Advice for the "Reality-Based" Community

Recently, the so-called "reality-based community" on the left has developed the theory that US oil companies have purposefully dropped gasoline prices from over $3.00 to $2.00 a gallon solely to help Republican re-election prospects in November.  This notion is so insane as to be, well, insane, and I am not even going to bother fisking it any more than I would bother refuting a flat-earth hypothesis.  OK, I can't resist, here are two quick arguments, by no means comprehensive.

  • US oil companies control a minority of world oil supplies, and those folks who do dominate the market (Hugo Chavez, Iran, the Saudis, the Russians) are highly unlikely to be cutting Bush much slack.
  • The implication is that either the old, high price or the current low price is somehow an unnatural contrivance.  If the higher price was a contrivance, ie above the normal market clearing price due to some collusion, then we would have been swimming in oil as supplies outstripped demand, and inventories would be overflowing.  If the current lower prices are a contrivance, then demand should outstrip supply and we should have lines at every gas station.  Of course, neither situation has been observed.

So here is this week's message for the Left:  Economics is a science.  Willful ignorance or emotional rejection of the well-known precepts of this science is at least as bad as a fundamentalist Christian's willful ignorance of evolution science (for which the Left so often criticizes their opposition).  In fact, economic ignorance is much worse, since most people can come to perfectly valid conclusions about most public policy issues with a flawed knowledge of the origin of the species but no one can with a flawed understanding of economics.

Postscript: In fact, the more I think about it, the more economics and evolution are very similar.  Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems.  And, in both cases, there exist many people who refuse to believe such complex and beautiful systems can really operate without top-down control.

For example, certain people refuse to accept that homo sapiens could have been created through unguided evolutionary systems, and insist that some controlling authority must guide the process;  we call these folks advocates of Intelligent Design.  Similarly, there are folks who refuse to believe that unguided bottom-up processes can create something so complex as our industrial economy or even a clearing price for gasoline, and insist that a top-down authority is needed to run the process;  we call these folks socialists.

It is interesting, then, given their similarity, that socialists and intelligent design advocates tend to be on opposite sides of the political spectrum.  Their rejection of bottom-up order in favor of top-down control is nearly identical.

Update:  From Cafe Hayek, letter to the Washington Post

Dear Editor:

that today's falling gasoline prices result from a fiendish plot to
keep the GOP in power, Kenneth Jones is certain that "gasoline prices
will go right back up to $2.75-plus after the [November] election"
(Letters, October 2).

If Mr. Jones is correct, he can make a
financial killing.  All he need do is to invest all of his assets going
long in gasoline futures (which are today about 30 percent lower than
they were in late July).  Indeed, he ought even to cash out all the
equity in his house, max out on his credit cards, and borrow heavily
from his brother-in-law so that he can invest as much as possible in
these futures.

He can then contribute his post-election financial bounty to the Democratic National Committee.

Donald J. Boudreaux



  1. Frank Ch. Eigler:

    Clever analogy!

  2. Rob:

    I like how you point how that both the Left and Right have their own ways
    of ignoring science.

    Although I tend to think the Right would be more apt
    to accept CAS as a mechanism because it doesn't shatter their underlying
    believes/philosophy, but merely changes how they view it.
    (ie. creation could have been through evolution, 7 days = metaphor)

    If you convince the Left that life and it's processes are not a zero sum game,
    then you have basically shattered their whole belief system.
    One could almost differentiate Left and Right based on their belief of the zero sum game.

    I'm currently studying Complex Adaptive Systems as a modeling tool.
    The power lies in the simplicity of the agents (simple properties, simple rules, simple actions).
    The simplicity gives ways to emerging properties/behaviors of the system.
    Of course self-organization (through simple interactions) plays a huge role.

    I'm contemplating trying to find a proof that emergence only exists when there is a non-zero sum game.
    Or maybe that emergence cannot exist in a zero sum game.

    Another idea is that a zero sum game might only be possible in a closed system.

  3. KipEsquire:

    The thing about gasoline is that it's cost-prohibitive to hedge. We simply are not going to build hugh fields peppered with storage tanks of gasoline -- for the obvious reason (i.e., kaboom).

    Without the ability to store gas the way we store grain or gold (or crude oil, for that matter), there is no way to smooth out seasonal demand differentials -- we refine it when we need it. And we need it in the summer. Fluctuating demand coupled with very-short-term supply constraints results in seasonally volatile prices.

    It really is that simple -- no conspiracy required.

  4. Brad Warbiany:


    Great analogy. I know you shut down trackbacks due to spam, but I linked you here... As I pointed out, the right wing at least takes solace in something that can never be disproven. Thus, they never have true evidence to the contrary of their top-down supreme being. The left, of course, despite evidence that socialism has never worked, no matter where it has been tried, seem to persist...

  5. daublin:

    I had the same "ah hah" a few months ago regarding economics and evolution. At the time, I wrote as follows:

    "At any rate, evolution appears to happen. It is a pity that evolution has been tied up with the question of the original of the human animal (although, if God did grow the human animal in that way, isn't that just more evidence of his grandeur?). The concept is helpful in many other areas. Art, economy, culture, science, scholarship, and even engineering all are grown, not designed from scratch.

    I don't know the answers here, but I know that evolution is a powerful tool and a powerful explainer. Ignoring evolution means both that we set aside a useful tool, and that we blindfold ourselves to an aspect of the creation we dwell in. While an evolving, growing world seems very weird, it seems to be what we have. Surely God wants us to study his creation that we dwell in. Surely he wants us to learn to thrive in it."

    Many socialists seem to believe, deep in their hearts, that *someone* must be in charge of everything. Things don't just happen. Smith's Invisible Hand is as mystical to them as Divine Intervention is to you or me.

    If socialists and libertarians ever want to understand each other, the socialists are at least going to have to understand how evolutionary processes at least CAN work. We understand their mystical faith in the government. Now they need to understand our scentific observation about evolving systems.

  6. Lance:

    This has crossed my mind quite a bit lately.

    I had a couple of takes on it:

  7. Eric H:

    I swear, I was sitting at lunch early last week or late the week before, CNN Headline news was on, and they had a little teaser before going to commercial about gas prices. I turned to my lunch companions and told them, poker-faced, that this was all a plot by the Bush Administration to manipulate the election. They came back from a commercial and started interviewing people about just that theory. I couldn't believe that anyone would fall for such a contrived, obvious, stinking pile of BS.

  8. Sean:

    Brilliant observation Coyote. Exactly why I continue to read this blog.

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  10. Anarcho-democrat:

    Going from memory, a Darwin biographer pointed out that Darwin was intrigued by Adam Smith's Wealth of Nations, and that he read that book during the time he, Darwin, was writing Origin of Species. The reliability of my memory aside, one would have to wonder how Darwin could have failed to have been intrigued by the ideas contained in Wealth of Nations, both because of the prominence of the earlier work and the compelling similarity of the underlying dynamic of the ideas of each.