I am Going to Break Every Window in Chris Plummer's House to Stimulate the Economy
We all know that the media is perfectly capable of ignoring even the most basic precepts of economics, but I thought Chris Plummer's article was especially heroic in doing so. Even more so, it is absolutely stunning in its arrogance. In his article, he writes on all the great ways that $8 a gallon gasoline will help make the world a better place. I will stay away from the global warming related issues -- I have a whole other blog dedicated to that -- but here are a couple of the most egregious parts:
They may contain computer chips, but the power source
for today's cars is little different than that which drove the first
Model T 100 years ago. That we're still harnessed to this antiquated
technology is testament to Big Oil's influence in Washington and
success in squelching advances in fuel efficiency and alternative
energy.
Given our achievement
in getting a giant mainframe's computing power into a handheld device
in just a few decades, we should be able to do likewise with these
dirty, little rolling power plants that served us well but are overdue
for the scrap heap of history.
OK, this first one is a science problem and not an engineering problem. Here is the problem: Gasoline contains more potential energy by weight and volume than any power storage source we have been able to invent (OK, its actually second, nuclear fuel is first, but I presume Plummer is not going there). That is the problem with electric cars, for example. Electric traction motors are demonstrably better sources of motive power than internal combustion engines. Even Diesel railroad engines are actually driven by electric traction motors. The problem is energy storage. Batteries store much less energy per pound and per cubit foot than gasoline. Ditto natural gas and hydrogen (except at very high pressures).
This claim that only the political power of oil companies keeps no-brainer alternative technologies at bay is absurd, though it is one that never dies in the lunatic fringes. Mr. Plummer is more than welcome to make himself a billion dollars by selling one of these mystery technologies he fails to disclose. I will be first in line to buy.
Necessity being the mother of invention, $8 gas would trigger all
manner of investment sure to lead to groundbreaking advances. Job
creation wouldn't be limited to research labs; it would rapidly spill
over into lucrative manufacturing jobs that could help restore
America's industrial base and make us a world leader in a critical
realm.
This is the broken window fallacy on steroids. I am a HUGE optimist about the limitless capabilities of the human mind, probably more so than Mr. Plummer (by the way, if he is such an optimist, he should read some Julian Simon). But the best that humanity can probably do any time soon is offset a goodly percentage of the damage from $8 gas. There is no net win here. If there were, he should also be advocating $10 bread, $2,000,000 starter home prices, and $200 a month internet service. Just think about all the innovation that would be required to react to these!
On a similar note, Venezuela's Hugo Chavez and Iran's Mahmoud
Ahmadinejad recently gained a platform on the world stage because of
their nations' sudden oil wealth. Without it, they would face the
difficult task of building fair and just economies and societies on
some other basis.
Yes sir. Chavez would be much worse off if he was getting $8 for his gas rather than $3. What is this guy thinking? Well, he says this:
In the near term, breaking our dependence on Middle Eastern oil may
well require the acceptance of drilling in the Alaskan wilderness
OK, but that can be done at $3 gas,and should have been allowed at $2 gas. This oil could have been developed in an environmentally friendly way years ago. Only Congressional stupidity stands in the way (probably with the past support of Mr. Plummer).
The recent housing boom sparked further development of
antiseptic, strip-mall communities in distant outlying areas. Making
100-mile-plus roundtrip commutes costlier will spur construction of
more space-efficient housing closer to city centers, including cluster
developments to accommodate the millions of baby boomers who will no
longer need their big empty-nest suburban homes.
Sure, there's plenty of
land left to develop across our fruited plains, but building more
housing around city and town centers will enhance the sense of
community lacking in cookie-cutter developments slapped up in the
hinterlands.
OK, I can't really get to all his points, but I have saved perhaps the best for last. Here is one of the most incredibly condescending, authoritarian, and insensitive arguments I have ever seen. He thinks it is better for poor and middle class Americans to pay $8 a gallon for gas because:
Far too many Americans live beyond their means and
nowhere is that more apparent than with our car payments. Enabled by
eager lenders, many middle-income families carry two monthly payments
of $400 or more on $20,000-plus vehicles that consume upwards of
$15,000 of their annual take-home pay factoring in insurance,
maintenance and gas.
The sting of forking
over $100 per fill-up would force all of us to look hard at how much of
our precious income we blow on a transport vehicle that sits idle most
of the time, and spur demand for the less-costly and more
fuel-efficient small sedans and hatchbacks that Europeans have been
driving for decades.
So, doubling the cost of necessities for the average American will make them financially healthier? His argument is that people do all kinds of dumb things financially that a smart person like he would never do, and if gas prices drained everyone's wallet, they would not have any money left to make dumb purchases he does not approve of. If this is such a great idea, shouldn't we all just move to North Korea and have done with it?
Jim Collins:
Let's see. If I follow his line of reasoning, it should be good for the economy if I beat the crap out of him and put him in the hospital for 6 months. Theoretically speaking of course. I have noticed a trend among Liberals. The never follow their line of thinking the whole way through to the end. They just stop when it justifies their way of thinking.
June 4, 2008, 9:39 amJoshK:
Good one. The scary thing is that people like the author probably consider themselves "enlightened" and smarter than the average slug.
June 4, 2008, 10:01 amCRC:
I'm not sure I agree that this is an example of the broken window fallacy. His basic premise is that higher prices in one resource (gasoline) will trigger research and investment into other, substitute resources. This much is basically true and not all that controversial (well for most sensible people).
That this investment will establish new jobs, technologies and production capabilities is probably (we don't know for sure until something is actually developed and produced) is also true.
Where most economically ignorant folks go off the rails, at this point, is in calling for mandated investment (usually with stolen money) into these new resources.
While there can be no doubt that oil and gasoline are still a (relative) bargain for what they buy us, and also that their higher prices will lead to new levels of conservation (gee...the market mechanisms lead to conservation of precious resources?) and the pursuit of alternatives, none of this needs the "help" of the government central planners. They are already "helping" enough thank you very much.
June 4, 2008, 10:02 amKit:
Spot the Bastiat abuse in this article. Amazingly Tony Jupiter used to chair government committees on energy in the UK.
June 4, 2008, 10:05 amNobrainer:
I, too, was fairly bothered by Plummer's article. Fortunately you've done a pretty good job of addressing the same items with which I took issue.
I was bothered, and also admittedly amused, with how contradictory his points were. The $8 gas being bad for oil producers was one of them (I'm guessing he's implying that we should tax gasoline heavily to achieve that pricing level and beat the oil suppliers to the punch.)
He also assumes that smaller, more technologically advanced and fuel efficient cars will necessarily be cheaper. Thus far, this is not the case. Side note: I was treated to a discussion in which someone concerned about their gas bill and interested in saving money asked of the Prius, "does it come with leather seats?"
Finally, if we should happen to discover vastly more efficient and cheaper cars, then the point about sprawl is completely moot. If the cost/mile ends up the same as today, or cheaper, then the will to live outside the city will either stay the same or increase.
June 4, 2008, 10:20 amlinearthinker:
With $8/gal gas, Plummer will be reduced to recycling his SF Chronicle for toilet paper when the truckers can't afford to haul it. But, he'd probably think that to be a good thing.
June 4, 2008, 10:39 amIan Random:
I think you are being a little unfair to the author. Gas less taxes for $8/gallon would be roughly $200 a barrel. So the market, without political favor, is dangling $200 bills saying come and get it. Now if someone with an idea can do it for less, I imagine they'd in their garage trying to implement it. Unless urban sprawl has been neutralized and that smart person is stuck in a studio apartment with no room to experiment. But in the meantime the high price's effect will be like just another tax increase and slow all the things he enumerates.
June 4, 2008, 11:11 amJosh:
That this investment will establish new jobs, technologies and production capabilities is probably (we don't know for sure until something is actually developed and produced) is also true.
Indeed it will. I'm also not certain whether this is an example of the broken window fallacy. However, it does share one big element with it: opportunity cost. All the money to be invested in this research and production has to come from somewhere. The fact that we haven't already invested it there is evidence that we have better things to do with it. Like fishing trips, AIDS research, and building houses. Oh, and living where we like, as opposed to clustering in the cores of mega-cities.
June 4, 2008, 11:40 amT J Sawyer:
"$8 gas would trigger all manner of investment sure to lead to groundbreaking advances"
Well there is already 9 and 10 dollar gas in Europe, so the advances should be shipping in soon. Unless congress enacts trade regulations that keeps them out.
Actually, there are some innovative responses in Europe. Diesel cars that can't be sold here due to our pollution regulations and tiny cars that can't be sold here due to our safety regulations.
Perhaps regulation is the problem?
June 4, 2008, 3:10 pmT J Sawyer:
"$8 gas would trigger all manner of investment sure to lead to groundbreaking advances"
Well there is already 9 and 10 dollar gas in Europe, so the advances should be shipping in soon. Unless congress enacts trade regulations that keeps them out.
Actually, there are some innovative responses in Europe. Diesel cars that can't be sold here due to our pollution regulations and tiny cars that can't be sold here due to our safety regulations.
Perhaps regulation is the problem?
June 4, 2008, 3:11 pmT J Sawyer:
"$8 gas would trigger all manner of investment sure to lead to groundbreaking advances"
Well there is already 9 and 10 dollar gas in Europe, so the advances should be shipping in soon. Unless congress enacts trade regulations that keeps them out.
Actually, there are some innovative responses in Europe. Diesel cars that can't be sold here due to our pollution regulations and tiny cars that can't be sold here due to our safety regulations.
Perhaps regulation is the problem?
June 4, 2008, 3:11 pmT J Sawyer:
"$8 gas would trigger all manner of investment sure to lead to groundbreaking advances"
Well there is already 9 and 10 dollar gas in Europe, so the advances should be shipping in soon. Unless congress enacts trade regulations that keeps them out.
Actually, there are some innovative responses in Europe. Diesel cars that can't be sold here due to our pollution regulations and tiny cars that can't be sold here due to our safety regulations.
Perhaps regulation is the problem?
June 4, 2008, 3:11 pmT J Sawyer:
"$8 gas would trigger all manner of investment sure to lead to groundbreaking advances"
Well there is already 9 and 10 dollar gas in Europe, so the advances should be shipping in soon. Unless congress enacts trade regulations that keeps them out.
Actually, there are some innovative responses in Europe. Diesel cars that can't be sold here due to our pollution regulations and tiny cars that can't be sold here due to our safety regulations.
Perhaps regulation is the problem?
June 4, 2008, 3:11 pmMesa Econoguy:
I read that piece of garbage too, and I’m getting very annoyed at MarketWatch’s normally reasonably informed coverage invaded by uneconomic crap like this (and other recent stupidity).
On the flip side, the WSJ (same parent as the above website) posted this today, which is far more relevant and actually incorporates economic thinking:
"By one count, America sits on enough oil and gas to meet its own needs for half a century. We won't help ourselves although our environmental delicacy somehow doesn't stop us from screaming at other countries to tear up their own pristine wildernesses to supply us with cheap energy. President Bush rushes to the Saudis, supplicating for more oil. Congress threatens OPEC with antitrust action. Go figure. That U.S. politicians can afford to indulge a persistent unreality about a basic input of industrial civilization only testifies to how responsive and resilient the global energy market has been despite the political silliness it meets at every turn.
But the biggest fools today may be those greenies who are clapping their hands over $135 oil as if this somehow represents the beginning of the end of fossil fuels. High prices are not the equivalent of carbon taxes – they will have the opposite effect in the long run, spurring investment and technological progress to bring vast new resources of fossil energy into production. For instance, turning coal, oil sands and oil shale into motor fuels, which is cost-effective at half of today's oil price, means massive additional releases of CO2. It's the worst nightmare of the climate worrywarts."
Screw global warming alarmists.
June 4, 2008, 3:37 pmJim Collins:
By innovation, do you mean things like drilling for our own oil? Let's face it. Any innovation is going to be stifled by the environmental crowd. We have a way of reducing the so called "greenhouse emmissions", it's called NUCLEAR power. By increasing the amount of electricity and lowering it's costs, it becomes economical to replace oil heat with electric heat. What would removing coal fired powerplants and home oil burners do for the "carbon footprint".
June 5, 2008, 6:06 am