Recently, I got into a discussion about economics over at another blog that was triggered by a remark John McCain made about the economic problems we’re having being largely in people’s heads. That got me thinking — that is so true that most people overlook it.
Economics doesn’t really deserve the title of “science.” It’s an outgrowth of psychology, as it’s entirely a creation of the human mind. It only exists in our minds and in our agreed-upon collective fiction. And it follows no rules of physics or anything else in the real world.
My own formal training in economics consists of a half-year class in high school that I’ve forgotten almost every single detail, and anyone who looked at my finances would agree I don’t handle the micro end of things very well at all. But I’ve picked up a few things about economics over the years that have shown that in this matter, ignorance might not only be bliss, but the key to grasping key concepts.
For example, “value.” “Value” is “what you can get someone else to pay for your item.” Right now, just down the street from me, the value of a gallon of gas is around $3.50. A week ago, tha very same gasoline was valued at $3.20. The gas hasn’t changed, Mongo hasn’t changed, I haven’t changed. But the gas’s value has changed.
The first thing I know about economics is that it does not take well to attempts to control it. Almost every single example I can think of where a government or other body has attempted to command the economy, it has worked out disastrously.
The current example of biofuels is just the latest. The government thought it would be a good idea to replace too-expensive gas with too-expensive food derivatives, and now we have food shortages in the US — something that hasn’t happened in a very long time, if ever.
It’s kind of like the time in the 90’s when the government thought it would be a good idea to “soak the rich” by taxing yacht sales. The rich just started buying and registering their yachts overseas, and the end result was the near-destruction of the American yacht industry, putting a lot of boat builders out of work — very few of whom were millionaires.
The Communists tried to centrally control and plan their economies, too, and look how well that turned out. Remember the Soviet Union and its glorious five-year plans? The Workers’ Paradises of Eastern Europe? Hell, look at North Korea and Cuba — they try to tell their economies what to do, and get a colossal middle finger in return.
This week, the first refunds to taxpayers as part of a “stimulus package” are going out. While I’m certainly looking forward to my $600 (it’s going into Mongo’s (my SUV) retirement fund), I don’t think it’s going to do a rat’s ass for the economy. It’s a temporary fix, and most people are planning to use it to pay down bills. While, on principle, I support most any measure that takes money from the government and returns it to taxpayers, I just don’t think this’ll do much good.
Now, let’s take a look at gas prices. (We will briefly pause for some extended profanities.) They’re bad. So, what are the ideas to fix it?
Well, we have those same idiots who come up with the idea they do every time: “let’s all pick one company and not buy their gas for one day!” This is political masturbation. It will make some people feel like they’re doing something, and do absolutely jack shit towards actually addressing the situation. (This, in essence, is in line with 90% of Democratic political activist plans.)
For years, the Democrats have said that we need to decrease our dependency on foreign oil, and develop renewable energy. One notion they’ve consistently brought up is a hike in the gas tax, to discourage waste. Well, now that gas prices have gone up without their having had to do so, they are quietly pretending that one never went anywhere.
House Speaker Nancy Pelosi (D-Haight-Ashbury-Asshat) has an idea: have the government stop putting oil in the Strategic Reserve. Because, after all, expensive (but plentiful) oil is far more dangerous than very little oil. This is even dumber than the last grand idea of tapping the Reserve to increase the supply and, hopefully, bring down the price.
John McCain has his ideas, too, and while they’re not as bad as the Democrats’ plans, they are still short-sighted and weak. He wants to temporarily cut back on the gas tax, to remove that part of the formula that goes into determining the price of fuel. It’s my understanding that the federal government makes more of a profit off a gallon of gasoline than the oil companies, and they don’t do a goddamned thing productive to earn it.
I have my own idea of how the government can help bring down fuel prices, and it doesn’t involve new government action. It simply requires some government un-action.
More specifically, they need to undo some of the things they’ve done in the past to “help” things, because there are few scarier phrases than “I’m from the government, and I’m here to help you.”
For starters, get rid of the requirements and subsidies for biofuels. It was a dumb idea at the time, and all it’s done is prove how dumb an idea it was.
Secondly, cut back on the regulation of gasoline. Abolish (or reduce) all the regional and seasonal blends and formulations we require the oil companies to produce. Right now, if there’s a shortage in one area, there’s a good chance they can’t just shift some from another area, because it won’t meet the requirements of the area that’s lacking.
Thirdly, stop micromanaging the whole thing. Here in New Hampshire, we’re still suffering over well-meaning government bureaucrats who thought they were doing the best. They required that we include MTBE in our gas to reduce emissions in our engines. The fuckheads didn’t take into account that sometimes gas leaks, so instead of breathing slightly nastier fumes, we’re drinking this shit in our groundwater. The federal government figured they’d make everyone’s air fractionally better at the price of pouring poison down our throats. Way to go, assholes — the fact that you thought you were doing a good thing makes it so much easier.
Fourth (and this one is almost heretical), look at the chokepoints in the gas supply and work on fixing those. US refineries are running at near capacity right now, so that would be one good point to start. Loosen up the regulations and offer some tax incentives for people to build new (and, consequently, cleaner and more efficient) refineries to get things going more smoothly.
Don’t like foreign oil? Then start looking at domestic supplies. We just discovered a big reserve in the Dakotas area. Other countries are drilling off our shores, but we won’t. And the thought of tapping even the slightest portion of the reserves in the Alaskan National Wildlife Reserve sends people screaming into the night, desperate to find some tree to hug. (Here’s hoping they run or bike off to the tree in question, reducing the carbon footpring of their hysteria.)
I wouldn’t mess with the gas taxes right now, though. While I think they’re too high (as a matter of general principle, I think most taxes are too high, and the government could do with a lot less of our money), they aren’t a major factor in the skyrocketing price of gas. Let’s leave that can of worms alone for a later time, and deal with the real problem now. (Yes, I know that’s a bit of heresy — asking government to deal with real problems — but I’m a bit of a heretic anyway.)
In essence, the best thing the government can do to fix most economic problems is GET THE FUCK OUT OF THE WAY. The free market is not perfect, by any stretch of the imagination, but it has a hell of a lot better track record than any well-meaning bureaucrat or politician.
Here’s how the government can mess up even the most simple concepts. As I said earlier, the value of an item is whatever you can convince someone to pay for it. This boils down to “I will charge you the most I can get you to pay, because if I make it any higher, you will either get it from someone else, go without, or take it from me and pay nothing.” And the buyer says “I will pay you this much and no more, or I will get it somewhere else, go without, or just take it.” Negotiations boil down to who can con the other into thinking that those values are not what they are.
When the government gets involved, though, this gets perverted. The government says things like “OK, when you settle on your price, tack on a bit more and give it to me.” Or “you can’t sell this. We’re going to take it from you, and then sell it to only those people we think should be able to buy it.” Or “you can only get this from certain people of whom we approve.” Or “you can’t charge more than this for this item.” Or “you can’t pay less than this for this particular commodity, no matter what it’s actually worth to you.” (Bonus points to whoever gets this reference) Or (more bonus points for identifying this planned change being floated by not a few major political leaders) “you can’t buy this. We’ll take your money from you in taxes, buy it for you, then give it to you, and you’ll be thankful that you got it for free.”
I suspect this is because economics, as I noted, is at its core a matter of psychology. It derives from deep-set human instincts and tendencies and beliefs. The free market is, to my way of thinking, the expression of our collective subconscious. Our brains, freed from the constraints of our minds, is handling matters at a level so far below our thoughts that we can’t even perceive it.
Government tends to ruin this because it introduces “idealism” into a system designed to work off the fundamental human principle of enlightened self-interest.
I once saw this diagram that illustrated the problem with government spending. It was a simple 2X2 grid, with “YOUR MONEY” and “OTHER PEOPLE’S MONEY” on one axis, and “YOUR BENEFIT” and “OTHER PEOPLE’S BENEFIT” on the other.
When you’re spending your money for your benefit, you tend to focus on value. You want the most for your bucks, and you pay sharp attention to details.
When you’re spending your money for others’ benefit, you tend to focus on efficiency. You want the best results for the least expenditure.
When you’re spending other people’s money for your benefit, you focus on satisfaction. Since it’s not your money, why not get the best, price be damned? It ain’t coming out of your pocket.
When you’re spending other people’s money for other people’s benefit, most any considerations go right out the window. It ain’t your money, you won’t see any of the benefits, so who gives a rat’s ass? It’s just numbers moving around a spreadsheet. It’s a very dull version of Math Invaders, or a Sudoku for those who can’t handle that kind of excitement.
And that’s what government spending boils down to: people getting paid to spend other people’s money for other people’s benefit. There is no motive for the spenders to get value for their expenditures, and no consequence for spending foolishly.
And they’re doing it with OUR money. That’s MY money, and YOUR money.
Maybe that’s the problem with modern economists. They’re so overeducated, they have forgotten these simple, key concepts. These ideas might be too simple for them, they can’t handle anything below a certain level of complexity.