe in regulating them as needed.MG

Do you think it would then be acceptable to refrain from applying special regulation rules as well?

No I don't want lead in gas or PCB's in my fish.MG

Your boogie man in this regard always seems to be great concentrations of wealth.

Absolutely and its exactly the same boogie man as yours.MG

Would you therefore suggest a limit on how much wealth people can have, or just that certain of their behaviors be 'regulated'?

Probably wouldn't need a limit but as things are I support the estate tax. Do you think people like Paris Hilton should be able to live off accumulated wealth and never have to work or contribute a single thing to society?

Ultimately that's what this is all about. Do you believe its OK or do you want to live under the influence of a ruling elite. The revolution was fought to over throw such a system and the founding fathers cautioned against the accumulation of great wealth. But Sam I'm not sure you believe in Patriotism or even country or give a crude about the founding fathers. I think the thing I could say about your beliefs is that like communism and anarchy your free market world works out great if everyone would just start acting like Jesus H Christ.MG

Posted by: Sam Grove

Posted by: muirgeo | Jul 8, 2007 6:03:26 PM

Why should there be corporations?MG

Ok, I'll try this off the top of my head (I must admit I like to use comments as a way of preparing for all the questions students will ask in the fall--the summer makes one rusty).
The original intent of the "corporation" was a means by which medieval towns could buy rights and priviledges from the monarch. For a one-time payment to often cash-strapped monarchs, towns and cities were granted a charter devolving to them certain rights of self governorship, trade priviledges, and immunity from certain royal control--provided, of course, that the provisions of the charter did not run counter to the laws of the land (which some say is the origin of constitutional review). This allowed these towns and cities to govern themselves and prosper, which was considered so important to the people of these places that the day the charter was granted is still celebrated in many European cities and towns, where the Lord Mayor is expected to get pissed drunk and beat the bounds, as the area celebrates its ancient rights and liberties. Hence the origin of the corporation is something that many people had much cause to celebrate.
The concept of "the corporation" was later expanded to include other grants from the crown. Sometimes these were useful grants--as in the granting of a monopoly in return for pooling enough capital to build a bridge or turnpike. However, in some cases these grants of monopoly went too far, such as grants of monopolies for playing cards, dice, tea, tobacco, ect. These grants caused so much trouble that it would not be a stretch to say that they contributed to the cutting of of Charles I's head (1649?).
The advent of Jacksonian democracy brought the popular concept of allowing the people to incorporate. Whereas before, corporations had required an explicit grant from the monarch (and in the US the state legislatures--talk about regulation!), the idea that ordinary people should be allowed the benefits of corporation took popular hold. Indeed, it was the practice of only allowing the granting of corporate charters by government that had produced so much abuse in the past, which was the driving force behind democratizing corporations.
As for the nature of the corporation itself? I think a historical economist would answer that the corporation proved an ideal way of pooling capital and mitigating excessive risk. The corporation was an innovation that contributed greatly to the prosperity of Western Europe. I believe such arguments were made by Rosenberg and Birdzell (How the West Grew Rich) and Douglas North (sorry the book's at the office). Aside form its historical successes, I think other economists would argue that the corporation is key to reducing organizational and transaction costs (see Nobel Prize-Winner Ronald Coase). In short, I think it is safe to say that the efficiencies of the corporation have done much to expand employment and bring much added value to consumers. Indeed, if we were condemnded to life in a world of sole proprietarships, then we would live in a much poorer world. Then again I could be wrong and it could all be a big conspiracy by the Illuminati or Elders of Zion, or insert favourite insidious non-existant conspiracy group here.

Posted by: The Albatraoss | Jul 8, 2007 9:56:18 PM

muirgeo:
"What now all of a sudden the use of "acts of violence " to describe the ultimate enforcement of mutual contactual obligations is absurd?"

No, it's not so sudden.

I've had many roommates in my day, & no violence was necessary. I've subletted before, without even considering violence. Ever hear of a security deposit? Renter's insurance? Writing off a bad investment & walking away wiser?

I think what you're suggesting is that I would resort to violence if the agreement goes bad. I wouldn't, but I'll accept your point in the sense that others might arguably do so justly. But with the government, violence isn't saved for if the agreement goes wrong. There is no agreement in the first place. The violence is required for the plan to go right. Do you see the difference?

I don't think it matters at this point. I think you're just defining violence so broadly that you can excuse any belief you've already committed yourself to. This shows you can't argue with any integrity. Not that you've demonstrated any such ability before now, but I had some hope.

Either that or you really are a violent & deeply, deeply antisocial individual. Either way, I prefer to debate with a brick, as it's just as enlightening, but at least I'll respect the brick for its consistency.

Posted by: Hans Luftner | Jul 9, 2007 1:45:54 AM

sam grove:
"Your boogie man in this regard always seems to be great concentrations of wealth."

muirgeo:
"Absolutely and its exactly the same boogie man as yours."

Wealth represents forgone consumption. The wealthy are people who consume less than they produce, and whose earnings are tied up in the ownership of capital that benefits us all. Wealthy people are doing us all a favor by not spending their wealth.

muigeo:
"Do you think people like Paris Hilton should be able to live off accumulated wealth and never have to work or contribute a single thing to society?"

Strawman. You have left out the millions and millions of dollars' worth of capital that Paris depends on for her lifestyle. That money provides jobs and ultimately contributes to the production of consumer goods.

It's easy to take a short-sighted leftist view and see the immediate benefit, to "the common good," of seizing Paris Hilton's wealth. But it's no less important that we consider the long-term impact of such a policy on future Conrad Hiltons and their incentives to create Hilton jobs and provide Hilton services in a world where their wealth does not survive them.

You liberals never see the whole picture, and that is why there's an inverse relationship between per capita wealth and collectivism.

muirgeo:
"Do you believe its OK or do you want to live under the influence of a ruling elite."

We live under one either way. The real question is: do we want to live under those who've really earned their power, or under those who've simply persuaded the greatest number of fools into voting for them?

muigeo:
"founding fathers cautioned against the accumulation of great wealth."

Actually, they were not concerned with wealth itself; they were concerned that the wealth would be wielded to influence government -- a phenomenon that only became economically viable when government took it upon itself to control wealth. Let's not forget that where wealth exerts influence on elected officials it's the officials who are violating an oath -- not the wealthy.

muirgeo:
"I say the representatives of the people who are elected outside of the influence of money interest are the best way to make additional regulations if we must."

You realize, of course, that Congress will raise and spend over $3 trillion dollars this year, every penny of which will be viewed in terms of what it does to elected officials' prospects for retaining power...? Since leaders are influenced by wealth either way, I'd much rather be led by someone with a track record of creating it and a personal interest in protecting it than by someone with a great sounding plan for redistributing it.

Posted by: cpurick | Jul 9, 2007 8:44:50 AM

Wealth represents forgone consumption. The wealthy are people who consume less than they produce, and whose earnings are tied up in the ownership of capital that benefits us all. Wealthy people are doing us all a favor by not spending their wealth.

cprick

To make such an assumption is simply a dogmatic leap of wanna-be-a-serf faith. You're are simply regurgitating talking points you think sound good but by no means are truism. Does the guy at the top of a money pyramid scheme produce more then the others? Do they as a group produce anything? I suggest much wealth accumulation has the same basis.

Imagine a CEO makes $100,000,000 dollars one year then congress changes the rules and allows him now set up shop in a communist foreign company using slave labor and he makes $500,000,000 the next year. Assuming nothing else changes except his wages and those of his workers has he increased production?

Did oil CEO's increase production or did the war artificially increase the ppb? Did bomb makers become more productive or did they get more money from the treasury because of the war?

In general what you say is true its the all too common exceptions that have me concerned.

Posted by: muirgeo | Jul 9, 2007 10:00:29 AM

"You liberals never see the whole picture, and that is why there's an inverse relationship between per capita wealth and collectivism."
cprick

Such a claim requires a reference. And you don't count as one.

Posted by: muirgeo | Jul 9, 2007 10:03:11 AM

"We live under one either way. The real question is: do we want to live under those who've really earned their power, or under those who've simply persuaded the greatest number of fools into voting for them?"cprick

I refuse to be a fatalist like you. Serfs probably thought that way too. Then the idea that Ken Lay, Jack Abramoff....long list of others....are more trust worthy or deserving is also one of you faith based "truisms" based on something you read somewheres but with no factual basis in the real world. Your view of the world is grim. That you consider yourself an "individualist" is amazing to me because you seem more like one of the many pawns on a chess board...or like one of the background characters in an Orwell novel.

Posted by: muirgeo | Jul 9, 2007 10:09:08 AM

muirgeo:
"Imagine a CEO makes $100,000,000 dollars one year then congress changes the rules and allows him now set up shop in a communist foreign company using slave labor and he makes $500,000,000 the next year. Assuming nothing else changes except his wages and those of his workers has he increased production?"

Assuming nothing else changes??? But other things will change. With the specified production shifted overseas, the domestic employees will turn their attention to producing other things. (After all, they have to work. Whether they continue to work for the original company or go to another firm is irrelevant.) As the economy now realizes the production of both the foreign workers and the domestic workers in their new jobs, that is a net gain over what was produced before.

Meanwhile, the $400,000,000 gained by the CEO finances the workers' new venture, and whatever portion of it he chooses to consume represents new manufacturing jobs for his displaced employees as well. Are you really so stupid that you can't see all this?? If so, perhaps you should post less and read more.

Similarly, every position you take is rooted in fallacy, ignorance and dishonesty.

Posted by: cpurick | Jul 9, 2007 10:36:45 AM

As I read through , The Road to Serfdom, I came across this in the preface for the 1956 edition and I think I more clearly understand my differences with some posters here.

"Conservatism, though a necessary element in any stable society, is not a social program; in its paternalistic, nationalist, and power adoring tendencies is often closer to socialism then true liberalism; and with it's traditionalistic, anti-intellectual, and often mystical propensities will never, except in short periods of disillusionment, appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place. A conservative movement,by its nature, is bound to be a defender of established privilege and to lean on the power of government for the protection of privilege"

Thank you Mr. Hayek!! I think my arguments are more consistent with that Hayek quote then many here claiming to be traditional liberals. Many here seem to be defending the current state of conservative rule as being closer to traditional liberalism. I've tried to make the point that it has just as much likely hood of leading to "serfdom/ totalitarianism/ a ruling privileged elite. At least on this point I think Fred is on my side.

Modern American conservatism is a mix mash of non-sense, conflicting ideology, self-contradiction and abuse of power. I would argue that if the true traditional liberal does not do as as Ron Paul does to argue against the slew of other corrupt candidates abuses of power your message will be intertwined with them. Here I see too many ready to defend corporate welfare to the demise of their supposed libertarian positions. The debate should be between the classic liberal and the modern liberal. The conservative Republican party should be a third and very small party IMO since it has no consistent ideology mixing social conservatism and economic liberalism. It has IMO very little to offer but what we have seen over the last 6-7 years.

Posted by: muirgeo | Jul 9, 2007 11:12:19 AM

Muirgeo,

My 'boogieman' is political power, you seem to have no qualms about political power, per se, only in its misuse.

Well, I say, political power will always be misused, for in its very existence it will tempt those who are not "Jesus H. Christ" and it is the well intentioned, such as yourself, who will abuse such power as they will justify it with their good intentions.

You think the charge of elitism belongs only to the wealthy, but it is applicable to the well intentioned who 'know better' how to use political power, the power of the gun, to 'make' things better. You discount the negative aspect inherent even in 'good' use of political power.

Odd that some of those founders were among the wealthiest of their time, including Jefferson and Washington. These people had huge estates and equally huge mansions. They were the power centers and represented huge accumulations of wealth. It was quite fortunate that Jefferson held to certain moral principles.

---------------

I migrated from the liberal side to the libertarian perspective. I carry little water for 'conservatives'. I agree with you there. And I may change my registration to vote for RP in the primary.

Posted by: Sam Grove | Jul 9, 2007 1:57:25 PM

Nice Hayek misquote. In the next sentence, which you forgot to include, Hayek defines privilege as:

"its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others"

The natural concentration of wealth occurring in the free market does not indicate that privilege has been extended, nor does it indicate that government intervention is required, or that it would be beneficial.

Conservatism as defined by Hayek is more a reluctance to change than anything else. Where laws are just, libertarians will also be resistant to change which introduces unjust law just as Hayek's conservatives are resistant to change on principle alone.

You are apparently smoking too much crack. Regardless of how you twist it, Hayek would not have shared your views. If you think he would, then you simply don't understand him.

Posted by: cpurick | Jul 9, 2007 2:13:58 PM

How dare you disgrace Hayek in such a manner!

Hayek is arguing for the EXACT SAME THING we classical liberals are! Are you really that blind, or just that arrogant to adopt Hayek as a source for your justification and then turn around and try to destroy EVERYTING he stood for.

Posted by: Jon | Jul 9, 2007 3:30:40 PM

Really, guys and girls. This is tedious and futile. Here's a snippet from a response to muirgeo before last Christmas, when s/he/it was trolling at Town Hall:

"muirgeo, it sounds like the Hanukkah/Christmas week finds you in a dour mood, so you've decided to camp out at Townhall for several days to lecture us darn conservatives on the virtues of perceiving everyday life in the USA as negatively as you do.

Your understanding of economics is as confused as your application of logic and philosophy, which you revealed in your silly "chickenhawk" argument regarding Mary Katharine's support for the war."

http://560wind.townhall.com/blog/g/91df9782-e598-4854-b818-765d27fd5499?comments=true

Point being, this Creature from the Brainless Abyss has been frequenting libetarian/conservative blogs as a one-trick pony for a long time. Seriously, go read some of its posts there...it is *exactly* the same faux-intellectual left-wing memes that get passed from "progressive" to "netroots, reality-based [idiots]."

Posted by: skh.pcola | Jul 9, 2007 4:18:36 PM

Wow! I didn't think quoting Fred would incite such anger. Anyway I'm out a country for a few weeks so you all get a brea from me and my trolling. On a fact finding mission to see just how dreaded is the Socialist Italian State. Don't have much reply to anyone because mostly your replies were name calling and anger....and for a quote. Yeah, Fred may not like the modern liberal but I'm not so sure he'd be defending these totalitarian neocons as some here seem to do.

Buon giorno!

Posted by: muirgeo | Jul 9, 2007 11:08:32 PM

Buon giorno! Muirgeo!

Don't forget to thank all the corporations that will make your trip possible.

"name calling and anger" if I ever heard the pot call the kettle black

Posted by: The Albatross | Jul 9, 2007 11:40:27 PM

Muirgeo: I don't believe a free market without ANY government control can exist, because you are existance proof of the idiots who would prevent such a thing from happening. Since we enlightened ones are stuck with idiots like you, we must also live without completely free markets.

Note: this isn't ad-hominem. You are a pseudonem, not a hominem. You show no signs of intelligent thought, so I must conclude that you are someone who is purposefully posting from a certain position even when that position is completely wrong. Criticizing a pseudonem which holds a position is criticizing the position, not the person.

Posted by: Russell Nelson | Jul 10, 2007 12:30:46 AM

...defending these totalitarian neocons as some here seem to do.

This really shows how far off target one can be.
Please, show me where, in this forum, anyone defends neocons.
See, he's quite the bilateral thinker.

Posted by: Sam Grove | Jul 10, 2007 12:35:44 AM

muirgeo says: "once we admit we need some regulation that isn't specified in the constitution".

Errrr, no. You keep getting things sideways. Of course there are regulations which are not specified in the Constitution. The Constitution doesn't specify regulations. It specifies actions which the Federal government may regulate. So, for example, the FCC is completely unconstitutional, since the federal government has no power to restrict speech.

muirgeo: "the claim that less regulation is ALWAYS better somewhat uncertain."

Oh, if you had a Maxwell's Demon, to separate the good regulations from the bad, surely I would agree with you. The trouble is that you think it's possible to have good regulations without the bad. Those of us in the reality-based community expect government to produce a mix of good and bad regulations -- and then we point out that the bad overwhelms the good. Honesty and logic then suggest that we would be better-off by getting rid of all government control over markets.

Not that I expect honesty OR logic from you. Again, I'm not arguing against your person. I'm sure that the person who posts your words is honest and logical. The trouble is that that person leaves out the honesty and the logic from your posts. Perhaps if that person's reputation was on the line, they would allow you to be more honest and logical?

Posted by: Russell Nelson | Jul 10, 2007 12:48:43 AM

muirgeo:
"I didn't think quoting Fred would incite such anger."

Quoting Hayek is fine.

Suggesting that Hayek shared your Marxist beliefs is just as fraudulent as everything else you bring here, troll.

Posted by: cpurick | Jul 10, 2007 8:02:52 AM

Awe, gee...it's so nice to come back from a long weekend to find that the semi-literate, violence prone troll is still here waiting for capitalism to collapse.

When Marx put forth his "scientific" theory that capitalism would result in alienation of man, inevitable monopolies which will, in turn, result in a tiny ruling class and a falling standard of living for everyone else, culminating in revolution and the establishment of a "new man" and a "new society", the world was a different place. Although, even as he was predicting falling wages for the proletariat and falling profit for the capitalist (a prerequisite for the communist revolution), wages were actually rising. This he simply ignored. There was, however, some musing by philosophers that man was born "a clean slate" and was far more malleable than he turned out to be.

It was even still sort of amusing when communists - bent on waiting for Marx's predicted uprising - were still waiting for this massive accumulation of wealth and the resulting revolution to erupt in capitalist economies in the middle of the twentieth century. It's not funny anymore when communist/socialist regimes have imploded one by one in the wake of their atrocities or have yielded to capitalism after hundreds of millions of brutal murders and repression. It's one thing to fantasize about an untested hypothesis and yet another to be so stupid as to ignore nearly a century of empirical evidence.

Leftists have been trying to "remake" man and society for at least a century. For the better part of the twentieth century, they have been sacrificing, by the hundreds of millions, this puny version of weak, acquisitive man on the alter of what humanity "could" and "should" be. With just enough coercion, brutality, brain-washing and venom, they believe they can wrest private property from people and force man to be communal and different. There is an immortal belief among them that a government elected by people will have no self-interest and will only act as a tool of the collective which has magically transformed itself into uber humans who have no acquisitive desires nor any self interest at all. Facts and logic be damned. This idea was bestowed upon these imbeciles by Karl Marx. Of course, most of them don't have the intelligence to actually read and consider Marx - not in light of what actually happened nor in light of what was happening in the world as Marx was making his illogical predictions. In fact, I doubt that most even know where their stupid ideas come from.

Everything this Muirgeo troll writes in every single thread on this blog has been written and said before. Just as Mao unleashed his hordes of barbarians to destroy everything they were too ignorant to understand during the cultural revolution, He/she/it seeks to do the same here. How many times have we heard "I just don't understand why CEOs make so much money" used as justification to steal that wealth from them? Their ignorance of how something works is justification enough for theft. How many times has this troll made the same assumption about the lack of self-interest in government while raging against the "dangers" of wealth created by free men despite overwhelming evidence to the contrary? How many times have these morons asserted (through a mouthful of burger, their wide girth wedged into an extra wide recliner on the deck of their 2,400 square foot house, surrounded by their fleet of cars) that the "inequitable" accumulation of wealth has "hurt" them and must be confiscated by government exercising the "will of the people" for "good of our country"? I've come to the conclusion that a certain amount of retardation or megalomania is required to be a Leftist/socialist/communist (frankly, those terms are interchangeable).

No amount of data, no amount of logic or reason will disabuse these useful idiots of their totalitarian ideas. For those who think we've seen the back of communism and socialism and the utter dehumanizing destruction they have left in their wake, Muirgeo and her/his/it's ilk should remind us that the danger still lurks. Those who think I am engaging in hyperbole are ignorant of the killing fields of Cambodia, the gulags, the 1,000 daily executions ordered by Stalin for two straight years, the torture of dissidents and the forced famines of almost every communist regime (for starters). For this inhumanity to sneak up on us again, all we need to be is ignorant of history and accommodating to the "good intentions" of the left.

Further, I'm shocked at the use of the term "mixed economy" by anyone other than our resident useful idiot. there is no such thing as a "mixed economy". A market is a bottom up structure while socialism is a top down structure. The two are mutually exclusive. What people call a "mixed economy" is really government frustrating the workings of the market. IMO, a "mixed economy" is more accurately described as a "frustrated" or "inefficient" market economy.

Posted by: methinks | Jul 10, 2007 9:22:49 AM

"muirgeo:
"I didn't think quoting Fred would incite such anger."

Quoting Hayek is fine.

Suggesting that Hayek shared your Marxist beliefs is just as fraudulent as everything else you bring here, troll." - CPURICK

Here Here!

may I add that it is not only fraudulent but it borders on immoral and is completely intellectually dishonest to abuse the views of Hayek in such a 14 word soundbyte.

Posted by: Jon | Jul 10, 2007 10:28:31 AM

"may I add that it is not only fraudulent but it borders on immoral and is completely intellectually dishonest to abuse the views of Hayek in such a 14 word soundbyte."

Fraudulent? Yes. Surprising? No.

Socialists will misquote, re-frame and generally find any possible way to lie their way to their preferred future. How many times has Milton Friedman been misquoted as saying "We are all Keynsian now"?

Posted by: Methinks | Jul 10, 2007 10:39:03 AM

"It's one thing to fantasize about an untested hypothesis and yet another to be so stupid as to ignore nearly a century of empirical evidence."

"For the better part of the twentieth century, they have been sacrificing, by the hundreds of millions, this puny version of weak, acquisitive man on the alter of what humanity "could" and "should" be."

"There is an immortal belief among them..."

"No amount of data, no amount of logic or reason will disabuse these useful idiots of their totalitarian ideas."

It's really quite a religion, isn't it?

Posted by: cpurick | Jul 10, 2007 11:21:50 AM

Ah well, muirgeo has gone to Italy whcih s/he will no doubt find delightful in all regards.

Meanwhile, back at the forum...

Perhaps an equation:
Human nature + political power = corruption

Posted by: Sam Grove | Jul 10, 2007 12:07:17 PM

Meanwhile ...

Human nature + Purchasing power = Luxury goods ...

I once got into a debate with a raging anti-capitalist who pulled out the phrase: "Excess is Excrement" I promptly responded: "Excess is Excitement"
Honestly, Ride in a Ferrari and find out how exciting it is.

Posted by: Jon | Jul 11, 2007 11:08:32 AM

"Excess is Excrement"

Great! I suppose this person pulled the ipod earbud out of his ears just long enough to tell you that. I'm assuming he wasn't engaged in the subsistence farming which took him completely out of capitalism and into "production for use"? Did he avail himself of capitalist produced clothing and housing? I bet he wouldn't turn down anything that capitalism has to offer and his ass was probably glued firmly to his recliner located in this capitalist wasteland. In other words, I bet he was covered head to toe in all this "excrement" of capitalism.

He needs to go to what's left of the Soviet Union (currently being reformed under the same KGB as before) for a bit of "re-education". Gulags not required - anywhere outside of Moscow will require him to pump water from a communal well and sleep with a gun under his pillow. For these parlor revolutionaries this will be enough.

One of my favourite anti-capitalist slogans is "Live simply so others can simply live." all it takes to watch them disintegrate into a whining mess is to ask "How does that work?" In fact, that seems to be a question most can't answer but the spectacle of the effort is priceless.

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