The Way Forward

Its one thing to confidently mark the end of a economic and political philosophy like conservatism. The harder part is to show a way forward that takes the best of the market signaling mechanisms of capitalism and modifies them for an age of limited resources like Peak Oil. The economist Robert Frank makes a very cogent argument this morning that the Invisible Hand of Adam Smith needs some guidance.

The production and consumption of many other goods, however, generate costs or benefits that fall on people besides buyers and sellers. Producing an extra gallon of gasoline, for example, generates not just additional costs to producers, but also pollution costs that fall on others. As before, market forces cause production to expand until the seller’s direct cost for the last unit sold is exactly the value of that unit to the buyer. But because each gallon of gasoline also generates external pollution costs, the total cost of that last gallon produced is higher than its value to consumers.

The upshot is that gasoline consumption is inefficiently high.

The obvious solution to this problem is to tax gasoline so that the “externalized costs” of pollution are figured into the costs at the pump. This is what most developed countries do (gas in the U.K. cost $8.50 per gallon). The tax would lower gas consumption and the revenue could help fund the R & D for alternative fuels. But because the inefficient Detroit automakers and the oil companies have had so much clout in the Republican Party (and some Democrats as well), this never happens. Unless we change this next year, we are headed for disaster.

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0 Responses to The Way Forward

  1. Ben Hoffman says:

    Making gas more expensive hurts the poor the most, as well as the middle class. How will someone making $7.50 an hour afford gas to get to work? How will the unemployed be able to look for work?

    No, the solution isn’t raising the gas tax.

  2. BobbyG says:

    Ben, so what would you propose? What if “market forces” drive the price up in that neighborhood (as seems to be a plausible prospect anyway)? The lower classes are gonna have the same difficulty. But, would you then simply shrug it off as “yeah, hey, supply & demand”?

  3. Eadwacer says:

    There are, roughly, three ways to quickly reduce use of a resource: (a) make it cost more; (b) make it hard to get; (c) make people not need it. So, just for e.g., you do (c) by causing a recession*, and lowering demand. You do (b) through some form of rationing, like license-plate scheduling. You do (a) by raising the price. (c) is unacceptable as policy, (b) is irritating and has external costs that could lead to (c). With (a), the question is, who gets the money and what do they do with it — Big Oil? OPEC? IRS? If we tax, we can then spend in ways that help the poor: on mass transit, on affordable/transferrable medical care, on reduced taxes elsewhere. I presume there are poor people in Europe, and they survive highly taxed gas. Are our poor lest reslient than theirs?

    *Or by using it more efficiently, a good long-term goal.

  4. Brandon says:

    Ben, Cheap gas doesn’t help me (poor) either. It may cost a bit less to travel, but I also have lung issues that are adversely affected by my polluted environment. Like many of my neighbors, I cannot simply pack up and move to the country and commute to work. Instead, to be able to make ends meet and be able to have some semblance of savings, I live in the city close to where I work.

    Those that can afford to, live outside the city and drive vehicles 20, 30 or 40 miles each way (mostly large cars and trucks where I live). They say this is because they enjoy the quite and clean air of the country, while imposing their unfair burden on me. This costs me extra because I have to pay for additional medication and healthcare visits.

    An increase in gas tax would certainly cause an initial rift in my finances, but the increase in my health would benefit from a (supposed) reduction in fossil fuel use. This would provide a much fairer long term financial prospect for me.

    Additionally, the article argues that the poor would be better served through direct action such as payroll tax breaks and increased Earned Income Tax Credits, both of which would help me and my neighbors more than an increase in gas tax would hurt us. In fact, the increase would help because it could be used to subsidize bus fare and increase routes.

  5. Ken Ballweg says:

    So, a livable minimum wage is not an option to address the cost increases for the poor? I know lots of businesses are dependent on their wage slaves, but, since most of them espouse a truly free market, doesn’t this just become a cost of business?

    Don’t think of it as a government mandate, just think of it as a really big union. That’s capitalism just as much a “trickle down” is economics.

  6. Rachel says:

    BobbyG said: “But, would you then simply shrug it off as “yeah, hey, supply & demand”

    Sadly, people are unlikely to shrug it off. Instead, there will be much lobbying to subsidise fuel for the less well off, or for everyone. While this is extremely bad policy, the pressure is going to become quite intense (it’s becoming intense already in countries that do have fuel taxes but ineffective public transport, like Australia), and it’s probable that, at some point in an electoral cycle, a candidate will get a substantial bounce from promising such a scheme. Democracies are inherently inefficient at solving these kinds of problems.

    As Jared Diamond explained so eloquently in Collapse, people will become extinct rather than give up “core values”. Because of the layout of American cities, cheap fuel has become a core value. Politicians succumb to the market on this at their peril. Countries succumb to their politicians at greater peril, but they deal with issues in three or four year cycles.

  7. rhb says:

    Let’s think radical for a minute. Brandon is on target with his assessment but doesn’t suggest what will happen to those who can afford to drive the 40 miles into town to work. How about we make all freeway lanes into and out of the city but two, diamond carpool lanes?

  8. Morgan Warstler says:

    Jon, don’t be daft. We’re going to have $10 a gallon gas, without the tax. Our consumption has already gone flat and is ready for a plunge.

    The incentives for moving to alt.fuel are already economic – the BEST way to get everyone on board is THE WAR. Patriotism drives lifestyle change – but Bush didn’t have the cojones to use it. In fact, when McCain / Obama get into office, the best first thing they can do, is recast our Iraq effort as reason to shame your neighbor if he’s rolling around in a giant 4×4.


    Notice how great things are going in Mosul! Al Qaeda is now hiding out in the desert from Maliki. Like the man said, things looking better there everyday.

    It is stupid for government to “invest” in To REALLY make boom, make private investment losses – good as tax credits.

    Let local farmers not pay taxes. End ag-subsidies. YOUR DEM FARM BILL shows what you should really be screaming about. It really hurt – focus on fixing that.

    You can’t just SKIP OVER the horrible shit the Democrat congress just foisted on us for Big-Ag, and ask for more taxes. Where’s the leadership?

  9. Hugo says:

    Once again, you think conservatism’s dead, Jon, while you wonder, whither journalism; I think the Press is dead, and wonder, whither conservatism?

    I can’t play on this string, because you set up two, contradictory, ground rules. To play, one has to accept the declaration that laissez-faire capitalism has had its run, and lost; and, having signed onto that feat of taxonomic nomenclature, one then must dispense with any further labeling.

    Conservatism is like Christianity; it lasted about 30 seconds, and then sacrificial structures crept back in. It can’t die. Ask an Eastern European.

    Conservatism is Duby or Panofsky on Medieval cathedrals. It’s Quohelet. Liberalism is the entire history of Western political thought, assaulting those buttresses. Conservatism is the reference point that gives meaning and mileage to “Progress”. It is the necessary foil of fools and progressives of every stripe—including George W. Bush.

  10. Ben Hoffman says:

    There are a few things the government can do to help the situation.
    * Provide more money for alternative fuel R&D.
    * Provide tax incentives to people who buy fuel efficient vehicles and penalize drivers of gas guzzlers.
    * Require auto manufacturers to offer affordable plug-in hybrids. The technology is there, the demand is there, but there is no supply.
    * Provide tax incentives to companies that allow their employees to telecommute.
    * Eliminate the tax break drivers of monster SUVs get. Real estate sales people don’t need to be driving Suburbans.

    Of course, the first step is electing a Democrat. If we would have kept on the course for alternative fuel development Carter started us on back in the late 70s, we wouldn’t be in the mess we’re in right now. And that includes the war in Iraq.

  11. Rick Turner says:

    Boy, Morgan is right on the case…fund a stupidly expensive war so we can keep using oil and not worry about the fact that it’s a dead horse.

    If you were to add the dollars spent on the war to every gallon of gas, what would you see as the real price?

    Morgan, you are such a bad advertisement for libertarianism it’s just not funny anymore…

  12. Jon Taplin says:

    Ben- If you combine a cut in payroll taxes for people earning under $40K a year with a Gas Tax, you would still get the right price signals and not hurt the poor.

  13. mecoboy says:

    I live in Portugal, and petrol prices have doubled from about 0,80€ to 1,40€ in six months. There have been 20 increases since January. But the minimum wage stays at 400,00€ per month and many people earn less than 1.000,00€ per month. The government is silent, agreeing only that market forces can sustain these increases. So what happens? People near the border are going to Spain for their petrol, where the price is just 1,10€ per litre, others just cannot afford to run their cars. People don’t go out, so other markets such as restaurants and bars fail, lorry drivers can’t afford to fill their lorries, so deliveries are not made, fishermen can’t afford diesel for their boats, so not only do they not eat but the fishing industries collapse as well. So the country falls into a bigger and bigger crisis. Who wins? The speculators, I heard that at least $60 of the price of a barrel of oil was going to the speculators, pushing up the price, and Big Oil. Who loses? Everyone else. Increasing taxes isn’t the solution, investment and development in alternative energy is.

  14. Jon Taplin says:

    Hugo- I need you to play on this string. Conservatism WILL never die, but even Bill Buckley who sat athwart history and yelled “Stop!”, came to feel that 21st Century Movement Conservatism had dragged the country in the wrong direction. He thought the Iraq adventure was a complete disaster. He would have no truck with our friend Morgan’s belief that “WAR IS THE ANSWER”.

    The thoughts of Hume, Adam Smith, Augustine et al are important going forward, but some room has to be made in your philosophy for the notion that the market makes no account for “natural capital” (i.e. the environment) on your balance sheet. Until we correct the price signals of cheap energy through taxes on carbon fuels, your notion of “stewardship” will not be achievable.

  15. Hugo says:

    I agree with you entirely, Jon—and now I see more than ever why you’ve worked hard to eschew pigeonholing and facile labeling. I think that, far from calling the conservative movement a blight, Bill Buckley was addressing the degredation of the movement and the degredations that in turn resulted.

    Here in Georgia there are no actual conservative Republicans in leadership positions, only nominal Republicans who control both the Executive and the Legislative. They’re all RINOs—biz-as-uze Democrats who re-badged when the wind changed. There are actual conservatives to be found here, but they’re fossil Democrats or else GOP back-benchers. So, what Georgians get is the same Old Boy jive with different initials, and it feels like most of the voters know it and are looking to turn the rascals out. To a person, these RINOs have the same impulse that sundered your Gov. Gray Davis: their response to any serious problem (e.g. CA energy crisis; or a massive deficit) is to spend their way out of it; and they never saw a budget surplus they didn’t want to spend immediately. J-Y Cousteau said that the Great Shark is nature’s “perfect eating machine”. These RINOs are perfect spending machines.

    I think that it was this modus operandi, profligacy—together with military adventurism and certain excesses in cultural “warfare”—that WFB saw as the corruption of conservatism. (Aside from the loss of all sense of humor; cf. Bob Barr.) By the time he died Mr. Buckley had found himself a lonely, principled conservative in a herd of RINOs.

    Were John McCain the “Goldwater conservative” he purports to be, he’d attack the GOP as a “charismatic organization” that lost its way after it lost the Gipper who brought coherence and a name, conservatism, to the party’s diverse and profoundly contradictory agendas. McCain would spank the Party, send GWB to his room, and at the same time promise to leave to the Party, and to the country as a whole, a legacy of conservatism that can endure not because of a Great Communicator* because it is good, and because it works—because it IS coherent.

    But John McCain won’t do that, because he has no intention of being for the Nation what George C. Marshall was for the U.S. Army and the Nation it serves. Rather, it seems that McCain wants to be a bit of a Duce, doesn’t he? Bully!

    So all of that is the Way Back. As to your Way Forward, the Bear Flag Republic could start by stomping the “More Model” flat. It’s the answer to everything, in government as in consumerism and in industrial productivity. More.

    No More.

    Which of the following objectives will you set in your next prospectus? Will you tell shareholders that next year you will:

    A) Do less with more;

    B) Do the same with more;

    C) Do more with more;

    D) Do less with the same;

    E) Do the same with the same;

    F) Do more with the same;

    G) Do less with less;

    H) Do the same with less;

    I) Do more with less?

    If you take the biggest state budget item, K-12, in most budget years the governors and legislatures—or, more importantly, the NEA—will be satisfied with A, B or C. It’s the more that matters. In a tough year, they might cut a deal to tolerate D or E, provided they’re given certain guarantees to return to A-C as soon as possible, with plusses for their patience. (So, A+, B+ or C+; or, more-more, more-more or more-more.)

    But voters aren’t shareholders. They’re not even “stakeholders”; their proxies are. And in any case the Annual Meeting isn’t held annually.

    But for a moment, look at these options with the eyes of a shareholder. Which of these do you think they’d want to read in your next prospectus?

    And why won’t the remaining options get you fired forthwith?

    Stewardship is, among other things, operating under the condition of thrift and innovation at all times. No More.

    * Ghastly moniker, BTW

  16. Morgan Warstler says:

    Notice, Jon you skipped the farm bill. You obviously can’t lead.

    1. 9/11
    2. peak oil
    3. we are winning

    It would be GREAT if you had the stones to repeat specifically my actual reasons stated here and often for why we need to stand behind the war.

    Notice you SKIP my point which answers yours, slowing down discussion. Please try and stick to the counter points made.

    1. $10 gas is coming without your tax.
    2. Dem Farm Bill just blew $300B – Ag Subs galore. Until you fix your side, you can’t be trusted with new tax dollars.
    3. War in Iraq is going well. I’ll cover that topic in above thread.

  17. pond says:

    The fundamental thing that capitalist theorists never took into account was, Who defends, protects, and maintains the Commons, if not the citizens through their government?

    When the great thinkers of capitalism, liberals in the 1800s and the fathers of America’s ‘conservatives’ today, developed their rationales in favor of free enterprise and free markets, the science of the environment was a century away. To those city-dwellers, Nature was a wild beast to be tamed and made fit for usage by man. Rivers were to be dammed, deltas were to be dredged for navigation, forests were to be cleared and their trees burnt or cut for timber. There was no thought of giving back except in the ploughman’s fields; agriculture and its limited awareness of crop rotation and tillage were as far as the science of the environment went.

    Sadly enough, today’s capitalist thinkers, libertarians, and conservatives, have learned nothing since then. The giants like Adam Smith have been followed by the munchkins like George Will.

    And so all the thinkers who have studied and learned from the environmental sciences, now stand on the left, and see only government as the answer. And today’s petty-minded conservatives can only ignore the science and deny it, asking their followers to do the same.

    The rise of conservatism in the latter decades of the 1900s was built on big ideas. Conservatism has had no ideas to inspire anyone since then; only money to buy voices. As the knowledge of how the world of nature actually works, and how interdependent we all are — and how utterly dependent we are on the planetary systems that make life and civilization possible — comes more to the fore, and becomes more obviously necessary for human life, the conservatives will seem as relevant as the Whigs and Monarchists in America in 1830.

    Rest In Peace, American Conservatism.

  18. Morgan Warstler says:

    pond, that shows an absolute mis-understanding on your part of libertarian theory.


    The argument against the commons is that there is no owner so everyone exploits it and here’s a hint for you:

    Government/Democracy is another form of the commons. Every damn jackal has his hand out.

    Government is our own worst side. Where and when we need it, is basically ONLY when we must protect ourselves collectively. Apart from that, it is all-to-often the province of scum and losers.

    So if you are going to argue against capitalism, try and find something where owners don’t take care of their property.

  19. Hugo says:

    Morgan, you’re being naughty again.


    There always have been commons.

  20. Morgan Warstler says:

    The best protection of lands occurs when the private owner has a vested private interest in maintaining and increasing the value of their asset. I only mention this, to keep pond from using the sickness of common ownership to justify more government. Look, pond, if you want more government, have a war. People love government in times of war. They listen to government more in times of war. Apart from that, don’t think you’ll ever get people to vote for more government. It is impossible!

    They simply can’t. There’s no more money to pay for it. We are very very VERY close to $MAX, and any new dollars that come in have to pay off the deficit. That’s why this blog is in danger of being trite. We can only take in a certain amount of tax revenue. So we can only spend a certain amount. Once we KNOW that, and I’m here specifically to keep saying it, then boldness is ONLY BOLD if you can do it with the current money we have.

    If Jon were bold, he’d focus day in and day out of what could be cut, what could become more efficient, whats a more “fair” or “innovative” way to take better care of the poorest and weakest – with the funds we currently have.

    Unless there are specific policy proposals that ACCEPT the fiduciary boundaries of our current tax base – then it is simply cheap talk.

    When McCain or Obama get into office, OVERNIGHT the reality is going to be “no new money” and it’s great to discuss other crap, but let’s get down to brass tacks and STAY on brass tacks.

    Jon if you want to help Obama, start focusing on palatable policy ideas that require money to come from one government program to pay for a new one. Or for entirely new ways of running a government program, stuff that does more-with-less.

  21. Jon Taplin says:

    Morgan-The airwaves are a commons, the national parks are a commons, the oil resources under the oceans are a commons, the coal in government lands are a commons, the national highways are a commons. I don’t understand why you can’t see this.

    If we stop your pointless war, there will be money to pay teachers a decent salary. Of course we have to be more efficient and as I have pointed out to you many times, I’m ready to take on the bureaucracy.

    BTW-The success of the Iraqi forces in Basra which you have pointed out to me, proves that they are better able to control their country than an occupying Army of American G.I.’s. Everyone said when the Brits pulled out of Basra it would be a disaster. Not true. Now they say when we pull out of the Sunni heartland, it will be a disaster. I think thats just a lie.

  22. Morgan Warstler says:

    We are going to pull out. But regardless of who does the pulling out, Obama or McCain – the actual way we pull out – will look and feel like the pull out described by McCain. Obama’s own description is going to change, now that he no longer has to pacify the left. Terms:

    1. It will take time.
    2. It will work in support of Western oil companies.
    3. We’ll keep forces there for the long term.

    NONE of this requires you to get all hippie. Why foist the cognitive dissonance on yourself of worrying about the price of oil and demanding we play weakling to OPEC?

    Together our interests can be formidable: US interests lie in both and Iraq. It is the only morally consistent position.

  23. Hugo says:

    Care and hospitality are a commons too. It’s hard to say which has aped, usurped and degraded them more—commerce or government.

  24. rhb says:

    “Unless there are specific policy proposals that ACCEPT the fiduciary boundaries of our current tax base – then it is simply cheap talk.”

    Okay Morgan lets start with this. Put your mouth wear the money flows and suck it out of that over-inflated it-takes-a-Peter Principle to understand fat to the ass-cheeks military budget your so proud of. That way we will know that your honestly trying to provide a solution instead proliferate the damn problem.

    BTW, Jon, do you remember back when Hugo was downright hesitant to speak up?

  25. Hugo says:

    Dang you, rhb. You know I have no self-humor whatsoever, and yet you take advantage of that.

    It just goes to show what kind of person you are—kicking a conservative when conservatives are all dead. For shame.

    Jon, if you want yer Bar Flag to fly, I suggest you get Los Californios Nuevos to set La Republica on options “F” or “H” above, as defaults, with “I” as the brass ring. Jerry B’s back in Sac; let less be more once again. The change in emphasis will be unique among the 50 pork-barreling states, and it will have the twin virtues of driving lobbyists to lurid acts of desperate self-dustruction (the circuses) while also stimulating innovation, innovation, innovation for Economy the Next (the bread).

    Screw the Spotted Owl; let Stewardship begin in the Governor’s finance office.

  26. Ken Ballweg says:

    You’re asking a culture of short sighted, vote buying (regardless of party) politicians to do more with less? Until someone is able to set proper priorities (e.g. a national and state level strategic plan that goes farther into the future than the next frackin’ election) that’s pure wishful thinking.

    In Oregon, with it’s wonderful popular initiative system of micro-management of government priorities, we instituted a very expensive prison system that sucks from other infrastructure, and cut social services for the kids, elderly and disabled by mandating draconian sentencing for all classes of offenses. The result is that very few want to work for the State Department of Human Services under the conditions imposed by more with less. Turn over and churn are making the programs inefficient and incapable of doing such simple things as getting all major child abuse claims investigated, or having adequate psychiatric hospital facilities to accommodate the short stay needs of people with major mental illness going through a psychotic break.

    As long as the short term pay off for special interest groups continues, and politicians are forced to buy votes with ear marks and contributions with pay outs that are not in the national or state’s long term interests “More with Less” is as dangerous as anything Morgan espouses.

    No long range plan, no leadership, no joint buy in? What you’ll get is rhetoric hiding chaos and cuts for the most vulnerable. Now that’s a wonderful way to run a nation into a hole that it can’t climb out of.

    Oh, and by the way, that Owl you propose to violate was responsible for stopping one of the great rapes of the treasury for short term purposes. The Forest Service was totally co-opted by big timber and was responsible for subsidizing their roads, and the riparian damage they left which has been responsible for significant damage to the west coast fishing industry which didn’t have the lobbying clout of Big Timber. No long term plan, no concern for equity, only money flowing from the treasury to big timber. So when you have your kinky way with that little owl, be gentle, she actually helped cut the pork out of the USFS.

  27. Hugo says:

    Only one screwed-up West Coast state at a time, please, Ken. California’s thorny enough.

    Actually, I was suggesting that a governor could order the executive agencies to work toward any of the three standards of stewardship, the three alphabetized combinations of the values of efficiency and effectiveness. I should think it goes without saying that the legislators and those who subborn and importune them can be no part of a solution to the very problem, crippling profligacy, that is to them a positive boon. On this coast, we note that seemingly half the back bench of the House of Representatives is occupied by leaden alumni of the California Legislature, graduates of a learning curve flattened and foreshortened by term limits, that mail-order GED of politics. So it’s not only Oregon, but, via a statewide ballot measure mandating the stupefication of California’s legislature, the entire country that must suffer the effects of the Voter Ejaculative.

    But by your Spotted reasoning any aim will do, so long as it can animate coordinated efforts in accordace with a strategic plan toward that end — an argument so circular as to suggest that, to paraphrase Cunard, getting there is more than half the fun. (Perhaps Czech President Vaclav Klaus had a similarly tautological dynamic in mind this morning when he observed at the National Press Club that environmental globalism is a blessing to post-Marxists in need of new rationale for total social control.)

    Instead of a goal, I’m proposing a value: stewardship. Earlier up this string run rhb points out to Morgan that the stewards of the defense budget are wastrels. And as you’ve noted, I am suggesting that the stewards of the states’ education budgets are wastrels also. The difference is that the Pentagon wastrels nonetheless purchase effectiveness, whereas the education wastrels purchase failure. Moreover, while the defense budget accounts for 20% of federal outlays, education in some states is most of the [owl] pie.

  28. Hugo says:

    Please pardon the double-post. Evidently I sent the text unawares prior to its completion. The second is the complete post, such as it is. The iPhone is blameless, as always.

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