Following a series of lesser acts of terrorism, our own World Trade Center in New York City was destroyed on September 11, 2001 by airplanes full of jet fuel, hijacked and made into massive bombs by Muslim terrorists. The loss of life was in the thousands. Property damage was in the billions. Since then, there has been a seemingly endless series of car bombings, suicide bombings, and assorted other brutal murders in Israel, Iraq, the rest of the Middle East, Holland, Spain, Britain, and around the world, all carried out in the name of Allah and Islam. None of the terrorism has met with any significant or meaningful repudiation by allegedly respectable Islamic organizations or spokesmen. As a result, some people have become impatient with Islam and its prophet Muhammad. This has especially been the case in Western Europe, which is home to relatively larger numbers of Muslim immigrants and their offspring than is the United States and whose Muslim population also contains a relatively larger number of highly militant “activists,” i.e., individuals threatening, and not infrequently carrying out, acts of force and violence.
In this environment, last September, finally tiring of the self-censorship imposed by the desire not to provoke Muslim fanatics, a courageous Danish newspaper Jyllands-Posten decided to publish a collection of twelve cartoons that it had commissioned as a test of self-censorship. The newspaper’s editor, Fleming Rose, was standing up against what he very reasonably perceived as a profoundly unjust demand by Muslims. He is quoted as saying, "Some Muslims try to impose their religious taboos in the public domain. In my book, that's not asking for my respect, it's asking for my submission." (The New York Times, Feb. 5, 2006.)
One cartoon published by the newspaper depicted Muhammad as a bomber, another showed him with horns, a third showed him standing blindfolded between two women who were totally covered in black except for a narrow opening over their eyes, which was the size of his blindfold. A fourth cartoon showed him standing at the gates of heaven telling newly arrived suicide bombers that heaven had run out of virgins. (All of the twelve cartoons can be viewed on the website of Wikipedia (http://en.wikipedia.org/wiki/Jyllands-Posten_Muhammad_cartoons.) There is nothing in any of the cartoons that would greatly offend anyone in his right mind.
The New York Times’ article reports, however, that a group of Danish fundamentalist Muslim clerics “inflamed the response” by adding “far more offensive cartoons that never appeared in any newspaper, some depicting Muhammad as a pedophile, a pig or engaged in bestiality.” They did this after their demand that the Danish government punish the newspaper and apologize was rejected. Wikipedia reports Denmark’s prime minister as replying, "The government refuses to apologize because the government does not control the media or a newspaper outlet; that would be in violation of the freedom of speech."
The courage of Jyllands-Posten and the Danish government was emulated by newspapers in half a dozen other European countries, which reprinted the cartoons. In the United States, the only newspaper of note to have joined them thus far appears to be The Philadelphia Inquirer. ABC’s Nightline showed one of the cartoons in its broadcast. Practically all others, including the US Department of State and the governments of most European countries seem to be merely trying to pretend that they uphold the right of free speech: they are all for free speech, but it should not be used to offend anyone’s convictions. French President Chirac, for example, simultaneously claims to defend free speech while asking everyone to avoid saying anything “that could hurt other people's beliefs."
The response to Jyllands-Posten’s courage has been a boycott of Danish goods, rioting in several countries, and the burning down of the Danish and Norwegian embassies in Syria, which was almost certainly the work of the Syrian government.
The following, reported in The New York Times of Feb. 4, is an indication of the further response that at least some in the Muslim world desire: "`We will not accept less than severing the heads of those responsible,’ one preacher at Al Omari mosque in Gaza told worshipers during Friday Prayer, according to Reuters. Other demonstrators called for amputating the hands of the cartoonists who drew the pictures.”
The question facing the Western world now is whether it will allow itself to be intimidated by a collection of utterly crazed fanatics and their religious delusions. If the decision is left up to most of the West’s politicians and intellectuals of the present-day, it will probably be to compromise, though hopefully less than to the extent of the severing of just the ears of “those responsible” and the amputation of just their thumbs.
The Muslim fanatics have no idea how revolting and offensive is not only their murderous behavior but also their beloved, utterly barbaric legal code of “Sharia,” with its beheadings, amputations, stonings, and floggings. It is revolting and offensive to anyone who values human life and the dignity of the human person. Let these wild beasts, for that is what they are, tremble lest they offend civilized people beyond the limit of endurance. Let them learn that in the Western world there will never be a “cultural diversity” broad enough and contradictory enough, to incorporate their barbarism into Western civilization.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested.) All other rights reserved.
Sunday, February 05, 2006
Saturday, February 04, 2006
Fiscal Schizophrenia—As Reported in The New York Times of Today, Feb. 4, 2006
Headline of The Times’ main story on page one:
“Bush to Propose Vast Cost Savings in Medicare Plan— $30 Billion Over 5 Years”
Headline and some text from a separate story on page 8:
“Bush Urges Study of Math and Science” “Mr. Bush was near Albuquerque, in the suburban city of Rio Rancho, as part of his post-State of the Union road show to promote major proposals in the address. In Rio Rancho, he pushed what the White House is calling the `American competitiveness initiative,’ which calls for, among other things, doubling federal spending on basic research grants in the physical sciences over 10 years, at a cost of $50 billion.”
Not counting the “among other things,” which will certainly add significant additional costs, Bush’s proposal on math and science works out to $25 billion in 5 years, almost enough just by itself to wipe out the “vast cost savings” of $30 billion projected in his Medicare plan.
In the article on his math and science proposal, the president is reported to have said (as a means of stressing the value of “mentoring”), “`I’m looking for a mentor, by the way, both in math and English.’” He should also be looking for one in logic. This conclusion, unhappily, is greatly reinforced by the observation in the article on Medicare that “Medicare spending totaled $333 billion last year. Under current law, it will climb by one-third in two years, reaching $445 billion in 2007, as the [president’s, the same president’s] new prescription drug program gets under way, the Congressional Budget Office says.”
In other words, the “vast savings” now being sought in the cost of Medicare, by such means as reducing “payments for oxygen equipment to Medicare beneficiaries,” are not much more than a mere 25 percent of the cost by which Medicare will increase, mainly as the result of the president’s own choices enacted just last year.
The questions must be asked: What is the president thinking? What are his advisors thinking? Do they think? Does he think? Do their right hands know what their left hands are doing? Do they know today what they did yesterday? Do they know today what they will do tomorrow?
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested.) All other rights reserved.
“Bush to Propose Vast Cost Savings in Medicare Plan— $30 Billion Over 5 Years”
Headline and some text from a separate story on page 8:
“Bush Urges Study of Math and Science” “Mr. Bush was near Albuquerque, in the suburban city of Rio Rancho, as part of his post-State of the Union road show to promote major proposals in the address. In Rio Rancho, he pushed what the White House is calling the `American competitiveness initiative,’ which calls for, among other things, doubling federal spending on basic research grants in the physical sciences over 10 years, at a cost of $50 billion.”
Not counting the “among other things,” which will certainly add significant additional costs, Bush’s proposal on math and science works out to $25 billion in 5 years, almost enough just by itself to wipe out the “vast cost savings” of $30 billion projected in his Medicare plan.
In the article on his math and science proposal, the president is reported to have said (as a means of stressing the value of “mentoring”), “`I’m looking for a mentor, by the way, both in math and English.’” He should also be looking for one in logic. This conclusion, unhappily, is greatly reinforced by the observation in the article on Medicare that “Medicare spending totaled $333 billion last year. Under current law, it will climb by one-third in two years, reaching $445 billion in 2007, as the [president’s, the same president’s] new prescription drug program gets under way, the Congressional Budget Office says.”
In other words, the “vast savings” now being sought in the cost of Medicare, by such means as reducing “payments for oxygen equipment to Medicare beneficiaries,” are not much more than a mere 25 percent of the cost by which Medicare will increase, mainly as the result of the president’s own choices enacted just last year.
The questions must be asked: What is the president thinking? What are his advisors thinking? Do they think? Does he think? Do their right hands know what their left hands are doing? Do they know today what they did yesterday? Do they know today what they will do tomorrow?
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested.) All other rights reserved.
Thursday, February 02, 2006
Oil, Big Business, and "Monopoly"
A reader of my analysis of the backlash against the profits of big oil companies thinks that one of my statements is “laughable,” namely, my claim that the “oil companies, including Exxon Mobil, have been doing their utmost to increase the supply of oil, including reinvesting a major portion of their profits precisely for that purpose. But time and again, they have been prevented from increasing the supply of oil by the environmental movement and the maze of governmental regulations and prohibitions that it has inspired.” He writes:
This reader simply ignores all of the repeated efforts of the oil companies to develop ANWR, to increase offshore drilling, to build new refineries and pipelines, and the fact that time and again they have been frustrated in these efforts by the environmental movement. He asserts the conspiratorial, leftist line, apparently endorsed by some prominent libertarians, that government intervention, indeed, socialism and communism, is a capitalist plot, that, if not invented, is at least promoted by big business and the rich for purposes of their further enrichment.
He is right, of course, to describe the environmental laws as monopoly legislation. They forcibly restrict the production of oil and thereby make its price higher. But their existence and result are not the responsibility of those who produce oil and thereby add to its supply and make its price lower.
I think that this reader and his mentors have probably been unduly influenced by the doctrine of “marginal revenue” and the supposed sensitivity of big business to a consideration of it, as opposed to a consideration of price, in deciding whether or not to expand production.
Marginal revenue is the change in total revenue that results from a change in production. It is believed that it follows from the concept of marginal revenue that the larger the share of an industry’s business that a firm accounts for, the less is its incentive to expand its production, because it will have to suffer the resulting reduction in price on its correspondingly larger, already existing output.
Thus, for example, if an industry presently produces an output of 100 units of product, which it sells for a price of $10 per unit, its total revenue is $1000. (I’ve kept the numbers as small and simple as possible.) If the industry’s output expanded to, say, 105 units, and the result was a fall in price to $9 per unit (a fall that is necessary in order to find buyers for the additional units), the total revenue of the industry at that point would be only $945, an actual reduction of $55. Its marginal revenue would thus be -$55. From the perspective of the marginal revenue doctrine, if there were only one firm in the industry, producing 100 percent of the industry’s output, its production would never expand in such circumstances, because the result would be lower earnings from the larger volume of production than from the smaller volume of production.
I want to point out that even in this, most extreme case, it does not actually follow that the industry’s output would not expand or even that the one firm that presently constitutes the industry would not expand its output. Everything depends on whether or not the production of the additional 5 units is profitable apart from its effect on the earnings from the existing 100 units of output. If, for example, the total cost of producing 5 units to be sold at $9 per unit is less than $45 by enough to provide a competitive rate of profit, those 5 units will be produced and the price will fall. The only question for the firm that presently produces 100 units is whether it wishes to produce 100 units at a price of $9 or 105 units at a price of $9. To whatever extent, it is possible for anyone else, anywhere in the world, to produce those additional 5 units, our firm simply does not have the option of choosing between 100 units at a price of $10 or 105 units at a price of $9. Its only choice is between 100 units at $9 or 105 units at $9.
In such circumstances, it’s not at all unreasonable to expect that even our 100 percent supplier firm would be out there attempting to increase its output. Because if it does not increase its output and anyone else does, it ends up with the same lower price, but does so with less volume than it might have had and accordingly earns lower profits than it could have earned.
Now the actual fact, of course, is that neither any individual American oil company nor all American oil companies taken together accounts for anything close to 100 percent of the world’s oil output. The United States consumes approximately 25 percent of the world’s oil output, and roughly half of that is now imported. This implies that total oil output in the United States itself is about 12½ percent of global output. The percentage of global output produced by any individual American oil company, such as Exxon Mobil or Chevron, within the United States is far less than that.
In terms of our example of price and quantity, the actual fact is that a large American oil company might presently produce on the order of 2, 3, 4, or 5 out of a global oil output of 100. For such a company to be able to increase its own output by an amount equal 1 to 5 percent of the present world oil output, the sheer percentage increase in its own volume would almost certainly substantially outweigh the percentage decline in the world price that its expansion caused. If, for example, Exxon Mobil could go from 5 to 10 in output, while the price declined from $10 to $9, its revenue would rise from $50 to $90, making it vastly more profitable.
The more the price of any commodity exceeds the cost of producing additional quantities of it, the more powerful becomes the incentive to expand its supply. This is as true of the price of oil today as of anything else at any other time. All that is required to bring the price of oil down is to get the government and the environmentalists out of the way. The American oil industry would then lead the charge in the expansion of production.
[For further discussion of the subject of monopoly in general and of the doctrine of marginal revenue in particular, see Chapter 10 of my Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). A pdf version is online at http://www.capitalism.net/ and at http://www.mises.org/.]
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested.) All other rights reserved.
Come on! Are we supposed to believe that the brave oil companies are the helpless victims of these environmental laws?! . . . government has supplied to oil companies a means of preventing supply from being increased when they raise their prices - in effect, a monopolistic privilege, in the Rothbardian sense... and we are to believe that oil companies are very angry about this and are trying to increase supplies in spite of it?! ... Environmental laws are just some of the monopolistic privileges that oil companies enjoy, and it is laughable to suppose that they aren't happy with that!
This reader simply ignores all of the repeated efforts of the oil companies to develop ANWR, to increase offshore drilling, to build new refineries and pipelines, and the fact that time and again they have been frustrated in these efforts by the environmental movement. He asserts the conspiratorial, leftist line, apparently endorsed by some prominent libertarians, that government intervention, indeed, socialism and communism, is a capitalist plot, that, if not invented, is at least promoted by big business and the rich for purposes of their further enrichment.
He is right, of course, to describe the environmental laws as monopoly legislation. They forcibly restrict the production of oil and thereby make its price higher. But their existence and result are not the responsibility of those who produce oil and thereby add to its supply and make its price lower.
I think that this reader and his mentors have probably been unduly influenced by the doctrine of “marginal revenue” and the supposed sensitivity of big business to a consideration of it, as opposed to a consideration of price, in deciding whether or not to expand production.
Marginal revenue is the change in total revenue that results from a change in production. It is believed that it follows from the concept of marginal revenue that the larger the share of an industry’s business that a firm accounts for, the less is its incentive to expand its production, because it will have to suffer the resulting reduction in price on its correspondingly larger, already existing output.
Thus, for example, if an industry presently produces an output of 100 units of product, which it sells for a price of $10 per unit, its total revenue is $1000. (I’ve kept the numbers as small and simple as possible.) If the industry’s output expanded to, say, 105 units, and the result was a fall in price to $9 per unit (a fall that is necessary in order to find buyers for the additional units), the total revenue of the industry at that point would be only $945, an actual reduction of $55. Its marginal revenue would thus be -$55. From the perspective of the marginal revenue doctrine, if there were only one firm in the industry, producing 100 percent of the industry’s output, its production would never expand in such circumstances, because the result would be lower earnings from the larger volume of production than from the smaller volume of production.
I want to point out that even in this, most extreme case, it does not actually follow that the industry’s output would not expand or even that the one firm that presently constitutes the industry would not expand its output. Everything depends on whether or not the production of the additional 5 units is profitable apart from its effect on the earnings from the existing 100 units of output. If, for example, the total cost of producing 5 units to be sold at $9 per unit is less than $45 by enough to provide a competitive rate of profit, those 5 units will be produced and the price will fall. The only question for the firm that presently produces 100 units is whether it wishes to produce 100 units at a price of $9 or 105 units at a price of $9. To whatever extent, it is possible for anyone else, anywhere in the world, to produce those additional 5 units, our firm simply does not have the option of choosing between 100 units at a price of $10 or 105 units at a price of $9. Its only choice is between 100 units at $9 or 105 units at $9.
In such circumstances, it’s not at all unreasonable to expect that even our 100 percent supplier firm would be out there attempting to increase its output. Because if it does not increase its output and anyone else does, it ends up with the same lower price, but does so with less volume than it might have had and accordingly earns lower profits than it could have earned.
Now the actual fact, of course, is that neither any individual American oil company nor all American oil companies taken together accounts for anything close to 100 percent of the world’s oil output. The United States consumes approximately 25 percent of the world’s oil output, and roughly half of that is now imported. This implies that total oil output in the United States itself is about 12½ percent of global output. The percentage of global output produced by any individual American oil company, such as Exxon Mobil or Chevron, within the United States is far less than that.
In terms of our example of price and quantity, the actual fact is that a large American oil company might presently produce on the order of 2, 3, 4, or 5 out of a global oil output of 100. For such a company to be able to increase its own output by an amount equal 1 to 5 percent of the present world oil output, the sheer percentage increase in its own volume would almost certainly substantially outweigh the percentage decline in the world price that its expansion caused. If, for example, Exxon Mobil could go from 5 to 10 in output, while the price declined from $10 to $9, its revenue would rise from $50 to $90, making it vastly more profitable.
The more the price of any commodity exceeds the cost of producing additional quantities of it, the more powerful becomes the incentive to expand its supply. This is as true of the price of oil today as of anything else at any other time. All that is required to bring the price of oil down is to get the government and the environmentalists out of the way. The American oil industry would then lead the charge in the expansion of production.
[For further discussion of the subject of monopoly in general and of the doctrine of marginal revenue in particular, see Chapter 10 of my Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). A pdf version is online at http://www.capitalism.net/ and at http://www.mises.org/.]
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested.) All other rights reserved.
Tuesday, January 31, 2006
"Record Profits Spark New Backlash Against Big Oil"—An Economic Analysis
The story named above, within quotation marks, appears in today’s New York Times. It opens with the declaration, “Still fuming over higher gasoline prices and rising heating oil bills, politicians and consumer groups set off a fresh wave of calls for special taxes against Big Oil after Exxon posted record profits of $10.7 billion in the latest quarter and more than $36 billion for the year.” It then quotes Wisconsin Governor Jim Doyle as saying, “`Once again, Exxon Mobil has reaped the largest windfall in U.S. history at the expense of hard-working families . . . . `I hope that this news will finally convince the U.S. Congress to take action and force the oil companies to give consumers a refund.’”
The article goes on to note that “New York Sen. Chuck Schumer and Rep. Edward Markey, a senior Democrat on the House Energy and Commerce Committee, were others who quickly piled criticism on Big Oil. `The Bush policy of subsidizing wealthy oil companies has proven to be wildly effective in boosting oil company profits, but it continues to harm American consumers and threaten economic growth,’' Markey said in a statement.”
It then proceeds to give the environmentalists their say: “ExxposeExxon, a coalition of 15 environmental and other groups that banded together a few months back, used the record results to launch a fresh attack on Exxon and its policies. `A company like Exxon Mobil that is making record profits, and is making those profits off the back of American consumers, has a responsibility to invest those profits into responsible energy policies,’' said Shawnee Hoover, a campaign director for the coalition. `And that is precisely what Exxon is fighting.’''
Such statements demonstrate breathtaking disregard of facts, logic, and the science of economics.
Let us begin with the fact that oil prices would be lower if the supply of oil were greater. The oil companies, including Exxon Mobil, have been doing their utmost to increase the supply of oil, including reinvesting a major portion of their profits precisely for that purpose. But time and again, they have been prevented from increasing the supply of oil by the environmental movement and the maze of governmental regulations and prohibitions that it has inspired. A prominent part of the environmental movement, of course, is the very organizations represented by “ExxposeExxon.” And prominent among the politicians who have done the bidding of the environmental movement are Senator Schumer and Rep. Markey.
For example, just last December 21, in a vote on the Senate floor, Senator Schumer helped defeat the attempt to open a small part of the Alaskan wilderness to oil drilling, which, had it been successful, would all by itself have made possible an increase in production capable of making the price of oil substantially lower than it is today. (Just as a relatively small decrease in the supply of oil is capable of increasing its price dramatically, because of the great need for oil and lack of available substitutes for many purposes, so a relatively modest increase in the supply of oil is capable of reducing the price of oil just as dramatically. True enough, the development of this source of oil might take a few years, but Senator Schumer and his colleagues have been preventing its development for over twenty-five years.)
The potential oil from ANWR (the Alaskan National Wildlife Refuge), which Senator Schumer and forty-three other Senators (forty-one Democrats and two Republicans) voted to keep from the market last December, significant as it is, is only a small part of the supply of domestically produced crude oil that the environmental movement and its congressional supporters have kept off the market. To it must be added all of the crude oil that could be produced from additional offshore drilling. To that must be added all of the additional crude oil that could be produced from the vast areas besides ANWR that have been closed to oil production by virtue of having been set aside as wildlife preserves or wilderness areas.
The increase in the supply of oil that would be achieved if only the environmentalists and their congressional supporters would get out of the way and allow profit-seeking oil firms to expand their output, is not the only readily available means of bringing down the price of oil. There is also the elementary economic fact that a decrease in the demand for oil would cause the price of oil to be lower. And among the things that would serve to reduce the demand for oil is an increase in the supply and reduction in the price of competing forms of energy, notably, atomic power, coal, and natural gas, all forms of energy whose supply the environmental movement has also succeeded in greatly restricting.
If politicians like Wisconsin’s Governor Doyle, Senator Schumer, and Congressman Markey were serious about wanting to reduce the burden imposed on American working families and consumers by the high price of oil, all they would need to do would be to abolish the restrictions on energy production that they have up to now been supporting. The truth is that their policy has been “wildly effective,” to use Congressman Markey’s phrase, in raising the price of oil and making life so much more difficult for the American people than it needs to be.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
The article goes on to note that “New York Sen. Chuck Schumer and Rep. Edward Markey, a senior Democrat on the House Energy and Commerce Committee, were others who quickly piled criticism on Big Oil. `The Bush policy of subsidizing wealthy oil companies has proven to be wildly effective in boosting oil company profits, but it continues to harm American consumers and threaten economic growth,’' Markey said in a statement.”
It then proceeds to give the environmentalists their say: “ExxposeExxon, a coalition of 15 environmental and other groups that banded together a few months back, used the record results to launch a fresh attack on Exxon and its policies. `A company like Exxon Mobil that is making record profits, and is making those profits off the back of American consumers, has a responsibility to invest those profits into responsible energy policies,’' said Shawnee Hoover, a campaign director for the coalition. `And that is precisely what Exxon is fighting.’''
Such statements demonstrate breathtaking disregard of facts, logic, and the science of economics.
Let us begin with the fact that oil prices would be lower if the supply of oil were greater. The oil companies, including Exxon Mobil, have been doing their utmost to increase the supply of oil, including reinvesting a major portion of their profits precisely for that purpose. But time and again, they have been prevented from increasing the supply of oil by the environmental movement and the maze of governmental regulations and prohibitions that it has inspired. A prominent part of the environmental movement, of course, is the very organizations represented by “ExxposeExxon.” And prominent among the politicians who have done the bidding of the environmental movement are Senator Schumer and Rep. Markey.
For example, just last December 21, in a vote on the Senate floor, Senator Schumer helped defeat the attempt to open a small part of the Alaskan wilderness to oil drilling, which, had it been successful, would all by itself have made possible an increase in production capable of making the price of oil substantially lower than it is today. (Just as a relatively small decrease in the supply of oil is capable of increasing its price dramatically, because of the great need for oil and lack of available substitutes for many purposes, so a relatively modest increase in the supply of oil is capable of reducing the price of oil just as dramatically. True enough, the development of this source of oil might take a few years, but Senator Schumer and his colleagues have been preventing its development for over twenty-five years.)
The potential oil from ANWR (the Alaskan National Wildlife Refuge), which Senator Schumer and forty-three other Senators (forty-one Democrats and two Republicans) voted to keep from the market last December, significant as it is, is only a small part of the supply of domestically produced crude oil that the environmental movement and its congressional supporters have kept off the market. To it must be added all of the crude oil that could be produced from additional offshore drilling. To that must be added all of the additional crude oil that could be produced from the vast areas besides ANWR that have been closed to oil production by virtue of having been set aside as wildlife preserves or wilderness areas.
The increase in the supply of oil that would be achieved if only the environmentalists and their congressional supporters would get out of the way and allow profit-seeking oil firms to expand their output, is not the only readily available means of bringing down the price of oil. There is also the elementary economic fact that a decrease in the demand for oil would cause the price of oil to be lower. And among the things that would serve to reduce the demand for oil is an increase in the supply and reduction in the price of competing forms of energy, notably, atomic power, coal, and natural gas, all forms of energy whose supply the environmental movement has also succeeded in greatly restricting.
If politicians like Wisconsin’s Governor Doyle, Senator Schumer, and Congressman Markey were serious about wanting to reduce the burden imposed on American working families and consumers by the high price of oil, all they would need to do would be to abolish the restrictions on energy production that they have up to now been supporting. The truth is that their policy has been “wildly effective,” to use Congressman Markey’s phrase, in raising the price of oil and making life so much more difficult for the American people than it needs to be.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
Monday, January 30, 2006
To Fight Corruption, Limit Government
In today’s New York Times, in an article titled “A False Balance,” Paul Krugman seems to claim that corruption on the part of Republicans and “conservatives” is something special, apparently attributable to their being Republicans or “conservatives.” And since Jack Abramoff happens to be a Republican and a “conservative,” that’s a good enough excuse, according to Krugman, for throwing out any efforts at balanced reporting that may have been made in response to the embarrassment that Fox News network’s stress on “fair and balanced” has caused to the notoriously left-wing media in this country.
Krugman wants the media to harp on the fact that the current lobbying scandal is a Republican scandal and argues that those journalists who don’t “are acting as enablers for the rampant corruption that has emerged in Washington over the last decade.”
The truth is, as Mises showed, that corruption is an inevitable by-product of an interventionist economy. Every act of government intervention constitutes harm to someone or benefit to someone at the expense of someone else, who is thereby harmed. Naturally enough, people want to avoid being harmed and are eager to obtain benefits. To the extent that politicians and government officials gain discretionary power to inflict harm or bestow benefits, they are in a position to extort money from the citizens, who will pay to avoid being harmed and pay to obtain seeming benefits.
If one is serious about fighting corruption, the first and most important thing that must be fought is all discretionary power on the part of the government and its officials. The powers of Congress, state legislatures, and city councils must be strictly limited to protecting the citizens against the initiation of physical force (including fraud), and nothing else. The more the government is pressed back within these limits, the less will be the problem of corruption. This is because the less will be the discretionary power the government and its officials will have to inflict harm or bestow benefits, and thus the less will be the need and the opportunity for citizens to bribe them. As part of the same process, elections will cease to be bidding wars between pressure groups. The pressure groups will dissolve once the government loses the power to harm or benefit them.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
Krugman wants the media to harp on the fact that the current lobbying scandal is a Republican scandal and argues that those journalists who don’t “are acting as enablers for the rampant corruption that has emerged in Washington over the last decade.”
The truth is, as Mises showed, that corruption is an inevitable by-product of an interventionist economy. Every act of government intervention constitutes harm to someone or benefit to someone at the expense of someone else, who is thereby harmed. Naturally enough, people want to avoid being harmed and are eager to obtain benefits. To the extent that politicians and government officials gain discretionary power to inflict harm or bestow benefits, they are in a position to extort money from the citizens, who will pay to avoid being harmed and pay to obtain seeming benefits.
If one is serious about fighting corruption, the first and most important thing that must be fought is all discretionary power on the part of the government and its officials. The powers of Congress, state legislatures, and city councils must be strictly limited to protecting the citizens against the initiation of physical force (including fraud), and nothing else. The more the government is pressed back within these limits, the less will be the problem of corruption. This is because the less will be the discretionary power the government and its officials will have to inflict harm or bestow benefits, and thus the less will be the need and the opportunity for citizens to bribe them. As part of the same process, elections will cease to be bidding wars between pressure groups. The pressure groups will dissolve once the government loses the power to harm or benefit them.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
The New York Times on Health Care Costs
On page 1 of today’s New York Times, there is an article titled “Health Care, Vexing to Clinton, Is Now at Top of Bush's Agenda.” Typical of The Times and the Left, the article treats the continuing rise in health care costs as a phenomenon of the free market and presents government intervention as the solution.
The article is an illustration of the massive ignorance and evasion that prevails on this subject. The truth is that the rise in health care costs is exactly what one should expect from the government’s long-standing policy of collectivizing the cost of medical care. This is a policy it has carried on since World War II, when it first began to foster medical “insurance.”
Under so-called medical insurance, the typical insured patient pays little or nothing of the cost of any medical treatment, however routine it may be. Such medical “insurance” is comparable to “insurance” for food purchases. It simply means that there is little or no cost to the individual when he buys medical care.
I used to ask my students to imagine that one night the class would go to a restaurant for dinner, on the understanding that everyone would be free to order whatever he liked but that the bill would be evenly divided. Thus, if there were thirty students in the class and someone ordered a $20 steak instead of a $5 hamburger, the additional cost to him would be 50 cents. Under such an arrangement, it's clear, everyone would have the incentive to order anything he wanted, because he would bear very little of the cost. But since everyone would soon do this, the cost to everyone would end up being far higher than it would have been had everyone had to pay his own way.
Now think of the consequences of the check being split a million, ten million, or a hundred million ways and you can see what’s actually wrong with our present system of collectivized medical care.
This is a subject I’ve written about at much greater length, in a pamphlet titled “The Real Right to Medical Care Versus Socialized Medicine” and in my book Capitalism: A Treatise on Economics. I’ll return to it in future posts.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
The article is an illustration of the massive ignorance and evasion that prevails on this subject. The truth is that the rise in health care costs is exactly what one should expect from the government’s long-standing policy of collectivizing the cost of medical care. This is a policy it has carried on since World War II, when it first began to foster medical “insurance.”
Under so-called medical insurance, the typical insured patient pays little or nothing of the cost of any medical treatment, however routine it may be. Such medical “insurance” is comparable to “insurance” for food purchases. It simply means that there is little or no cost to the individual when he buys medical care.
I used to ask my students to imagine that one night the class would go to a restaurant for dinner, on the understanding that everyone would be free to order whatever he liked but that the bill would be evenly divided. Thus, if there were thirty students in the class and someone ordered a $20 steak instead of a $5 hamburger, the additional cost to him would be 50 cents. Under such an arrangement, it's clear, everyone would have the incentive to order anything he wanted, because he would bear very little of the cost. But since everyone would soon do this, the cost to everyone would end up being far higher than it would have been had everyone had to pay his own way.
Now think of the consequences of the check being split a million, ten million, or a hundred million ways and you can see what’s actually wrong with our present system of collectivized medical care.
This is a subject I’ve written about at much greater length, in a pamphlet titled “The Real Right to Medical Care Versus Socialized Medicine” and in my book Capitalism: A Treatise on Economics. I’ll return to it in future posts.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.
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