New School Politics

Naturally, trends in rising commodity prices causes increased concern about resource scarcity. As I’ve discussed, despite such concerns (which dates back since well before the time of Jesus) the real dilemma for man is not a matter of resources but of how to transform resources into wealth. While natural resources are technically limited, and those such as oil will eventually diminish in quantity, the earth is itself a giant ball of “natural resources,” so its hardly like we are running on empty.

In fact what the real difficulty our world economy has is the scarcity of productivity–in terms of capital–and the limits of our technology. As technology improves, not only can we do more with the resources we have but we can also extract a greater quantity of these resources.

Two articles confirm this. The first includes The Economist’s index of commodity prices from 1862 to 1999 and found that real prices decreased at an average of 1% every year over that entire period of time–indicating a steady rise in supply.

The second mentions a different index of real commodity prices from 1900 to 2003, which fell by .8% every year over that time.

The lesson: as long as we continue to increase our productive capacity, resources will not be a grave problem and the goods that are important will be pleantiful.

HT: Bryan Caplan

Popularity: 46% [?]

Step Two: Insert foot.

In response to a survey during the primary asking, “If you are nominated for President in 2008 and your major opponents agree to forgo private funding in the general election campaign, will you participate in the presidential public financing system?” Senator Obama checked “Yes.” He elaborated:

I have been a long-time advocate for public financing of campaigns…If I am the Democratic nominee, I will aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election.

Clearly, John McCain’s reaction indicated that there was no effort from Barack Obama “pursuing an agreement” on public financing so to keep it in place.

The Senator has had little trouble finding spare change

But of course things have changed since February of this year–Obama discovered he hasn’t the age-old Democrat’s fundraising handicap. Nay, he’s actually got quite the knack for raising money. So much so that he expects a cash flow great enough to able him to spend more than the $84.1 million limit that public financing mandates.

Money talks. And apparently what it says is more trustworthy than what flimsy pols like Barack Obama say. David Brooks hit the nail on the head–as he often does–with his column entitled, “The Two Obamas.”

But as recent weeks have made clear, Barack Obama is the most split-personality politician in the country today. On the one hand, there is Dr. Barack, the high-minded, Niebuhr-quoting speechifier who spent this past winter thrilling the Scarlett Johansson set and feeling the fierce urgency of now. But then on the other side, there’s Fast Eddie Obama, the promise-breaking, tough-minded Chicago pol who’d throw you under the truck for votes.

This guy is the whole Chicago package: an idealistic, lakefront liberal fronting a sharp-elbowed machine operator. He’s the only politician of our lifetime who is underestimated because he’s too intelligent. He speaks so calmly and polysyllabically that people fail to appreciate the Machiavellian ambition inside.

Senator Obama has made a career out of commanding oratory and the image of a new and different and transcending and trustworthy politician. But everywhere we look, he has not fulfilled his own prophecy.

As Brooks notes, Senator Obama could “no more disown” the derisive Reverend Jeremiah Wright than his own grandmother–so he claimed. But when political circumstances changed, he dropped Wright like a sack of potatoes after their noted 20 year history.

Obama could have accepted Senator McCain’s proposal for 10 one-on-one town hall meetings–an unprompted, candid discussion with his opponent and the American people that screams born-again politics–but he has not, and will not take such a strategic risk.

The Senator could have cast legislative votes in the same non-partisan manner that he espouses on the stump, but his voting record indicates he is one of the least, if not the least, likely to step out of the party line.

The Senator could have taken tough stances on votes in the Illinois State Senate or taken the initiative to use his keen political skills to lead on certain vital legislative issues, but he has done neither.

The issue of campaign financing is only more evidence that Barack Obama is anything but the messianic public figure that him, his campaign, and his supporters (including many in the press) have made him out to be. While I wouldn’t usually waste my time blogging about a seeming textbook flip-flop, let’s remember who is making it. This is the man who was supposed to restore public confidence to the political system. This is the man who was supposed to change the way politics is done in Washington. But it is only style, not substance, that would indicate that.

ADDENDUM: The above news came the same week that John McCain himself flopped on the issue of federal offshore drilling moratoriums. And before I get criticized for only rebuking Obama, let it be know that I am not turning a blind eye to the GOP’s nominee.

The difference as I see it however is that Barack Obama choses to ride a far higher horse, which makes his reversal more noteworthy. Moreover, now that he has gone with the wind, at least John McCain has the right position on the issue of drilling. Regardless of how much he pandered to get to his stance, what this means is that if the Arizona Senator gets his way the government will reduce its restrictions on energy production in this country, and thats a good thing.

Popularity: 66% [?]

So says Daniel Day Lewis in There Will Be Blood, which was an adaptation of the Upton Sinclair novel, Oil.

Despite sensationalist claims to the contrary, what was true at the turn of the 20th century still rings true today–the world is flush with oil. And the true dilemma is not a lack of the resource, but a limited ability to extract and utilize it.

Here is a Cambridge study covered by Reuters:

World oil production will not begin to fall for at least another 24 years, contrary to doomsday theories that supply is already in terminal decline, a prominent energy consulting group said Tuesday.

Cambridge Energy Research Associates said in a report that the world has some 3.74 trillion barrels of oil left — enough to last 122 years at current consumption rates and triple the amount estimated by “peak oil” theorists.

The world consumes nearly 85 million barrels of oil per day, with the United States using about a quarter of that, according to the Department of Energy.

The report flies in the face of many who have been predicting “peak oil” production being reached for some time now.

The “peak oil” idea was first proposed by the late geologist M. King Hubbert in 1956, who correctly predicted a 1970 peak in U.S. production in the lower 48 states. Hubbert followers have carried forward the theory, applying it to global supplies …

“Peak oil” theorists fail to note that the industry has replaced more oil reserves through field reserve upgrades than from exploration, which has tended to keep production levels steady, Jackson said.

Technological development and geopolitical shifts, more than realities underground, will govern how production unfolds before it begins to decline permanently in the second half of the 21st century, the Cambridge report said.

Some still worry about exhausting our oil reserves–which will (essentially) happen, albeit not for a very long time–and use it as a reason to defer oil usage in favor of “alternative” energies. Even without the recent findings of Cambridge however, the idea strikes me as a silly one that shows a lack of appreciation for the price system.

If we are truly running out of oil then the price will go through the roof. As the global availability shrinks toward nothing the price of oil will be so high that consumers and producers will begin to turn towards substitutes. The increase demand for alternative energies will create incentive for investment in these alternative energies.

And futures markets will have the similar effect of boosting such investment even earlier on.

But, what promoters of energy independence and alternative energy need to remember is that we live in the real world, and the energy we use is bounded by its chemical properties and our capacity to harness them. Simply put, there is a reason that 85% of our energy is the product of fossil fuels: they are presently the most efficient sources.

Now, I am sure that for many hearing me label fossil fuels as “efficient” may seem peculiar. After all, all we here about in the public sphere is that fossil fuels are the antithesis of energy efficient. The disparity is a matter of standards: while the political standard for efficiency may be a matter of popularity or CO2 emissions, the market standard for efficiency is opportunity cost.

When economic actors (rationally) look towards maximizing efficiency, they do so under the constraints of limited capital–both human and nonhuman. Economizing is about maximizing utility per unit of input. Thus, when applied to the sector of energy, people are going to want to produce the maximum amount of energy per the amount resources they invest. So given its potential and all of the technology and capital we have in place to harness it, fossil fuels are the most market-efficient source of energy.

This is why the vast majority of our energy consumption comes from fossil fuels. And it is also why alternative energies are just that–alternative.

Popularity: 52% [?]

George Will’s latest column in Newsweek consisted of a series of questions he would like to see Senator Obama answer during this campaign. It is worth reading the whole thing, but here are a few of my favorites:

• ExxonMobil’s 2007 profit of $40.6 billion annoys you. Do you know that its profit, relative to its revenue, was smaller than Microsoft’s and many other corporations’? And that reducing ExxonMobil’s profits will injure people who participate in mutual funds, index funds and pension funds that own 52 percent of the company?

• You say John McCain is content to “watch [Americans'] home prices decline.” So, government should prop up housing prices generally? How? Why? Were prices ideal before the bubble popped? How does a senator knowideal prices? Have you explained to young couples straining to buy their first house that declining prices are a misfortune?

• Michelle, who was born in 1964, says that most Americans’ lives have “gotten progressively worse since I was a little girl.” Since 1960, real per capita income has increased 143 percent, life expectancy has increased by seven years, infant mortality has declined 74 percent, deaths from heart disease have been halved, childhood leukemia has stopped being a death sentence, depression has become a treatable disease, air and water pollution have been drastically reduced, the number of women earning a bachelor’s degree has more than doubled, the rate of homeownership has increased 10.2 percent, the size of the average American home has doubled, the percentage of homes with air conditioning has risen from 12 to 77, the portion of Americans who own shares of stock has quintupled … Has your wife perhaps missed some pertinent developments in this country that she calls “just downright mean”?

• You favor raising the capital gains tax rate to “20 percent or 25 percent.” You say this will not “distort” economic decision making. Your tax returns on your 2007 income of $4.2 million show that you and Michelle own few stocks. Are you sure you understand how investors make decisions?

• You denounce President Bush for arrogance toward other nations. Yet you vow to use a metaphorical “hammer” to force revisions of trade agreements unless certain weaker nations adjust their labor, environmental and other domestic policies to suit you. Can you define cognitive dissonance?

Most of these questions capture economic illiteracy that is commonplace in politics. It especially suggests the arrogance of a politician who think that he can make economic decisions better than individuals can in the free marketplace. The second question really gets to the heart of it–could you even imagine him trying to answer?

Popularity: 51% [?]

Just prior to closing my computer tonight I had remembered I wanted to share an article I read from the front page of today’s Wall Street Journal.

Russian oil production, for years a vital source of new supplies for world markets, is showing signs of a slump, adding to uncertainties that have helped push oil prices to record highs.

Russian output fell for the first time in a decade in the first three months of this year, according to the International Energy Agency, which represents industrialized oil-consuming countries. It said Russian production averaged about 10 million barrels a day, a 1% drop from the first-quarter of 2007.

The article also contained a troubling comment by CitiGroup analysts, “Russian oil production growth is no longer to be taken for granted.”

Bloomberg is showing that oil closed on the New York Mercantile Exchange at $113.58. Current crude prices seem to be out pacing Goldman Sach’s March predictions for future oil prices.

Tacking on $15 a barrel to all of its oil estimates, Goldman now sees average selling prices of $95 a barrel for 2008, $105 a barrel for 2009 and $110 a barrel for 2010. The high end of its range is now $135 a barrel — but Goldman hinted that prices could be headed even higher.

While Goldman believes their oil forecast to be bullish, compared to current market trends they may actually have been quite conservative. Only time will tell where future commodity prices go, but I would be highly skeptical of anyone who anticipates a large slump in demand or a sudden miraculous increase of supply.

To read the rest of the WSJ article please follow this link, you will however need a WSJ account to access it and other pieces located in the online archives.

Popularity: 33% [?]

News this week was released indicating that the unemployment rate surpassed 5%. This along with $100/barrel oil, a very weak dollar, and growing inflation (here and here) are probably the consequences of the Federal Reserve cutting interest rates to the extent they have in the face of the credit crunch.

I surmise that this policy is probably creating more problems in the long run although it may calm the nerves of Wall Street in the immediate. Credit problems were the perril of loose credit, so it makes little sense to keep credit too loose in response.

Its sounds good, politically, to encourage the stimulation of investment with new money. However, economic laws still apply and by lowering interest rates against market forces we will reduce the incentive to save and essentially cause a shortage of investment capital.

Once again, there is a disparity between popular opinion and reality.

Popularity: 15% [?]

1. Initiate a National Service
2. A single State Solution between Palestine and Israel
3. Ensuring an end to energy dependence in the Middle East
4. Increasing abilities of non-governmental organizations, and US government organizations to provide immediate and effective disaster relief around the world that promotes pro-American imagery.
5. Outlawing Shari Law in the United States
6. Forming a joint anti-terrorism act with China, Russia, Japan, and the EU to ensure a task force greater than Interpol with no objective but to prevent global terrorism and also to create a multinational counter-terrorism task force capable of responding to nuclear, biological, chemical, and hostage crisis’s in every corner of the globe within 24 hours.
7. Providing cold-war level funding to form and operate pro-American television, Internet, and print sources outside of the United States.
8. Using covert military action and government sponsored economic means to open up rogue terrorist states to capitalism and western values.
9. Securing major American sea and airports to scan one hundred percent of cargo, also ensuring that the southern boarder of the United States is secure.
10. Rebuilding the national intelligence, enforcement, and emergency response community from the ground up to increase response time, preparedness, and capabilities, while balancing cost.

In the coming days I will create an in dept explanation of how to accomplish the steps I have outlined.

Popularity: 36% [?]

This summer, Hezbollah, a terrorist organization operating out of Lebanon, kidnapped two Israeli soldiers and killed several others. After days of scrutinizing the reasoning and organizations behind the attack, Israel decided to authorize a “severe” response against Lebanon, the country harboring Hezbollah. After the world condemned both countries, Israel continued bombing Lebanon, at one point commencing in a ground campaign aimed at the destruction of Hezbollah. The US tried to remain impartial but couldn’t help but get involved on the side of the Israelis. The “war,” as Israel has just officially declared it, caused grave public relations disasters for both countries throughout the world as images of dead children were broadcast throughout the world by international news agencies. Weeks after intense rocket barrages, Israel decided to end the war even after they didn’t achieve their goals. The conflict should have served as an example to countries around the world about the risks of keeping enemy soldiers as POWs.

Fast forward to March 23, 2007. After British Navy soldiers from the HMS Cornwall boarded a boat in Iraqi waters to search it, they were captured by Iranian Revolutionary Guard soldiers. Britain has tried to resolve the conflict amicably, but Tony Blair has continually chastised Iran for what he calls an “unjustified and wrong” act. Recent UN sanctions have put Iran under pressure to eliminate their nuclear program. As usual, however, Iran has stood firm, calling the sanctions “unlawful” and “unjustifiable.” With the sanctions adding more fuel to the fire, one must wonder how far Iran plans to go. Will the UK, like Israel, react to the Iranian conflict with force? Senator John McCain suggested that the UK take “very decisive action” against Iran while the US provides “moral support.”
Lire le reste de cet article »

Popularity: 36% [?]

A new poll taken by a respectable polling organization in Iraq has found that the majority of Iraqis’ believe life is better now than under Saddam. In fact, since the troop surge in Baghdad many Iraqis’ feel that American and Iraqi security forces can control the militias and end the killing. Of course, it is not even possible to find this story in most of the American press(meanwhile it is being reported in the press all over Europe), and it took me almost 3 minutes to find it on FoxNews.com

Why is it that this story, a story about what actual Iraqis believe is happening in their own country, is not reported? I do not think everything is going well in Iraq, but I have said all along that while violence is occuring within the Sunni Triangle, the rest of the country is relitivly stable (Kurdistan is trying to attract money to build up its ski resorts and has rapidly industrialized without the threat of violence). Why is it that CNN.com only has stories of an American soldier accused of murder in Iraq, anti-Iraq War protests, and chlorine gas attacks? If this does not show an obvious bias in the American media, I do not know what will. If anything, it also shows the bias by the press in the Palestinian conflict, they keep on hoping for peace and calling for a Palestinian state when the Palestinians continue to blow themselves up on a daily basis. Yet in Iraq, where people try to work together, they call that a civil war?

If the Bush administration wants to sway any public opinion, they need to start showing the American public poll results such as these.

Editor’s Note: links and punctuation fixed 3/19 6:30pm

Popularity: 22% [?]

On March 31, 1998, General Motors took a colossal step forward. Years of research had yielded a car capable of replacing petroleum powered vehicles. The EV1 proved to naysayers that electric cars were a feasible enterprise. A quick glance at statistics on the EV1 prove that the car provided affordable and efficient transportation to all drivers. The futuristic styling was intended to appeal to auto enthusiasts everywhere, as were the nimble 0-60 speed (8 seconds), and the higher than average range (60 miles on a single charge). The EV1 was “simply put…amazing,” claimed Generation 2 EV1 driver Kris Trexler. Trexler’s 3,275 mile voyage through the United States showed that the EV1 was a car that was, in fact, efficient and capable of replacing gasoline powered vehicles. GM pleased thousands with the EV1. One day in 2003, however, the American automaker announced they were recalling all EV1s. The death of the electric car was abrupt and swift. Who Killed the Electric Car?, a documentary by director Chris Paine, documents the rise and fall of the EV1. Lire le reste de cet article »

Popularity: 27% [?]