Flatman embraces fatalism

Does Thomas Friedman understand economics? Read this column

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

We can’t do this anymore.

I am as cynical, and pessimistic, and misanthropic, and (if someone really really bugs me) obnoxious as they get; but I am not fatalistic – I don’t believe humanity is doomed. Friedman’s view however is precisely that – fatalistic (he says he’s an optimist, but he isn’t, not as far as this article goes). And that view either stems from his ignorance of economics, or his willingness to be part of – as Rothbard calls it – the Welfare-Warfare State. If the past is any indication, it is the second.

The “crisis” – some would call it a well-deserved hangover – stems from three deep-rooted civilizational problems – refusal to respect individual and property rights, refusal to understand the consequences of the “tragedy of the commons”, and a “God Complex” that the State suffers from when it comes to the market.

Individual and property rights are moral axioms; you could try to derive them from some metaphysical truth – it is important to guard against nitpickers – but not otherwise. What this means essentially is – individual before collective, always; and the junking of all forms of utilitarian calculus – social utility, public good, common good, public interest etc etc. A civilization that refuses to respect these rights, or indulges in Orwellian Newspeak when it comes to them, or is inconsistent when it comes to their practice is doomed to a state of perpetual crisis. You will then have pressure group warfare, lobbyists cutting each others throats, groups conspiring to rob, maim, kill other groups that they hate, egalitarian policies that enforce “equality of opportunity” and “equality of outcome”, will succeed in neither, but will create more and more animosity, and so on. All this will happen in the name of “democracy” and that is a fitting epithet because democracy refers to majoritarianism – Law is not what is Just, but what the Majority says is its Will. Respect for individual and property rights means the elimination of all laws that gives the State the power to dispose of any individual in any manner of its choosing – so “eminent domain”, all discriminatory laws – “affirmative” or otherwise, taxation laws, “moral” laws, “paternal”/ “nanny” laws, laws to protect “national security” etc etc will have to go. If this cannot be done, then “rights” are nothing more than “legal fiction”.

Some people understand all this, but their heart bleeds for those who are suffering from “unequal” distribution of wealth, lack of “equal opportunity”, or for some other egalitarian cause. Others believe that the absence of a State means complete anarchy – people cannot be trusted if left to their own devices, but the State can because it is not staffed by regular people, but by Gods – bureaucrats, and hence the State has to set the “rules of the game” from above. Still others exist who believe that freedom can lead to moral corruption; or that people are not “really free”, and that the omniscient, omnipotent State apparatus must step in to “guide” people. Such people cannot be argued or debated with – their axioms are different; they have to be made politically irrelevant if rights have to reign. Its a case of Either-Or, and there is no point in pretending otherwise.

That was the moral position on liberty. Now some practicalities.

I have mentioned the “tragedy of the commons” many times, but what does it mean? This question is all the more important because – I don’t know if Friedman is aware of this – Hardin’s chilling philosophical essay that popularized the phrase deals with the same unsustainable lifestyle argument which Friedman makes (refuting Hardin’s conclusion on population is more interesting that doing so with Friedman, but not this time).

The “tragedy” lies in a simple empirical observation that communists/ socialists will continue to be blind to – a man will take better care of his property than of property that is “not his”. Its not just about public pastures, but everything. I am sure people won’t piss in their cars even if there is no law against it, but won’t mind doing it on the roads even if laws exist (more so in India). The same goes for every piece of so-called “public property.” From roads, to airwaves, to rivers, to wildlife, to forests – the “tragedy” explains everything. It explains how property rights, however informal they may be, protect forests against deforestation, and in fact promote regeneration. It explains how ownership of forests and wildlife keeps poachers at bay, and actually increases the wildlife population (also read this and this – If wildlife pays, it stays). Further, Rothbard has written innumerable books and articles on how roads can be privatized, pollution controlled, ownership of airwaves granted etc – visit the Mises Institute website and search for them, or do the same on my blog (if you can’t find anything, leave a comment on this post). I haven’t found too many articles on property rights on rivers, oceans and seas – that would prevent water pollution, and the problems associated with excessive whaling and fishing. But I am sure that’s the way to go. The Rothbard article – “Who owns water?” is a step in that direction. While the finer points need to be figured out, there is no doubt about the existence of the “tragedy of the commons” – property rights allows people to invest in assets secure in the knowledge that they will reap the fruits of the efforts they put in.

The “God Complex” of the State is a pernicious problem. Markets cannot be controlled, especially by bureaucrats, who are selected from the same mass of people that go by the name “public.” The paper-pusher-cum-scribbler in a dusty office does not have any special insight as to the functioning of the market. That’s why every “market failure” is in fact a “State failure.” As always, the root of the problem lies in the egalitarian “Welfare State” whose main intention is to promote the welfare of those who vote the current crop of politicians to power – at the cost of those who didn’t.

The State will see that the market isn’t giving out loans to those who don’t have the ability to repay them. So, to “fix this injustice” it will legislate and offer incentives to people to loan out money to such borrowers. It will tamper with everything from interest rates to money supply to distort the market’s signaling mechanism. And when the signaling mechanism gets distorted, you end up with a pile up. Who’s to blame? Naturally the “capitalist pigs.” The politicians who were trying to do good, and the bureaucrat who ensured that the “good” happened are entirely blameless.

Airline companies enter the business to see which company can crash the most planes; they will employ bullock cart drivers to fly their planes; they will fit the noisiest, cheapest and most unreliable engines on their aircraft. No? The fact is – they enter to make profits, and a company that allows its planes to crash more than a couple of times a year will see its customers disappear. If you don’t agree, ask yourself which airline you will trust – one that lost twenty planes this year, or two? The honest answer will be two. In that case, why do bodies like the FAA or DGCA exist? The same can be said about “every” State regulatory agency. They “think” they help the market, but they end up creating barriers to competition and actually grant their seal of approval to any company that is still in business regardless of its QoS – if the company were up to mischief, surely the “agency” would have taken care of it. That is the thinking it helps perpetuate. No wonder people always get screwed during financial crises – they thought the super-bureaucrats employed by the “agencies” were actually watching their backs.

Friedman thinks that Mother Nature is saying “no more.” If she is, sell her to the market. She won’t complain any more. Further, he thinks the market is saying “no more.” He heard it wrong; the market was speaking in french. It actually said – laissez-nous faire – leave us alone. The market was telling the 800 pound imbecile – the State – to get off its back. There is no problem with the “growth model.” Laissez-faire capitalism will continue to deliver the goods as long as the State keeps its hands to itself. The China problem – the “more and more” happened because the market is shackled. Demolish the State, or at least make it withdraw completely from the market – from banking, from money, from regulation – and China will self destruct thanks to its currency manipulation. Otherwise, Friedman’s predictions will come true. Going green isn’t going to change anything; going laissez-faire will.

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Comments

  • Alamanach  On March 9, 2009 at 3:51 pm

    I generally agree with your larger point, though in defense of the FAA– the Federal Aviation Regulations grew out of real-world accidents, not bureaucratic foresight. For example, an aircraft’s fuel gauge has to read correct only on an empty tank in order to be airworthy. You can fly with a crummy gauge that reads full on only a tenth of a tank and still be legal. This odd state of affairs has come about because we haven’t had accidents that would have been prevented with more accurate fuel gauges. So, the FAA has pretty much left fuel gauges alone.

    The FAA is actually one of our better government agencies. But then this is because they have something of a laissez-faire approach to begin with.

    • Aristotle The Geek  On March 9, 2009 at 5:46 pm

      I am not aware of the history of the FAA, or the DGCA (its Indian equivalent) for that matter. But, a quick look at the Wikipedia suggests that the aviation industry introduced the idea of government regulation as a means of cartelization, just like the bankers did with the Federal Reserve-

      The Air Commerce Act of May 20, 1926, is the cornerstone of the federal government’s regulation of civil aviation. This landmark legislation was passed at the urging of the aviation industry, whose leaders believed the airplane could not reach its full commercial potential without federal action to improve and maintain safety standards. The Act charged the Secretary of Commerce with fostering air commerce, issuing and enforcing air traffic rules, licensing pilots, certifying aircraft, establishing airways, and operating and maintaining aids to air navigation. A new aeronautics branch of the Department of Commerce assumed primary responsibility for aviation oversight.

      The FAA was created, as you say, in the ’50s after a couple of accidents. But that still doesn’t mask the fact that the agency is just another government bureaucracy. Read this, and this, and this.

      Traditionally, some of capitalism’s worst enemies have been other “capitalists” – businessmen who want to gain at the cost of other businessmen not through competition, but by currying favors. The “regulation industry” is a consequence of that mentality.

  • raveler  On March 10, 2009 at 5:05 am

    Bummer, and to think, I used to like Friedman. He suffers from the all-to-liberal-altruistic-egalitarian-divinely-infuenced-college-in-the-west sydrome, as do many. The higher the education the dumber they get.

    • Aristotle The Geek  On March 11, 2009 at 1:43 am

      He’s not as bad as the born statists; after all this is the fellow who wrote “The Lexus and the Olive Tree” and “The World is Flat”. But the recession seems to have spooked him. That’s why the existential crisis.

  • Assman  On March 10, 2009 at 11:37 am

    Aristotle, while Friedman’s article can qualify as rhetoric, the point is not quite clear as yet. He is not advocating state control, nor are the others concerned with the “unsustainable lifestyle.” There is a serious issue with the cost of things, especially the natural resources, whose real cost is more than the market price. Now rivers may be saved from pollution if they are privatised, agreed. What about the atmosphere?

    And above all, is this the sort of lifestyle we have chosen into, people work like machines, and community culture is under threat. This is the scenario wherever industrial form of production exists as opposed to being a trait of capitalist or communist economies.

    Your thoughts?

    • Aristotle The Geek  On March 11, 2009 at 2:33 am

      # “He is not advocating state control, nor are the others concerned with the ‘unsustainable lifestyle.'”
      Anyone who talks about using taxation to send out price signals (hope you followed the “past is any indication” link) and who writes what he’s written in the present article is advocating a substantial role for the State in the economy, even if it is not outright state control. There is already enough evidence available that there is no force more powerful than a free market when it comes to efficient resource utilization and improving people’s lifestyles – it has been proven time and again. But Friedman and the eco-warriors are not willing to let the market do its own thing – some because of “an existential crisis”, others because of an ostrich mentality. And that is the whole problem.

      # “There is a serious issue with the cost of things, especially the natural resources, whose real cost is more than the market price.”
      I guess you are talking about oil here. Well, it makes no difference whatever the “natural resource.” Here’s the thing. Any business venture has to make a profit. And it won’t sell at a price that is below marginal cost. The problem that you think exists with oil, gas etc is not a problem at all.

      Take oil. Every source is finite, and every source has a cost of production beyond which it is not profitable to continue doing business – if the market price falls below it, that is. But if the price moves up again, the venture becomes profitable again, and so will newer ventures – like oil sands. The reason oil prices are low today is because there is no demand in the market. Some wells and sands will have to cease production till prices move up again. And they will. That’s how the market works, and it will if the State stayed out of the whole affair.

      # “Now rivers may be saved from pollution if they are privatised, agreed. What about the atmosphere?”
      There is no solution to air pollution in the present system because property rights are ill-defined. If the system changes somewhat, Rothbard offers a solution – read this (pdf) – the section on “Air Pollution: Law and Regulation.”

      If you talk about “global warming” however, I don’t think there is any chance of compromise. Its plain politics as far as I am concerned – carbon as a pollutant in a world where every life form is carbon based is one reason; another is proving “beyond reasonable doubt” that carbon dioxide is behind the present warming. I don’t buy the “consensus science.” Otherwise the State will arbitrarily impose regulations and spend trillions of dollars without anything getting done.

      These two are specific cases. Now, the atmosphere is just like the sea. And I am not aware of any theory that describes how these can be parceled out – owning parts of the sea and air. Rothbard talks of fishing rights, but, since the seas are not scarce, and neither is the atmosphere, I really don’t know how private property will solve these problems. But note this – treating them as public – common – property isn’t helping either.

      # “And above all, is this the sort of lifestyle we have chosen into, people work like machines, and community culture is under threat…”
      If you take taxation into account – every kind – half the day is spent working for the government. I am not suggesting that not having taxation will free up that time completely – but man then has a choice about how he spends his money.

      I really don’t think generalizations can be made about “community culture” etc. In a free society, people will be free to live wherever they want as long as they can afford it – be it the Himalayas, or Bombay. In modern society however, the “rat race” is a fact. But think of the days before the industrial revolution and the amount of time people slogged for two meals a day and a shirt on their back. Technology has pushed down the costs of nearly every commodity man needs and is in fact making them available in unimaginable quantities. And its technology and freedom that will help preserve nature, help feed more and more people, and allow people to enjoy leisure.

      Friedman’s “solution” is not the solution. If the eco-warriors win, and if the State seizes control, civilization will come to a grinding halt, and people will die in the tens of millions. We have seen that demonstrated too many times in the past. The latest demonstration, an ongoing one, comes from Zimbabwe.

      • Assman  On March 11, 2009 at 12:34 pm

        Aristotle, What I mean about the problem in pricing of oil and other natural resources is not that they are very low based on current economic trends. Rather, I feel that considering how tough the process of formation of petroleum is, and considering how scarce this resource is, it is underpriced. At this rate, it is common sense that the resource will be abused till it very little of it is left. Now, if we agree so far, we can both suggest some means. I feel that taxation here is a necessity, so that the extra money can be diverted to developing alternate resources.
        Air pollution is not a result of inefficient resource utilisation, but rather because of radical increase in utilisation. Earlier, a person would have cherished locally produced food, today it is economical to carry food across continents burning fossil fuels in large quantities. Earlier people would have worked in the fields adjacent to them, and in a workshop near their place, but now people have to commute across cities because it is not uneconomical to do so. What I am getting at is that the petroleum price being only fixed by the demand and supply or even by the government is creating trends of over utilisation causing unjust usage of the resources which may, at this rate, never be available for the coming generations.
        Also, industrial revolution did not only reduce the prices of things, it put a price to everything. Now, previously, in a agriculture based economy, people still had production. But there was no cost of people, people were a part of the system and not a liability.
        There is no doubt that taxation and excess government intervention is detrimental to the economy, but there are some serious issues which we should decide how we plan to address. And we need to do this before we have caused some irreversible changes to our environment.

        • Aristotle The Geek  On March 12, 2009 at 3:50 am

          # “I feel that considering how tough the process of formation of petroleum is, and considering how scarce this resource is, it is underpriced. At this rate, it is common sense that the resource will be abused till it very little of it is left.”
          Prices are based on values that are subjective in nature – they are a function of demand and supply.

          Further, “abuse” makes no sense at all. You are assuming that all “natural resources” are finite in nature and that we will soon run out of them. I agree somewhat with the first position, but not with the second. Even in cases like oil, there will always be some source available – as long as you are willing to pay for it. I gave the example of oil sands – its more expensive as compared to drilling a hole in the ground – wells. But that’s a completely new source. Then there is the possibility of liquefying coal and as technology improves we will always be able to find new and efficient sources of energy – both conventional and non-conventional. As for other resources – metals, especially, they can be recycled. Take aluminum – newer cans are thinner and stronger than those made a few years ago. And its heavily recycled. The same case can be made for most others.

          People have been warning about “running out of resources” for over 100 years now. And it hasn’t happened. On the contrary, new reserves are being discovered every few years.

          # “I feel that taxation here is a necessity, so that the extra money can be diverted to developing alternate resources.”
          You think the government is better at inventing stuff than the market? Understand the market first – its about money – profits. They know that the one who comes up with “alternate resources” that are cheaper than present ones will mint money. If they don’t think that can be achieved profitably, they won’t do it. But I believe some crazy (in a good way) entrepreneur will still hammer away at the problem.

          What the government will do is take money from those who want to spend it for their needs, and divert it to what they think is important. They subsidized biofuels thinking it would save the environment. And they ended up disrupting the world’s food supply. Any resource that does not pay back the investment that goes into it is not worth considering – someone has to always pay for it. If something is out there, the market will find it – first.

          # “Air pollution is not a result of inefficient resource utilisation, but rather because of radical increase in utilisation…”
          In a free market where everything is privately owned, the one who pollutes will pay a price. In a government-run economy, no matter what the government does, the pollution will continue to rise unabated.

          The market always wants to find efficient solutions because they typically end up lowering costs. If, say, most of the petrol was converted into energy, the amount of exhaust fumes that a vehicle lets out will reduce, and it surely will have an impact even when the usage increases radically – this is the efficiency, or inefficiency.

          In what context do you use words like “unjust”? What injustice? And why should we sacrifice our life for some future generation?

          # “Also, industrial revolution did not only reduce the prices of things, it put a price to everything. Now, previously, in a agriculture based economy, people still had production. But there was no cost of people, people were a part of the system and not a liability.”
          Clarify, especially the “put a price to everything” and “not a liability” part.

          • Assman  On March 12, 2009 at 10:01 pm

            Aristotle, I understand the relation between demand supply and pricing. The price of petroleum also, barring the effect of the cartel, is governed by that. I feel that the petroleum has taken millions of years to form and there is surely limited amount of it. I feel that a product such as this should be used very judiciously, and only when absolutely necessary.
            While I think the Government is not better at inventing an alternate energy source better then free markets but I do feel that the increased taxation will increase the incentive to come up with the alternate. The alternate is awaiting conception for a while now, and there is no proven alternate technology which can replace without an adverse impact still. New reserves are being discovered, and surely there must be a few more reserves waiting to be discovered, but there is certainly a limit.
            I feel the pricing should be justly placed as the production cost
            +overheads
            +cost(value) of producing the natural resources
            +cost of the disposal of the by products thereafter
            + (the profits based on the market).
            Here I am proposing to introduce two components which are only partly included – A. the cost(value) of production of natural resources and B. the cost of disposal of by products thereafter which get included only till the point of human interaction. The energy and time spent by nature in the production of these resources, the rarity of the event in a macro time scale should determine this component A of the cost. The time and energy spent by nature, the adverse impact on the nature and the cost to correct the same should determine this component B. And well where do these components A and B go, I do not know, but the government is a good custodian of it because it is responsible for these things as of now.
            I know these do not have the makings of a concrete economic theory and will require some pruning here and there, but this is one way that the usage of petroleum and other natural resources at an ever increasing rate can be curbed.
            We are still yet to agree on the necessity of curbing the usage of petroleum and other natural resources, and I submit, I can not convince you of that need.

            • Aristotle The Geek  On March 13, 2009 at 2:51 am

              You are walking down the wrong path when it comes to deciding production cost. And I didn’t say that you don’t understand markets in the “demand and supply” sense; its at a far more deeper level. Let me explain.

              Values – economic values – are purely subjective in nature. Even if I spend ten years carving a figure out of a rock, unless someone is willing to pay me for the effort – buy that carving, it has zero value – regardless of the enormous effort I put into it. It may seem unjust, but that’s the market. Only those products and services that people demand have value, and “that value” is determined by a process of demand and supply. Further, even your costs are subjective – they too are values that you have placed on someone else’s efforts or products. This theory needs to be understood before any discussion on economics.

              # “I feel the pricing should be justly placed as the production cost
              +overheads
              +cost(value) of producing the natural resources
              +cost of the disposal of the by products thereafter
              + (the profits based on the market)…”

              Let’s discuss A and B. Your “A” is to be determined based on “the energy and time spent by nature in the production of these resources…” How do you value this, and more importantly, why? I have already agreed that the resources are finite; it is a fact that replenishing them – unlike our forests – will take millions of years. But that is no reason to include it in the “cost of production.” Nature has already placed a cost on its resources – the ones required to locate and bring them out of the ground. Nothing more needs to be added. As I said, if some resources were to become scarce all of a sudden, the market would immediately work that information into its pricing system. As for “B”, I accept the pollution argument – because I hate fumes – and nothing more. But no treaty or government action can put an end to it.

              You are needlessly worrying about people who might live on Earth in, say, 2200. Did those in 1800 know that we would be using electricity, or flying in aeroplanes, or going to the moon and mars? Anticipating needs of a future that you cannot even imagine, and sacrificing the needs of the present generation on the basis of such a vague theory is … – I think you get my drift. Energy drives the world, and man will always find new sources of energy, as also other minerals. Stop worrying about scarcity on that front.

              # “I do feel that the increased taxation will increase the incentive to come up with the alternate. “
              It will do nothing of that sort. Sources of energy that are cost-effective only when heavily subsidized are a bad idea. And that’s what taxation will do. New sources of energy have to compete on the market if they have to be successful. Otherwise we will continue to have fiascoes like biofuels, and even solar energy. Let one source beat carbon-based fuel sources, and the world will adopt it the next day.

              # “We are still yet to agree on the necessity of curbing the usage of petroleum and other natural resources, and I submit, I can not convince you of that need.”
              You cannot, because, as I said, your argument is based on a wrong premise – that usage needs to be curbed. And I have already tackled that – human ingenuity makes the argument unnecessary.

              • Assman  On March 13, 2009 at 10:52 am

                To clarify, I have nothing against free market capitalism, and I quite agree that the form of market will not make a difference on the limited nature of resources. Yet, with respect to conservation of resources, I do feel that these resources need to be conserved and that is why I feel we have erred in our system and am suggesting amends. I do not think that subsidizing of a new technology would be a good solution, rather I feel that the cost of traditionally accepted technologies would have to be increased to bear the impacts that they are creating.
                I think Aristotle gathers my position largely w.r.t this.
                Now why I feel “A” component should be included is that I do not feel it is being used to address our “needs”. We can source wheat from closer by, we can have local commodities instead of trading from across the nation/oceans without compromising our happiness/needs. The only reason we go for a costlier option is that the option costs us lesser. Like say, local wheat in Bangalore costing more but transported less and wheat from Punjab costing less but transported more hence burning more petrol. Economics may tell us that the latter is a better option. But it makes little sense to burn all that much excess petrol to gain a few bucks more of profit. And that is where my reservation lies. A product which has taken a long time to form and which is limited, not to be formed quite easily again can not be viewed in its monetary worth alone. And if it should be, then the meta-economic components need to be added to its cost as well.
                Other issue is that the increased happiness in coke or other drinks as opposed to local/natural drinks is notional. I do not think that it is increasing any happiness and the fact that it creates jobs etc. is akin to saying that breaking a window creates employment (broken window fallacy).
                Summarizing, the usage of petrol in today’s age, seems quite dispensable or vastly reducible. More than conserving for a future generation, it is important that these products be judiciously used. That is what I think is not happening today.
                Also I think you can reconsider your response to the increased incentive to production of alternate technologies in the event of petroleum costing more(adding the proposed) components.
                Now while I realise that these are subjective components being added to the efforts of someone else (nature), these components will give an idea of the rarity. I can not defend the pricing that I propose, because these are preliminary ideas. If you feel the need to include the components or to correct the pricing of “valueable” resources then we can work on its improvement. Otherwise, please feel free to ignore this, for I can not market the correctness of a theory to you the need for which you do not agree with yet.

                • Aristotle The Geek  On March 14, 2009 at 3:38 am

                  Unless you come up with an answer to why the resources – limited as they may be – should be used “judiciously” you are not going to convince anyone. As far as I am concerned, the whole theory is flawed because of this lacuna. Man has lived on Earth for a million years without petrol; and I am sure he will find some way to replace any resource that extinguishes.

                  I will give a couple of examples. Imagine that we are out of coal and oil and gas – nothing is left on Earth. Now what? Obviously you still have wind and sunlight and tides and geothermal sources. And the price of energy will then adjust to reflect this case. Further, Imagine we are out of iron ore, and bauxite, and uranium. Now what? Obviously we will have to recycle existing items and look a other alternatives. Alternative sources will always be available.

                  You are constructing a theory based on a doomsday scenario. Tell me this – the resources are finite. That means we will run out of them regardless of how judiciously we use them. Lets assume that conservation will make them last 50 years more. After that, what?

                  Your theory is no shield against resource exhaustion. The only thing conserving resources – that don’t need to be conserved – does is waste wealth and effort. Another thing – you are placing a higher value on Earth than on Life. Think about it.

                  • Assman  On March 14, 2009 at 8:06 am

                    Arisitotle, I thought about it, I do not think that I value earth more than life, I am saying these are not critical to our life or happiness. We can quite easily conserve these.
                    You believe that after petroleum is exhausted there would be viable alternatives. And that they are not viable now, but will be viable later because of the increase in petroleum costs. But considering the amount of energy that we use, this seems hardly enough to replace a majority of our needs today.
                    Now as you say if we conserve it, we could have it last another 50 years. Maybe less, but the idea is that with the new components of cost considered the cost of petroleum is more “real” and the incentive to build an alternate is higher. Of course the alternate needs to get evaluated in the same manner.
                    Anyway, I think we will stop here, we run the risk of repeating ourselves.
                    I am curious to know the libertarian view on
                    1) insurance
                    2) cartel
                    3) copyrights
                    Can you tell me what is the libertarian take on the above.

                    • Aristotle The Geek  On March 15, 2009 at 3:22 am

                      # “Anyway, I think we will stop here, we run the risk of repeating ourselves.”
                      I agree.

                      # “I am curious to know the libertarian view on
                      1) insurance
                      2) cartel
                      3) copyrights”

                      The libertarian polity is based on a laissez-faire system – no regulation, no subsidies, no government-granted monopoly, no import and export duties, no anti-dumping duties etc. Since it is a broad ideology, there is a difference of opinion as to taxation – some minarchists (limited government libertarians) believe that taxation is necessary – mostly voluntary, the anarchists say – to hell with it.

                      Within this frame work, if some companies come together to form cartels, the law won’t have the power to break it up. But, under a free market, cartelization of a bad kind – bad quality, high prices – is not very likely because a competitor is always free to enter.

                      Copyrights – again, there is a difference of opinion. Some minarchists believe that intellectual property is a form of property and that the government should enforce it just like any other property right. Everyone else is against the notion of “intellectual property.” See this for more information.

                      Insurance – I don’t know what you are after. Insurance is a business like any other business. Clarify.

                      PS: Start a new comment thread – this one has reached its max depth.

  • raveler  On March 12, 2009 at 11:09 pm

    I have heard this argument against capitalism before, that resources are finite and capitalism will deplete them all, and then bla, bla bal; This is the same crowd that insists capitalism caused the great depression.

    First, resources are finite no matter what form of government, or economy exists. Take oil for example if oil were $200 a barrel, it’s still cheaper to refine, than ethanol or biodeisl, thus more profitable. The only reason venture capitalist pursue, ethanol, biodiesl, windpower, ect . . . is because of the government subsidies. Government needs to get out of the business of creating bogus markets with tax payer subsidies, it’s antirights,(remember the only thing Gov can create is bureaucracy). If gov enhanced markets didn’t exist, venture capitalists would invent alturnative energy technologies in the event of resource scarcity, but when the fed pays them twenty cents on the dollar to build wind power where are they going to sock their money? (it’s a non sequitur). Look at the current energy policy in the United States and ask yourself, how capricious is this? Obviously they never stopped to contemplate the causality of ethanol, they couldn’t have; because, it’s a disaster! Your standard of living, your quality of life is directly related to your energy consumption. The environmentalist would happily cast us back to the 19th century in a heartbeat, for some hypothetical G W myth. The environmental agenda in this country is antiman, antirights, thus antilife.

    T.F. needs to return to the journalese expertise that wins Pulitzers. Thanks for the healthy discussion.

  • yet_another_hindu_infidel  On March 22, 2009 at 1:27 pm

    hmm… didn’t swaminathan iyer say something similar on the lines of “sustainability” of global trade balances and ethics. if risks of cracks in massive globalization and gargantuan trades can lead to a domino effect resulting in empires left in smoldering rubble then would it be rational to go back to same old trading traditions. i think it would make a lot more sense if states produced the smallest and simplest things themselves in there own backyard instead of reaching out to another continents for there simple needs. it’s the simplest things that create gargantuan trade deficits and expose or risk the world to another recession. or a depression. karan thapar fears a lurking depression emerging out of east europe over defaults in repayment of loans amounting to 1.5 trillion dollars.

    • Aristotle The Geek  On March 22, 2009 at 6:04 pm

      All these commentators, Swami and Thapar included, are pragmatists who want to preserve things as they are. The present system of trade is an agreement between different mafiosos – each carving out pieces of their own territory and controlling the affairs in their area. Since they don’t know what free trade is, or can’t allow free trade (where will they earn their “cut”, then?), they play around with a system they don’t understand. Its like fiddling with a nuclear reactor hoping against hope that you don’t trigger a meltdown. Unfortunately that has happened.

      China and the US had a small military standoff – their navies actually. And the way Obama and his idiot secretaries are fumbling around, China is going to be mighty pissed off. The UK has started printing money. And the world is going to the dogs – being fed to them actually.

      If these nut jobs don’t see reason, things will only get messier. Some one needs to whip them all – from Bush to Obama to Brown to Sarkozy. All of them deserve it.

  • yet_another_hindu_infidel  On March 22, 2009 at 7:24 pm

    i don’t think the world will be going back to it’s decade old trade practices. the current financial crisis is a call for change. the US is already on a demand crunch and it wouldn’t make much difference if china pulled out a few dollars out of it’s treasuries. if china thought it could strangle the US economy with it’s forex money then it thought wrong. china stands more to loose in event of any misadventure. china’s caution on the navy stand off or whatever was just it’s blatant attempt to keep it’s head above waters. you don’t need speculation to determine what china had in mind jamming all that money in US treasuries. it may now think it done something wrong. no doubt the biggest looser in this crisis are the chinese. the US corporations can slowly make a transition and approach other asian countries for there demand/production needs. china might have trillions of dollars worth of IOU’s but it’s fiat money after all. the euro might soon take a dive to cause this recession isn’t over yet and some are already talking about a depression.

    let me ask you? what would china want more? it’s trillion dollars worth of “guaranteed” paybacks? or a share in the US market?

    • Aristotle The Geek  On March 22, 2009 at 8:28 pm

      # “if china pulled out a few dollars out of it’s treasuries.”
      Its not a few dollars, its 700 billion+. And remember this – if China does it, everyone else will do it – that would be a signal that they no longer trust the US dollar. If the reserve currency changes, the US will have to make payments for its imports in that reserve currency, like we do in dollars – because it is a world reserve currency. The implications for the US are too terrible to contemplate. Read this. And this man is thinking war.

      # “the US corporations can slowly make a transition and approach other asian countries for there demand/production needs.”
      Not easy. Half the factories – those that export to the US and other countries – in China are owned and operated by US corporations.

      # “let me ask you? what would china want more? it’s trillion dollars worth of “guaranteed” paybacks? or a share in the US market?”
      China has two problems – one, its economy is export oriented, and its politics is undemocratic. If the economy collapses, there will be a literal bloodbath. So it will have to find other markets or shift inwards. The second problem is its investments are losing value – the more the dollar falls, the more it will happen. What it might want is a “guarantee” that its investment doesn’t become as worthless as a Zimbabwean dollar. It could start buying US companies, but if the past is any indication (the opposition to the CNOOC-Unocal deal), it isn’t very likely.

  • yet_another_hindu_infidel  On March 22, 2009 at 9:48 pm

    Its not a few dollars, its 700 billion+….
    …thinking war.

    dude, the chinese pulling out there money isn’t happening. i just meant to say that the hunter had become the hunted. if the chinese pull out there money which i don’t think they’ll do(cause they’ve just figured out the game) they themselves will be the biggest losers here. i have trouble doubting US suzerainty. especially the sheikhs of middle-east because they have no where to go except the US really. the europe, middle-east, US, the japan and south korea block, all consider china as a bad child. and oh yes, 700+ billion is jack sh!t considered to the total GDP(14 trillion) of the US. pulling out that sum of money isn’t exactly a knockout.

    • Aristotle The Geek  On March 22, 2009 at 10:17 pm

      I am not saying it will – the Euro is not in a great shape anyway – but something is cooking

      China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

      Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

      Do you know how important a “reserve currency” is? The US was getting a free lunch all this time. If the dollar loses its “reserve” status, it will be in huge trouble, with its trillion dollar trade deficit and all. Go back to India 1991 – that bad. Again, I am not sure it will happen. But if it does, there is going to be a bloodbath.

  • yet_another_hindu_infidel  On March 22, 2009 at 10:48 pm

    tit for tat. so be it. let US respond. if china knows a market at par with the US or better then let it go find one such. and if it’s a war then im curious to see which country reaches whose shore to bomb who. the middle-east was a fucking desert – didn’t matter what you bomb. ballistic and depleted uraniums sounds good to me. what would china’s fucking tactic be? could china’s farmer solders play “swarm” in a country several fucking thousand miles away. the US has been planning for a war since WWII. you got to be day dreaming to considering writing off the US. if it’s a bloodbath, im asking who’s?

  • blr_p  On April 29, 2009 at 8:10 pm

    Trying to find an appropriate place to post this, maybe I got lucky with this quote

    “What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

    Wanted to talk about energy, since thats the drving force behind everything.

    Read this

    http://www.sciam.com/article.cfm?id=the-economist-has-no-clothes

    and then

    http://www.energybulletin.net/node/48731

    which states

    The economy = How much energy is available.

    Let us know your thoughts :)

    • Aristotle The Geek  On April 29, 2009 at 10:00 pm

      “The economist has no clothes,” Nadeau writes. Neither does he.

      (Its interesting to note that he’s on the faculty at GMU and yet he left out the Austrian school out of his “criticism” altogether – Boudreaux, an Austrian economist, is the chairman of their Department of Economics. Carl Menger should have been included with Jevons and Walras.)

      Before Nadeau criticizes economics, he should get a grip on the fact that in economics, all values are subjective in nature. And therefore damage to the environment will only have value if the “damage” is proven conclusively, and the “damage” actually “damages” someone – like pollution does.

      Basically, the SCIAM article is a joke.

      Lardelli’s article is better. He, unlike the Keynesians, understands that you can’t eat money. But he’s wrong when he says that the recession is resulting in the “stuff” disappearing. What’s happening is that money – among other things – is being shown its true place, and its true purchasing power.

      Further, to paraphrase JS Mill, demand for commodities is not demand for energy. Money and energy have nothing to do with each other. The energy/dollar wealth ratio that Lardelli’s plucked out of his hat is a figment of his imagination. When he equates energy consumption with economic growth and then comes to some conclusion, he’s – and I love this phrase – confusing correlation with causation. And I don’t buy his “logical” conclusions. Some of them are downright stupid. This is what I would say to the conservation brigade-

      If we paid too much attention to those conservationist people, we’d still be conserving flint for our grandchildren to make axes.

      It’s strange how Malthusians – and I use the term broadly, as a synonym for catastrophiliacs – seem to thrive in periods of crisis.

  • blr_p  On April 29, 2009 at 10:38 pm

    yet he left out the Austrian school out of his “criticism” altogether

    I think he’s levelling his criticism at mainstream economics. Saying its using outdated models, which struck me as a bit odd.

    When he equates energy consumption with economic growth

    What if you substitute the word production instead of consumption ?

    The crux of that article as i see it is if you cannot continue to produce enough energy, we cannot grow or at least not at the rate we have in the past. So it gets harder to service future debt etc.

    What my question is about is more to do with whether we have passed the peak moment of energy production ?

    As this energy is what fuels everything.

    Its not how much oil sells for on the market but rather how much it costs to produce said amount of oil.

    I thought this was not true, but they use the IEA documents to base their premise on.

    • Aristotle The Geek  On April 29, 2009 at 11:35 pm

      # “I think he’s levelling his criticism at mainstream economics.”
      He’s criticizing the neoclassical “theory of value.” That’s where Menger comes in.

      # “What if you substitute the word production instead of consumption ?”
      If energy is not demanded, production is irrelevant isn’t it? What’s important is – whether the demand is being met. Even then, if the supply falls short of demand, the prices will rise. And new investments into exploration and newer energy sources will be made. That’s how the market works. What is “growth,” BTW? And why should anyone care about it? That’s the problem with aggregates – we tend to concentrate on irrelevant ideas.

      # “whether we have passed the peak moment of energy production ?”
      There is no such thing. Every age had its own premier energy source – humans, animals, now hydrocarbons. If the market is left alone, it will remedy any “shortfalls” in energy production.

      # “Its not how much oil sells for on the market but rather how much it costs to produce said amount of oil.”
      I don’t understand why that is important – if it costs $1000/barrel, it will sell for $1500 on the market. So what?

      Eventually the COP *will* affect the price, and I don’t see why the price is important either – I agree it is to individuals and firms who do the actual buying and selling. But why you, me and all the armchair theorists? Price is a function of demand and supply. And price is the mechanism that the market uses to allocate scarce resources. If there was just one barrel of oil left in the world, I could buy it for a billion dollars and take a last joyride in my car running on the ICE, whereas the farmer who needs it to run a tractor may not get it. So what?

      I wouldn’t worry about energy. I would worry about government intervention in the market though. They will kill the hydrocarbon market while billions of barrels of oil lie buried underground.

  • blr_p  On April 29, 2009 at 11:57 pm

    What is “growth,” BTW? And why should anyone care about it?

    GDP growth, what allows a country to prosper.

    ..which depends on energy being available to produce goods & services. If the cost to obtain it increases as time goes on then we reach a point where its not profitable to extract any more.

    Less energy = less GDP growth = harder to repay debts and finally currency devalutaion with the evil that accompanies it.

    See the factor missing in this discussion i feel is time, we don’t know for how much longer we can continue to get oil at affordable prices.

    There is no such thing. Every age had its own premier energy source – humans, animals, now hydrocarbons. If the market is left alone, it will remedy any “shortfalls” in energy production.

    Thats the thinking i feel this guy is gunning at. That the market can solve any problem but isn’t it true that the market actually depends on energy to exist. We all do.

    If energy production cannot keep up with growth expectations then growth levels off and then declines.

    I never did believe in peak oil, and don’t know how to say its not a problem.

    • Aristotle The Geek  On April 30, 2009 at 12:36 am

      # “GDP growth, what allows a country to prosper.”
      Its an aggregate, and an irrelevant figure. Prosperity comes from invention, production, consumption and efficiency – not from figures calculated by some paper pusher in a government office. The problem is you are looking at the issue from “within” the present system, whereas for me economics is individual action and the free market fulfilling people’s demands. I will quote King-

      A grave deficiency in any centralized economic system results from inadequacy of information. The controlling authorities in a centralized system are never able to obtain a comprehensive and accurate depiction of the society under their command.

      Government reports are often meaningless on their own terms and almost always misrepresent the nature of an economy. For example: one man spends to build a bridge, another to destroy it. Does it make sense to sum these two expenditures together into a “GNP”? Incompatible plans do not add up to some kind of “super-plan” nor does spending on them add up to an aggregate reflecting total productivity of any kind whatever.

      The Gross National Product is supposedly a measure of economic prosperity. But is it?

      If I wash my car, the only effect on the GNP is the cost of the water and soap that I use. Suppose that I give the neighbor kid $5 to wash my car. In this case, the GNP is increased by the cost for the water and soap, plus the $5 I give the neighbor kid. But is the economy really more productive if I give the neighbor kid $5 than if I wash my own car?

      When I get my shirt washed at a laundry for $1, the GNP is increased by $1. Suppose I marry my laundress and then no longer pay cash to her for washing my shirt. Is the economy more prosperous in the first case than the second?

      I go to my dentist and get a root canal. He charges me $300, and the GNP is increased by $300. Then he hires me to paint his house and pays me $300. Now the GNP is up $600. Now suppose that instead of paying him cash, I agree to paint his house in exchange for the root canal. No cash changes hands. The GNP is $600 less than if we had paid each other cash rather than bartered. Is the economy more prosperous if we pass the $300 back and forth than if we barter?

      This suggests a simple way to increase the GNP: All we need do is get Congress to pass a law mandating that every person in this country shine the shoes of exactly one other individual, charge him $20,000 for shining his shoes, and exempt such shoe-shine fees from taxation. The income of each individual in the United States would go up by $20,000. The GNP would skyrocket! But each individual would be left with the same amount of money as before; each would have done a trivial amount of labor; each would have had a trivial service performed for him. That’s all. Would anyone be better off in the wake of such a doubling of the GNP?

      My position is that the government shouldn’t interfere in the economy, and nor should it collect any such statistics – they always cause more harm than good. Economics is not about aggregates, its about individuals.

      # “See the factor missing in this discussion i feel is time, we don’t know for how much longer we can continue to get oil at affordable prices.”
      Assume that oil will cost $1000/barrel from tomorrow. What then?

      # “but isn’t it true that the market actually depends on energy to exist. We all do.”
      It does. But there are many different sources of energy – hydrocarbons is just one of them. As soon as hydrocarbons become pricier, an alternative that was previously unaffordable will now become affordable. That’s how things work – always.

      # “If energy production cannot keep up with growth expectations then growth levels off and then declines.”
      I don’t see that happening. And I wouldn’t put my faith in catastrophiliacs and their untenable hypotheses.

  • blr_p  On April 30, 2009 at 12:54 am

    Assume that oil will cost $1000/barrel from tomorrow. What then?

    Ah, so lets see how economics gets this done then :)

    If its that quick, are we not dead ?

    no time to adapt.

    Demand will reduce drastically and with that a lot of production. This applies to everyone.

    So how do we continue to create value then, if energy becomes exorbitant ?

    • Aristotle The Geek  On April 30, 2009 at 1:19 am

      The market cannot perform magic – defy reality. It can only use the pricing mechanism to issue signals regarding relative scarcity. If we are really short on oil, and there is no other energy source in sight, then yes growth will take a huge hit, and so will civilization. We can’t do anything about it. But if the scarcity manifests itself over a period of time, the pricing mechanism will warn us in time to either change our lifestyles or to look for other resources. For example, if countries hadn’t subsidized diesel and built highways without looking at whether they pay for themselves, goods would have moved via trains rather than via trucks. And electric cars and other “eco-friendly” alternatives would have made their appearance sooner rather than later gaining critical mass in the process. Fiddling with the mechanism affects everything.

      # “So how do we continue to create value then, if energy becomes exorbitant ?”
      Price is not the problem, scarcity is – though they are related. It really depends on how exorbitant “exorbitant” is. Energy is not a vanity purchase or collector’s item like say an art piece. So, any source of energy will only be useful if there’s plenty of it available. If we forget hydrocarbons altogether, we are left with nuclear, tidal, solar, wind and some other esoteric sources of energy. Then there are the biofuels. All of them are renewable in nature and they will have their price. And it will have to be paid. There’s nothing that can be done to avoid it. Over time, the situation will improve because costly power will force manufacturers and individuals to become more efficient. Value will still be created. Price has no bearing on it.

  • blr_p  On April 30, 2009 at 2:11 am

    The market cannot perform magic – defy reality. It can only use the pricing mechanism to issue signals regarding relative scarcity.

    Right, we have some time.

    http://www.energybulletin.net/primer

    The whole crux of this argument is tied down to how the new discoveries are smaller than previous which affects production.

    Its not like there is more of the earth to explore. We are slowly arriving at the point where the most profitable oil has already been discovered. There is more but it gets more expensive to extract. This will buy time.

    Time is the key factor. If there is enough, economics will take care of the rest.

    This does have a bearing on how long we can continue to keep printing money tho. As future debts become unserviceable due to insufficent value creation.

    So if you project into the future, where the economy is much larger than it is currently and by that i mean there is much more money around than present along with the extra debt created.

    Do we reach a point where the current system is not sustainable ?

    Where its not possible to consume as much and still repay debt.

    • Aristotle The Geek  On April 30, 2009 at 10:27 pm

      If your argument follows from “whereas fossil fuels are akin to a massive inheritance, one spent rather drunkenly, renewables are much more like a hard won energy wage,” that a massive supply crunch is in the offing which will affect the boom that we have become used to, I agree, but its still a long way off. There are plenty of untapped (and even undiscovered) hydrocarbon reserves. But yes, there will come a time when we would have used up most of it. All we can hope is we discover the next major energy source. Otherwise its back to a low-energy lifestyle.

      But how is this related to printing money, or value creation? Printing money is taxation by stealth (even Mankiw shows his true colors), and the debts incurred by government are nothing but waste of money, and a “redistribution” of wealth. If governments are not able to collect tax as a result of a slowdown, let them default on their debts. That would teach them not to take up more debt than they can repay (governments don’t “repay” debt in any case; they keep “evergreening” it, and more – increasing it).

      The fact is – you can only consume what is produced. And the purchasing power of money is determined by the “real” economy. So, if an economy produces 100 apples and has a billion dollars floating around, the price of each apple will probably be $10 million.

      In a low-energy environment, energy will be scarce, and hence costly. So all products will be costly. And people will have to live with that. There’s no alternative. Governments will have to learn to live within their budget, as they did till the 20th century.

  • blr_p  On April 30, 2009 at 11:48 pm

    but its still a long way off

    This is the main point of contention. Peak oilers want to claim that we have already passed it. But i’m trying to find cracks in this assertion.

    If you look at this graph

    Only because in the last 5 years production has not increased do they think the peak has already past. Because it would be in the interest of the supplier to sell as much possible and profit from it.

    Further they say it decreases at 2-4% per year. Which implies we would have half as much as we do now in only 25 – 50 years hence and a quarter, 50 -100 years from now.

    So 25-50 years from now we can expect to pay double whatever the equilibrium price for oil is currently and twice that again in 50 – 100 yrs hence. This is assuming their figures are fairly close to the real thing.

    This brings into question what caused the spike in oil prices during the 2005-2008 time frame.

    I thought it was mainly due to speculation in the futures markets. By 2006 the real estate bubble was showing signs of deflating, so the money shifted into oil futures creating an oil bubble. The war talk over Iran might have aggravated it slightly.

    What do you think ?

    Peak oilers think it was because production plateaued and that made ppl buy futures to gurantee prices at a later date.

  • blr_p  On April 30, 2009 at 11:49 pm

    graph did not embed for some reason

  • Aristotle The Geek  On May 1, 2009 at 1:47 am

    # “Only because in the last 5 years production has not increased…”
    All they have to do is wait for Alaska to open up, and the Arctic to be explored, and the countries around India that are sitting on huge gas reserves to get going etc etc. They seem to have missed the politics, and the geopolitics, of energy exploration.

    # “This brings into question what caused the spike in oil prices during the 2005-2008 time frame…”
    It surely wasn’t “speculation.” The whole world, and China and India particularly, have been consuming energy like anything over the last decade, and prices have steadily moved up since the 1997-98 price of $10/barrel. See, the US “has” been spending money – there has been “real” consumption. It’s only that the consumption wasn’t backed up by savings. When the consumption plummeted, so did production, and so did oil prices. That’s all there is to it. The spike in prices that lasted for about 18 months beginning early 2007 was because demand was more than supply – there wasn’t too much of spare capacity.

    You can find a good account here. And a chart showing oil prices over the last decade.

  • blr_p  On May 1, 2009 at 7:43 pm

    All they have to do is wait for Alaska to open up, and the Arctic to be explored

    Drill baby drill — a reality check

    An oil & gas Shangri-la in the Arctic?

    and the countries around India that are sitting on huge gas reserves to get going etc etc. They seem to have missed the politics, and the geopolitics, of energy exploration.

    The Caspian Oil Myth

    Not exactly what you read on the indo-pak defense boards of course or indeed for that matter our press :)

    • Aristotle The Geek  On May 2, 2009 at 2:01 am

      Once this recession ends, energy prices will be back above $100. By 2013-14, they will touch $200. The simple reason is there is too much o politics when it comes to energy – geopolitics, and environmental politics. While I am optimistic when it comes to technological breakthroughs, I am not optimistic about the politics surrounding it. Only when energy becomes extremely costly will the politicians do something about it.

      This doomsday scenario has been playing on for 100 years now, and the peal oilers have been wrong every time. I think they are wrong again. I agree there is a limit. But that limit has not been breached yet.

  • blr_p  On May 1, 2009 at 7:53 pm

    The spike in prices that lasted for about 18 months beginning early 2007 was because demand was more than supply – there wasn’t too much of spare capacity.

    Ok, then that graph about production in the last 5 years correlates with the price increases we saw. Too much demand and not enough supply.

    Yes, this peak oil production theory is starting to have more credibilty now.

  • blr_p  On May 2, 2009 at 8:19 pm

    This doomsday scenario has been playing on for 100 years now, and the peal oilers have been wrong every time. I think they are wrong again. I agree there is a limit. But that limit has not been breached yet.

    More like 50 years which is when Hubbert’s paper came out. Consider this.

    Peak oil gets delayed so long as there is spare capacity. The Non-Opec members do not have any. Which means it has to come from the Opec members.

    “That’s a problem. Saudi Arabia stands alone as the player with the resources, technical skill, and desire to increase production in a meaningful way in the near term. The other major OPEC members with big resources – Iran, Iraq, Venezuela, Kuwait, and Nigeria – all face political constraints that will limit their ability to add large increments of new production.

    Of course, if those political constraints were removed, the issue of peak oil would probably be forgotten for another 20 years or so. Wells believes that Iraq could eventually produce 7 MMbbl/d, but that level won’t be reached until at least 2020, due to the obvious obstacles: political wrangling, violence, and the lack of technically savvy personnel who can manage large new exploration and production projects. Iran, Venezuela, and Nigeria could likewise ramp up production, but all are beset by political regimes that have little interest (or ability) to dramatically increase output for the export market. Wells predicts that Iran may be able to increase its output to about 5.5 MMbbl/d, but not much beyond that.”

    The other argument the peak oilers have which that SCIAM article alluded to is..

    Non-Market Economics vs. Price System

    “Technocrats argue that communism and capitalism are both systems evolved from scarcity, and that mankind has never attempted to implement a system based on abundance, using science and energy accounting to arbiter government decision making. In this way, the technocratic system would not be susceptible to the failings of Communism or Capitalism or price system economic concepts.”

    …which is mocking this paen to the Price System :)

    • Aristotle The Geek  On May 2, 2009 at 9:54 pm

      I have already written about what I think of peak oil. And this is the second argument.

      There is no such thing called non-market economics. If something isn’t (relatively) scarce, it isn’t traded on the market, it doesn’t have a price, it is not part of economics. Further, how are these “technocrats” going to “distribute” goods and services? What if I want Bruce Willis to wash my car? I think he will, once, if I pay him five million dollars, but how will that happen in a technate? Or what if I want to import exactly one apple from Himachal Pradesh, the cost be damned?

      These jokers are no different from the communists who thought that a central planner could fix billions of prices and thus run an economy, and that the “government” will make the decisions. “Price” is determined by demand and supply. People demand the strangest of things, and if there is enough demand, someone will start supplying it as well. Values are subjective. Energy doesn’t enter the calculation here, it cannot. There is no way you can calculate the energy cost of each and every product and service on the market. I think you need to read the Mises essay on economic calculation that I reference here. As for that paean, it is a bad joke and was definitely not written in 1944, three decades before Watergate.

      “Technocracy”-

      In a ‘High Tech’ society (such as North America) to ensure stability, and continuity, it will be necessary to institute measurement and control of the economy by energy units instead of monetary units (money), and management of the economy by energy budgets instead of money budgets, at all levels, including consumer credits. That’s it!

      […]

      All necessities for life in our advanced technological society would be available to all – it would be an affluent society whereby every citizen commanded from cradle to grave, not only basic needs but many luxuries.

      The mechanism that enables our society to exist would be the establishment of “Functional Sequences,” such as Transportation, Communication, Education, Medicine and etc. At the top of a pyramid type structure would be the Continental Director, and then spread out below and reporting to the Director would be four major sequences: Armed Forces, Continental Research, Social Relations and Foreign Relations.

      […]

      Each citizen achieving maturity or classified as an adult, would be issued an “Energy Distribution Card.” This is similar to the credit card usage of today but with a significant and profound difference. In place of a monetary control, the energy required to do and use anything would be tabulated and each person would be allotted his or her share of the amount of the Continent’s available resources after all basic necessities are accounted for. Be assured, even though the present method of operations has wasted so much in its need to expand, there would remain adequate energy and natural resources to allow each person the widest latitude of consumption.

      How do you know what the available resources are? what about private property? Who will produce everything? What about freedom?

      “Jokers” is the right word, for more reasons than one. If we find a kalpavriksha, then yes, anything goes.

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