… What is older than the idea that some exalted elite know what is good for us better than we know ourselves? Obama uses the rhetoric of going "forward," but he is in fact going backward to an age when despots told everybody what they had better do and better not do.
Around the world, that elite may be determined by different means: age, skin color, wealth, education, social affiliation. And I’m not claiming that they’re not right more of the time. What I am claiming is that there ought to be more than this as a basis for policy.
I like to think I have better sense than most Republicans/conservatives/libertarians/classical-liberals: I freely recognize and admit that Obamacare is essentially Romneycare, which in turn is largely the Republican alternative to Democrat proposals circa 1990.
What bugs me about policymakers, in this case the Democrats and Obama, is the claim that this is something new. It isn’t.
How is Obamacare old? Consider:
… When confronted with the fact that millions of Americans stand to lose their existing medical insurance, as a result of ObamaCare, defenders of ObamaCare say that this is true only when those people have "substandard" insurance.
Who decides what is "substandard"? …
… One of the fundamental reasons why private medical insurance has gotten so expensive is that politicians in state after state have mandated what this insurance must cover, regardless of what individuals want.
Insurance covering everything from baldness treatments to sex-change operations is a lot more expensive than insurance covering only major illnesses that can drain your life's savings. Now these mandates have moved up from the state to the federal level.
Insurance is an institution for dealing with risks. It is a costly and counterproductive way to pay for things that are not risks -- such as annual checkups, which are known in advance to occur every year.
Your annual checkup does not cost any less because it is covered by insurance. In fact it costs more, because the person who is insured must pay premiums that cover not only the cost of the checkup itself, but also the costs of insurance company paperwork. ... [emphasis added]
... Another way in which ObamaCare is an old political story is that it began as supposedly a way to deal with the problem of a segment of the population -- those without health insurance.
But, instead of directly helping those particular people to get insurance, the "solution" was to expand the government's power over everybody, including people who already had health insurance that they wanted to keep.
Note the pattern in the bold emphasis I added to each quote. It isn’t about hope and change, it’s about old guys in suits and ties and their busybody enablers telling everyone else what to do.
And lest you think that I’m dogmatically opposed to the Democrats and Obamacare, let me point out that the “War on Drugs” and the “War on Terror” — which get far more Republican than Democratic support — are justified with arguments that politicians have been making for centuries.
We would be very much the poorer, if all useful goods were expensive and only useless goods were cheap.
Keep this in mind the next time someone remarks that hamburger flippers should be paid more and lawyers should be paid less.
See more at: Marginal Revolution, where Alex dissects a quasi-Marxist claim that it’s a shame that people who do things that the author defines as important aren’t paid much.
I find it an enduring shame that the Marxist labor theory of value still holds water after over a century of failures, when the marginal revolution (which addressed the failures of the labor theory of value to accurately model human interaction) is still met with derision in some social sciences.
It’s a shame because, to the extent that Marx was a bright guy, he might himself have rejected his own theory in place of the improved version if he’d lived long enough.
Better analysis than I can provide is available at Eclectecon. It shows two things in “Marginal Cost of Oil Production”. The first is a chart of what prices are needed to justify the addition of new sources to global supply:
This just rehashes the last 10 years: we’ve reached a price that justifies extracting from shale (e.g., North Dakota) and tar sands (e.g., Alberta).
The second shows the shutdown prices based on country of origin.
The relevant values here are along the green line. This is how low the price can go before someone shuts down production. This suggests a floor of around $40. Demand decisions may force the price back up, but supply decisions are unlikely to until this level is hit.
One additional point is raised. Oil can be stored either above ground or still in the ground. Speculation that prices may be higher in the future might lead some to cut back production so as to store the oil in the ground. I don’t think this idea holds too much water: it’s basically a predatory pricing argument, and those don’t work as well in practice as many think they might.
... But the central bank exaggerates the reserves at its disposal. About $170 billion of its assets sit in two giant wealth funds, the Reserve Fund and the National Wealth Fund (NWF) ...
Cash from the $82 billion NWF is committed to long-term infrastructure projects, says Sergei Guriev of Sciences-Po, a French university. The NWF has also provided money to VEB, the Russian development bank, to finance construction at the Sochi Olympics.
The loans by which it did so have been "restructured" to allow delayed repayment. Mr Guriev says many people believe the money to have been embezzled. The NWF may thus be unable to offer any liquidity to the government.
In terms of money that could actually be put to use, Russia's reserves could be more than $100 billion lower than the headline figures suggest. Mikhail Zadornov, a former finance minister, said in a recent interview with Dozhd, a television channel, that the usable amount could be as low as $200 billion.
That was published 26 days ago.
We are in the realm of "who the f**k knows" here. But if Russia has been bleeding a few billion in reserves every day for a month, and half the money was already misappropriated ... then we're looking at the likely collapse of the Russian economy before the new year.
Timothy Ash, an analyst at Standard Bank, is astonished by the news that the Russian finance ministry will deploy around $7bn of ‘spare’ currency reserves to prop up the rouble (as explained earlier)
Ash says the intervention is “unbelievable stuff”:
“Why, if the central bank has $413bn in reserves, is the ministry of finance being called on to put its hand in its pocket for some small change — they are like checking the back of the sofas at this stage”.
Let me read between the lines for you. Those "spare" reserves are coming from the finance ministry, instead of the Bank of Russia where announced reserves are supposedly held, because those reserves aren't actually there.
Currency traders are used to countries lying about their reserves. And what they do when that happens is "attack" that currency. Basically, they try to get out of it as quickly and as "big-ly" as they can. This is what currency crises are all about: investors running for the exits.
So where'd all the money go? They don't call governments like Russia's kleptocracies for nothing.
Here’s Thomas Sowell from his book Basic Economics:
The fundamental principles of economics are not hard to understand, but they are easy to forget, especially amid the heady rhetoric of politics and the media. [emphasis added]
I sometimes think that listening to politicians and bureaucrats talking about economic issues is like learning a board game from a kid. The kid never remembers all the rules at once, and seems to conveniently forget or remember them most often when it’s self-serving.
Here's a pop quiz the Berkeley Energy Institute gave to readers.
Which of the following two choices leads to more fuel savings:
(A) buying a 15 mpg Cadillac Escalade instead of a 12 mpg Chevrolet Suburban, or
(B) buying a 50 mpg Toyota Prius instead of a 29 mpg Toyota Corolla?
Read it carefully: it's decision making at the margin. Ceteris paribus conditions are provided for the readers. "Assume you would drive the same distances and speeds no matter which car you have." Thus the total fuel use will be the least with the Prius and the greatest with the Suburban.
I care about this because the misinterpretation of nonlinearity in this example is very close to the misinterpretation of nonlinearity in casual analysis of macroeconomic policy and events. For example, it's really easy for dim bulbs in the legacy media to claim the the Great Recession was comparable to the Great Depression if they don't log the real GDP data first.
Should people wait for goods, or should goods wait for people? Consider:
I think this is a really fundamental way to improve thinking about the economy.
In what situations do you personally think it’s OK to wait for a good that you personally are going to use?
It’s the holiday shopping season, and it should be really clear to all of you that you’d put up with this in almost no dimension of your life.
And yet we constantly have governments putting us in this position. Even here in rural southern Utah: have you had to wait at the DMV, how about at court, how about for an official transcript? I could go on.
In fact, most of use are worse than that, and I suggest we often clearly cross the border into being temporary a**holes. How so? Think about it: you’re so used to having everything available for you when you want it, that when the people who provide that service for you fail (for even a moment), we get upset at them … without even a thought about how amazingly they perform most of the time. Did you ever react well when Wal-Mart failed to have your favorite chocolate-coated sugar-bomb cereal on the shelves (even though they’ll usually have it back out there again within several hours)?
I have to be rather bald about this. Obama’s response to recent questions about the Keystone XL pipeline make me wonder whether he’s stupid, or whether he’s just pandering to people who are stupid.
FYI: The Keystone XL pipeline is an oil pipeline proposed to run across the plains, primarily for the purpose of bringing oil production from northern Alberta (that’s ramped up over the last 10 years) to refineries and ports along the American Gulf Coast that have been there for decades.
Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices …
Where do I begin?
Is Canada our friend or not? Do we help friends? In this case, private U.S. firms want to help Canadians, and the U.S. government is blocking that.
Why single out oil? I know, it’s the Keystone XL pipeline that’s in question here, but I really can’t imagine him saying this about Canadian water?
Whose oil will it be when it crosses “our land”? Is Obama also against Canadian storage tanks in Houston, or are those not necessary? My guess is that the Canadians sell their oil to the American owners of the pipeline as soon as it crosses the border. It seems to me that he’s actually against our oil, and is using the Canadians as a punching bag (see the first point).
Why is adding “the Gulf” necessary? Would Obama be in favor of this if the pipeline went to the Pacific Ocean? My guess is that this is to attract the attention of people who are worried about oil spills in the Gulf specifically in the wake of the BP Horizon spill. If I’m right, Obama hopes that listeners suffer from availability bias. If I’m wrong, then I think Obama suffers from it. Note that my position is not in favor of spills: I’m just pointing out that they can happen anywhere but that referring to a place where they recently did happen should make you suspicious of manipulation.
Why bring the oil to the Gulf at all. Oh yes … because the refineries are already there. Note that Obama is not suggesting the we build new refineries closer to where the oil comes out of the ground. Heck, he could even offer to build refineries for Canada to just keep the oil away. But he didn’t. Instead he rather specifically wants oil refineries along the Gulf to not have access to Canadian oil. Why?
Why would anyone care where the outputs of the refineries, which are for the most part no longer “oil”, are sold? This almost seems like Obama wants a trade restriction on refinery exports. Then why didn’t he just say so? Oh yeah … because restricting exports is usually stupid. Do note that Obama never suggests that we’ll build the pipeline and then throw big, sharp, rocks in the harbors where the resulting products might leave from. Because that would sound stupid. Even though that produces the same outcome of reducing exports.
And how is this not going to have an effect on U.S. gas prices? This is a President whose policies actually encourage people to import their own pharmaceuticals because they’re cheaper to put pressure on domestic pharmaceutical prices. Apparently gas doesn’t work the same way. It’s not like you can put it in containers and take it with you. Oh … wait … scratch that.
I’m sorry. All Presidents say dumb and bizarre stuff sometimes. But this is by far the most “out there” thing this President has ever said.
P.S. I need to add another point about what will happen to the oil without the pipeline. It will still get to refineries. Maybe even refineries along the Gulf. How do we want it to get there? Tanker truck driving too close behind you on the interstate? Railroad tanker cars snaking through your town? Or in the pipes just like the ones that go everywhere already. If Obama is against the Keystone XL pipeline, is he also against the pipe that carries gas (and perhaps oil) into your home?
Cross-posted from SUU Macroblog which is required reading for my students.
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