Except that the ‘feedback lag’ you’re talking about isn’t lag at all - it’s simply economic choices. No, everyone won’t sell their gas guzzlers tomorrow. But they won’t if you pass CAFE standards, either. In fact, the law may have the opposite effect - higher CAFE standards may raise the price of cars, which in turn will act as an incentive for people to keep their older, less efficient cars.
But people CAN drive less, or choose alternate transportation. And they can make that choice smoothly and linearly with oil price increases. But historically, oil is still relatively cheap, especially compared to per-capita income.
There is no rush here, by the way. Oil isn’t going to go up on a linear curve. We won’t be looking at $80/barrel oil next year or the year after. Because as oil gets more expensive, more fields come online that weren’t profitable at lower prices. The tar sands are a good example. And also, given a bit of time alternative sources of energy that were non-competitive before but are now will start coming online, thus helping slow the increase in demand.
In the meantime, higher prices will act as a stronger incentive to build efficient cars than CAFE standards anyway, because now auto makers risk losing huge market share if they don’t keep pace with fuel efficiency. Look at how much money they are all now spending on hybrid technology - ten years ago, you couldn’t get them near it.
Government interference in the market - just say no.
On the other hand, if you can demonstrate that the current market is distorted because of the government (selective tax breaks, road subsidies, whatever) then I would be in favor of removing those distorting laws. The ultimate goal should be to allow the market to accurately reflect the cost and benefits of the transactions taking place.
So, which is it? Your first post criticizes Bush for not encouraging conservation, and this post ciriticizes him for not encouraging consumption (which is exactly what an increase in supply would do).
Are you saying Bush is a flip-flopper? Maybe he just re-evaluated the situation and has decided a different course of action is appropriate.
Sam pretty much answered David Simmon’s post for me. I don’t have much to add other than this: Anyone who advocates the idea that governments react faster than markets either doesn’t understand how governments work, doesn’t undersatnd how markets work, or both.
That’s right, government’s don’t act faster than markets. However, that is fixable (or at least there is the possibility of a fix) while the lag in growing crops to cover a shortage and in switching industrial production to different products isn’t so fixable. Yes, worldwide production and shipping of grains and other agricultural products can smooth things out but that has weaknesses. The majority of the agricultural land is in the northern hemisphere so all the crops mature at about the same time.
Anyone who overlooks the economic booms and busts, not to mention the other ills such as child labor, of the 1880’s-90’s and early in the 20[sup]th[/sup] century is hiding their head in the sand. Entirely unregulated market processes weren’t a panacea then nor are they now.
Few people favor entirely unregulated business activities so the argument isn’t over regulation or no regulation. It is about what should be regulated and how much.
Few people question the existence of God, so the debate is not about whether or not God exists, but in what form he/she/it exists. Right?
IOW, the number of people supporting a theory is not an accurate gauge of its validity. I would agree that, in the context of current US policy, you are correct about regulation-- we will certainly have a lot of it. In the context of a GD debate, there are not, nor should there be, any limits on which arguments are permissible.
There’s lots of externalized costs associated with gasoline use, including military ones and environmental ones, and there are lots of subsidies such as the SUV tax break noted above. These are estimated to amount to a few dollars a gallon (which is why many European nations put those sorts of taxes on gasoline).
Unfortunately, I think the definition of business purposes is pretty broad. As your own cite notes:
I agree with you wholeheartedly. As for the Prius, I waited 7 months for mine and I signed up on the list last November only about 4 days after the first one was available for a test drive at the dealership. My dealer told me that they are now telling people the waitlist is at least a year and probably more like 18 months. (And, the car is awesome, by the way!)
You are all missing the point. Market forces do work, within limits – the rising price of gas at the pump can give people an incentive to buy more fuel-efficient cars, and Detroit will, eventually, respond to that demand by making more of them. But that leaves a lot of inefficient cars on the roads for at least a couple of decades. Everybody needs a car. If you buy a new one you will keep it an average of five years, then trade it in; somebody less prosperous will buy it used and drive it until it falls apart; in total, it could remain on the roads for 10 or 15 years. While that is going on, the price of gas keeps rising and rising – because oil production from a given area follows a bell curve – that was the case in Texas (see Out of Gas: The End of the Age of Oil, by David Goodstein, W.W. Norton, 2004). and we’ve probably passed the all-time peak of global oil production already. If we haven’t passed it yet, it won’t be long. And increased fuel efficiency can only do so much. Sure, a Prius gets 50 miles to the gallon. In a couple of decades gas might be so expensive that even driving a Prius become prohibitively expensive for most people – and when we reach that point, our economy will no longer be able to function as it does now. How will people get to work? To the store? To school? How will goods be shipped from their point of production to point of consumption?
You’re all missing the point, as I said, when you make this debate about whether more government regulation of the auto industry is necessary. What needs to be done is something the market can’t do: We need alternative modes of transportation, modes that do not depend on fossil fuels. And we need to stop building everything around the automobile. We need to stop building sprawling suburban areas that you can’t get around in unless you have a car. We need to start building compact, pedestrian-scale communities.
Why is the market ***unable ** * to develop modes of transportation that don’t depend on fossil fuels?
I can agree that there are lots of hidden subsidies that prop up an “automobile culture”. But it’s unlcear what types of communities would be built if those usbsidies were eliminated. I’m very uneasy about any grand plan for the government to design our communites. The market currently offers people a variety of communities to live in, including your preferred “compact, pedestrian-scale” type. But I think it’s safe to say that, given the choice, many (most?) people simply don’t like “compact” living arrangements.
That can be an issue. In fact California has a program where it buys up old polluters. But the problem today is that an increasing number of new cars are inefficient. I’d be willing to tradeoff increased life for 20 mpg cars in return for reducing the number of new 15 mpg cars.
Higher CAFE standards, by the way, do not necessarily require expensive new technology. They can be met by the auto companies changing the mix of the cars that they sell. Higher prices for SUVs, and more marketing and incentives for fuel efficient cars will do it. It won’t happen by itself because the SUVs have better margins, thus it is in the interest of the auto companies to push them.
Yes, oil is still relatively cheap. But people cannot make the choice of reducing driving so easily. Alternate transportation is expensive from the government view, being heavily subsidized still. Where I live people have traded off lower home prices for lower commutes. Many just cannot afford to live closer to work. A few bucks a month more in gas bills is a lot easier to take than $200K more on a house. Yes, there is more working from home, but the number of people who can do this is still small. A big reduction in driving has an impact on the tourist industry also.
If you do the numbers, paying a premium for a Prius doesn’t pay. One might buy one because they’re cool, or to be socially responsible, or for insurance over big hikes, but it is not to save money.
Right now there is a strong incentive to build fuel inefficient cars because of profit margins. There is going to be a lag between the time the market turns around for smaller cars and Detroit can meet the need. Are they smarter than they were in the '70s? Doesn’t seem like it to me. But I suppose Japan can use the money.
It’s only a “problem” if you presume that gas conservation, beyond what the market dictates, is needed. You’re using circular reasoning here.
Most can. Carpooling, even if only a few days a week, would be pretty simple for most people to do. It’s less common simply because people prefer the convenience as a trade-off to savings.
Can you show us “the numbers”. You are going to have to assume a certain price for gas in your numbers. If that price goes high enough, it will be economical. If it doesn’t become economical except in a wild, doomsday scenario, then that just says that conservation beyond what we’re doing now is not needed.
Those profit margins will disappear like dew in the morning if gas prices go thru the roof. I think the mistake you are making is using “static economic” analysis. And as long as we refuse to bail out failing car companies (Lee Iococa take note), they will tool us quickly as they can to meet market demand. Companies do not survive (unless propped up by the government) by offering people what they don’t want/need. There are plenty of car companies out, including companies that make small, fuel-efficient cars, that we needn’t worry about monopoplistic practicing forcing consumers to buy SUVs and Hummers.
Because in the private sector, nothing gets done unless it is directly and immediately profitable – and under modern conditions, light-rail and streetcar systems are not directly profitable. Outside of Hong Kong, there’s not a public transit system in the world that completely pays for itself at the farebox. We discussed this in my thread. Some posters argued that we should have such systems only if they are profitable and government should not subsidize them – quite forgetting that our automotive transportation system, which we think of as a “private” one, is subsidized by government in dozens of obvious ways, without which automobiles would be pretty much useless.
Yes, Americans love their suburban, car-centered lifestyle. Just because we like it doesn’t mean we can sustain it. Junkies like their heroin too, but that does not mean it will be possible for a junkie to go on using it forever. Sooner or later his veins will collapse, etc.
Gas conservation, beyond what the market dictates, is needed because
When you burn gasoline you add CO to the atmosphere. I hope I don’t need to explain this point further.
The market runs at its own ever-accelerating pace. It is not always self-correcting. We might go along using more and more gas every year until its supply falls disastrously, its price rises disastrously, and we reach a crisis point where the system breaks down irreparably. Government action to gradually wean us of our oil habit might prevent that.
We need petroleum for a lot of things besides gasoline. It is the principal ingredient in most synthetics and many medicines. We can’t afford to burn it all up.
This is an example of why government interference in the market is often misguided. By the time the government reacts and enacts something into law, market conditions have changed.
Well of course the number of people supporting a theory isn’t a gauge of its validity. Does your statement about regulation mean that you favor returning to the good old days of the 1890’s? I don’t understand your point.
As to the ability of governments to respond as well as business. In just 9 days the Kennedy administration formed a task group, analyzed the Cuban missile crisis and found a solution. In just over a year in WWII the government took over and directed the conversion of a civilian industrial system into one devoted to the large scale production of war materials.
It all depends upon the motivation to act in a unified manner. A business can do it but the US is so diversified that it is difficult for politicians to do it without an almost overwhelming threat such as missiles in Cuba or Pearl Harbor attacks.
The delays in the supply-demand market system are systemic and I don’t think they are solveable by everyone working togeter. It just takes a certain amount of time to grow a crop even with everyone praying for a little more speed.
Free enterprise doesn’t have all of the best brains. There are some pretty smart people in government too and if the political climate favors it a lot can be done in a hurry.
And finally, most of the free market theories are ivory tower idealizations. The conditions needed to achieve a really free market are so rarely met that it’s hardly worth considering.
What makes me hesitant to support a purely market-driven approach is uncertainty about the relationship between a declining oil supply, the economy, and the amount of resources that will be required to develop an alternative energy infrastructure.
If demand for oil keeps growing, and the supply diminishes “rapidly,” it would seem possible for the economy to tank. There’s no telling how long it would take the market to develop trains, trucks, ships, airplanes, industrial processes (smelting furnaces, cement kilns, etc.), and materials that don’t require cheap fossil fuels to be economically viable. And while we’re waiting for the market to develop these products there could be some serious turmoil.
Given the uncertainty, it seems prudent to tax fossil fuel usage and fund research into alternatives: this would give the market an early nudge and make the transitition less painful when it happens. I’ll be the first to admit that there are a lot of unknowns, and it may not be an issue. But I’d hate to be around if it is an issue and we’re not prepared.
I don’t doubt that the market could develop alternatives; I do doubt that it has the foresight necessary to minimize the impact fossil fuel depletion will have on the population.
Just pointing out that the argument given to counter my statement was fallacious-- Appeal to Widespread Belief.
Aside from the fact that neither of these examples didn’t have ANY activity preceding your start time… it’s is specifically the job of the government to defend the US against external enemies. It’s SUPPOSED to do that well. You’re also talking about actions of the executive branch, which does act more quickly than Congress, and I’m pretty supprised that you’d want Bush and Cheney to run the US energy policy at that detailed a level. Keep in mind that your guy isn’t necessarily the one who will be in charge.
That’s the second time you’ve referred to crops. I’m not sure how that relates to our discussion about oil, but surely you’re not offering the agricultural policies of the US as shining examples of government success in regulating a market, are you?
No doubt. A lot can be done, mostly to enrich the people with the most political pull. If we suddenly learned that we would run out of oil next month, it’s possible we’d have to create some Manhattan Project type activity. As it is, there is no evidence that we are on the precipice of doom. Government intervention should be the LAST option, not the first.
You seem to be ignoring the last 300 years of capitalism for which there is ample real world examples of how the market deals effectively with supply/demand situations. And free market theories are no more “ivory tower idealizations” than are theories about government’s ability to take the place of the market.
John, that wasn’t an argument intended to counter anybody’s argument. I just happen to think that very few people want no government regulation whatever.
How long did it take Congress to pass the Patriot Act? The Dept. of Homeland Security Act? To authorize federalizing the airport security? To authorize war with Iraq? When the political consensus is there, whether justified or misguided, Congress can and does act with dispatch.
And “my guy” isn’t in charge of too many multinational corporations either. Looks like a wash.
Let me go through this slowly. The crop thing is an illustration of a built-in and relatively unalterable delays in the supply-demand feedback loop that can lead to instability, and I think has done so in history.
Yes, sooner or later the market does come to a supply-demand balance but only after an awful lot of misery for an awful lot of ordinary people who are caught in the squeeze of the time lag before it does. There are plenty of resources available to handle that if they are properly applied. There is no guarantee that the political process will handle those resources properly for the purpose of easing that hardship but it seems certain to me that the private and so-called free market hasn’t and won’t.
And I forgot to say that I don’t think and have not said that government regulation can replace the market. What I’m talking about is the economic analog of compensating networks to provide lead or lag inputs that help stabilize a system and prevent surging from practically no output and deflation to overheated operation and inflation. The Federal Reserve, by manipulating their interest rates has done a pretty good job of that sort of thing and I think the same principle would work on a broader scale if someone would just put their mind to making it work.
It’s going to take me awhile to digest your use of the Patriot Act and the Iraq War to justify further extension of governmental authority. The government is able to do several bad things quickly, so let’s have it do more things quickly and hope that those things don’t turn out bad also? Is that it?
I’m actually not being sarcastic, although it might sound like it. It really is going to take me some time to digest this. Maybe things will seem clearer in the light of day tomorrow.
What I don’t understand about the US Congrees: years ago, FORD basically BOUGHT the Congress…they got SUVs classified as trucks, so as to exempt the SUV market from the regulations that apply to cars. Because of this, FORD (and other makers) were able to sell vehicles that were:
(1) more dangerous than cars (rollovers, roof collapses)
(2) less fuel efficient (no need to meet CAFE standards)
(3)dangerous to other vehicles on the roads (bumpers higher, headlights higher, etc.)
So the US Congess allowed tis to take place…all of which means that you are given all the wrong incentives to purchase vehicles that are dangerous and fuel wasting. Now, the bills are coming due…we have to import over 50% of our oil, much of it from unstable regions. Foronce, why doesn’t the Congress listen to reason? Make it worthwhile to purchase fuel efficient vehicles. and stop rewarding waste!
You must be having a bad day. Let’s go through the sequence. You wrote that government is way too slow to act. I gave some counter examples (Cuba missiles and mobilization in WWII). Your responded that those didn’t count because they were executive actions. I then provided some examples of rapid congressional action. The examples in no way condoned what was done but was just an example of rapid action of which you claim government is incapable. You seem to be having trouble keeping track of what you said and what is a response by example to that.
As to congress doing “several bad things quickly,” hell Enron, Worldcom and other business considered it a bad day for them if they only “several” things a day that were bad for everyone else, and also bad for any foolish idea of a “free market” solving all problems.
You’re right John, you’re not being sarcastic, it only sounds like it.
You stated by indirection that I advocate government replacing the market which is a bunch of crap. You argue that the free market will solve all of the problems resulting from the high cost of energy. Sooner or later it will but at the cost of great economic dislocation and misery for millions of people who aren’t as well off as you and I. You say that government is SUPPOSED to protect us. Well, economic dislocation is probably just as devastating as knocking down a couple of buildings (unless we go into a frenzy and spend all sorts of resources on ineffective responses to the knockdown) so that, to my mind, is also something that falls within the province of government in tending to the general welfare.
I think I, at least, have had enough of you’re devious postings on this matter. Good day to you, sir.
