If Gas Prices Jump at the Pump, Thank Trump (and Other Politicians)

“Remember $2 gas?” former House Speaker Newt Gingrich asked in 2012 as he sought the Republican Party’s presidential nomination. Politicians love to remind us of low gas prices in the past and promise their return in the future.

But in early April, Reuters reports, US president Donald Trump threatened to severely curtail the US government’s military relationship with Saudi Arabia unless the Organization of the Petroleum Exporting Countries (OPEC) reduced oil output to drive prices back UP.

Yes, that’s right: Trump wants you to pay more for gasoline, and he’s willing to use the threat of military action of a sort (withdrawing US troops and weapons systems from Saudi soil) to make that happen.

Here’s a dirty little secret of American politics that’s by no means unique to Trump:

American politicians know that regular people want low gas prices, and that we won’t vote for politicians who openly advocate for higher gas prices.

American politicians also know that the American oil industry, which pumps a lot of oil out of the ground and a lot of money into political campaigns, wants gigantic subsidies.

So American politicians talk low prices to the one group while using policy to achieve high prices for the other group.

From the “oil depletion allowance” and other special tax tricks, to taxpayer-funded roads into drilling areas, to much of  the US “defense” budget (why do you think US military policy for the last 40 years has been to keep the Middle East in turmoil and Iranian — and now Venezuelan — oil off the market?), petroleum is one of America’s most subsidized industries.

The American shale extraction processes of recent decades simply can’t compete with old-fashioned foreign drill-and-pump crude at market prices, so American oil lobbyists buy politicians and get them to goose the price back up whenever it falls below $50 a barrel or so.

And who knows? Absent the giant subsidies, oil might have been replaced by much more lightly subsidized “renewables” long ago.

There haven’t been many bright spots in the COVID-19 panic, but for many Americans the lowest gas prices in years were a welcome bit of good news. If you had anywhere to go, you could get there for a lot less.

And that’s how it would be most or all of the time if not for politics. The high gas prices you pay aren’t set by the market, they’re set by politicians on behalf of Big Oil.

Open This Content

Commentary on State Capacity and State Priorities

Two EconLog readers’ comments on yesterday’s post struck me:

Phil H.:

Caplan’s point is a good and striking one. His conclusion is fairly extraordinary, though: He is apparently claiming that all (or a plurality) of the major decision makers in the American government are power-hungry demagogues who deliberately decided to channel money into stimulus rather than research because they are bad people.

I like a powerful contrarian claim, but this one is a little too far for me.

Fair question, Phil.  I doubt many politicians are explicitly thinking, “Research is better for society, but stimulus is better for  my career.  I don’t care what happens to human lives or the economy as long I can be king of the ashes.”  Instead, I doubt politicians are doing much thinking at all.  They go with the herd – and their own arrogance.

However, as I’ve previously argued, anything less than Vulcan rationality in a major leader is extremely morally wrong, because with great power comes great responsibility.  Normal backroom observers would probably say, “Well, these politicians are just playing the game.”  I puritanically reject such excuses.

The problem lies in the failure to acknowledge the importance of institutions and structures, and to assign everything to individual actions. Do we really believe that all of the leaders of China are “good” people, and that’s why they responded more effectively to the crisis? Is New Zealand’s good record a reflection of Ahern’s moral excellence?

I have an extremely overall negative view of the Chinese Communist Party’s behavior, and remain suspicious that they are hiding severe pandemic-related failures and crimes.  But if I knew nothing except the standard coronavirus narrative, I would consider them better people.  On the other hand, I suspect that the leaders of New Zealand are morally a cut above what Americans are used to, though of course as remote islands they have major advantages in disease containment.

My broader point, though, is that we should compare leaders to standards of common sense and common decency, and almost all fall woefully short.

There does seem to be a good case to make that the leadership of the USA has become paralysed by partisan infighting. The problem is that it’s now ingrained into the systems and institutions. Even if a Mr Smith went to Washington, that wouldn’t sort out the problem.

How does “partisan infighting” prevent such obvious measures as wide-scale voluntary paid human experimentation?  I just don’t see it.  If the parties can agree to fritter away trillions of dollars, they can agree to suspend pseudo-ethical rules that keep policymakers in the dark.

Rob:

Hey Bryan — I had always read state capacity to include the capacity to make intelligent decisions. So a state with a big military or lots of spending power, but without wise politicians or experienced bureaucrats to know how to sensibly use them, it still lacks capacity in some sense. It lacks the capacity to achieve its goals.

The whole point of distinguishing between achievements and capabilities is that achievements normally fall short of capabilities.  This is true for individuals and organizations alike.  My achievements fall short of my capabilities; don’t yours?

So you can imagine a government that has the capacity to shut down its entire economy, but not the research ability to figure out whether it should — or decide on the right specific actions that are needed in order to stop a pandemic spreading. Such a state lacks essential capacities.

This might be an unhelpfully broad concept, but I think that’s how others use the term too.

Once you define “state capacity” this broadly, blaming failure on  “lack of state capacity” is virtually meaningless.  You might as well declare that “good government causes success” and “bad government causes failure.”

The real story, I think, is that state capacity researchers are willfully equivocating – yet another case of the motte-and-bailey fallacy.

When the audience is sympathetic, “high state capacity” means collecting lots of taxes, building a strong military, constructing roads, having universal public education, and so on.

When the audience is skeptical, “high state capacity” simply means being a government that rules over a rich, modern civilization.

The trick is to use the latter definition to legitimize the concept, then use the former definition to justify more resources and power for the government.

Or so it seems to me.

Open This Content

State Priorities, Not State “Capacity”

In the last few years, social scientists have started heavily appealing to “state capacity” to explain the wealth of nations.  Why do some countries prosper?  Because they have great state capacity.  Why do others flounder?  Because they have crummy state capacity.  What do floundering countries need to do in order to prosper?  Build state capacity, naturally.

Many of these same social scientists see the coronavirus as a great vindication of their research.  Which countries are coping well with coronavirus?  The ones with great state capacity.  Which countries have been devastated?  The ones that lack state capacity.  How can we resolve our current crisis?  Again, build state capacity.

Two years ago, I heavily criticized the state capacity fad.  Weak and question-begging empirics aside, the whole literature is conceptually confused.  But the current crisis has convinced me that I’ve been overly generous.  How so?  Because the coronavirus crisis plainly shows that Western democracies have overwhelming state capacity.  Check out the muscles on these governments!  They haven’t just effortlessly raised and spent trillions of dollars.  They handily shut down their entire “non-essential” economies.  In a matter of weeks, they casually disemployed many tens of millions of workers, shuttered millions of businesses, and virtually sealed their borders to trade as well as travel.  After this staggering exercise of power, I don’t see how you can fairly attribute any shortcoming of these governments before the crisis on lack of state capacity.  The sheer capacity of these states beggars belief.

Why, then, do most of the Western democracies seem to be doing such an incompetent job?  Perhaps most egregiously, the U.S. federal government spent over two trillion dollars on relief, but next to nothing on testing or research.  As Alex Tabarrok summarizes:

We would also save medical costs by suppressing the virus. (The focus on ventilators has perhaps been overdone given that ventilators in no way guarantee survival–better to stop people needing ventilators.) We would also save lives. Thus, a program of mass testing seems like a no-brainer. Yet, there is no direct funding for anything like this in the $2.2 trillion CARES bill which is stunning. Here’s Austan Goolsbee:

We literally put in a tax break for retailers and restaurants to expand their capacity but not money for production of more COVID tests.

Here’s Paul Romer:

We have an economic crisis because it is not safe for people to work or consume. Our Congress just passed a bill that will spend $2.2 trillion to deal with the crisis. Can anyone identify any spending in this bill devoted to making it safe for people to work and consume?

What’s going wrong?  Simple: Despite fantastic state capacity, the U.S. government has absurd state priorities!  Instead of squandering trillions on poorly-targeted relief, the U.S. government could have spent a few hundred billion on testing and vaccine research.  Better yet, it could have offered hundreds of billions in prizes for progress in these areas – prizes open to anyone on Earth to win.

So why didn’t this happen?  Simple: Because the people in charge in virtually every country are irresponsible, disorganized, innumerate, impulsive, and emotional.  Blaming their failures on “lack of state capacity” is like blaming Bill Cosby’s imprisonment on “lack of financial capacity.”  Cosby’s in jail because he’s a serial rapist, not because he lacked the money to hire a good lawyer.  When your resources are superabundant, the top remaining explanation for failure is your own terrible choices.

My point: As a matter of logic, success and failure depend on two factors.

Factor #1: The total resources you possess – your “capacity.”

Factor #2: How you choose to use those resources – your “priorities.”

Isn’t this obvious?  It is to me.  But I don’t think I’ve ever heard a fan of state capacity research acknowledge this obvious point, much less try to fairly adjudicate it.  I don’t think I’ve ever heard such a fan say, “You could say that some governments fail because they squander resources that are more than sufficient to handle their problems.  But using our new measure of squandering…”  I don’t think I’ve ever heard such a fan say, “You could say that some governments would succeed if they simply revised their priorities.  But using a new data set on priority revision…”  I’m tempted to say that appeals to state capacity are tautological, but even the tautologies are half-baked.

The underlying confusion: When a person doesn’t do X, we often casually announce, “He can’t do X.”  That, my friends, is a total leap of logic.  Yes, perhaps the person in question genuinely can’t do X.  On the other hand, maybe he’s simply made X a low priority.  The only way to really know is to see what happens when the person in question unambiguously makes X his absolute priority.  In slogan form: “Can’t implies won’t.  Won’t does not imply can’t.”

The same goes for organizations, including governments.  The Soviet Union failed to grow enough food to feed its people.  That does not imply, however, that the Soviet Union lacked the capacity to do so.  The real story, in fact, is that the Soviet government doggedly prioritized military might over civilian diet.

So what?  At minimum, we need to audit the entire state capacity literature.  To what extent can the problems it attributes to “state capacity” instead be assigned to “state priorities”?  Unless we miraculously discover that capacity, not priorities, explains 100% of all sub-perfect government performance, the next step is to dial-down the multitudinous simplistic pleas for “increasing state capacity” – and replace them with pleas for better state priorities.  Instead of pretending that the coronavirus crisis somehow confirms everything they’ve been claiming, this is a time for the fans of state capacity to engage in poignant soul-searching.  Western democracies have decisively displayed their gargantuan capacity.  But what good is gargantuan capacity in the hands of short-sighted, power-hungry demagogues?

There’s a great scene in Kill Bill where Vernita Green tells the Bride: “That’s being more rational than Bill led me to believe you were capable of.”  And the Bride responds, “It’s mercy, compassion, and forgiveness I lack; not rationality.”  Next time a researcher sees poor government performance and blames “lack of state capacity,” tell them, “Perhaps it’s good priorities it lacks, not capacity.”

Then tell me how they respond, because I’d really like to know.

Open This Content

The Answer is Always Individualism

I just saw an article by venture capitalist Marc Andreessen called “It’s Time to Build.”

I’m both encouraged and troubled by it.

I’m encouraged to see anything promoting and celebrating human achievement, instead of just shitting on wealth and promoting envy.

I’m troubled because it begins with the premise that “We” have failed to do really big giant things. It’s a small step from “We need to build bold things” to a technocracy where everyone is forced to put their resources to uses dictated by scientistic managers with grand plans.

I’m troubled because Silicon Valley sometimes seems to long for any kind of “Big” effort, no matter how much of a boondoggle, or whether it’s backed by force or funded against citizens will via taxation.

It mentions how “We” need to overcome regulatory capture. Well that only happens if the state shrinks, and big, unified, central visions imposed on the populace die with it. You can’t reduce capture and also increase state-run Hoover Dam type projects. Silicon Valley is naive about Public Choice Theory and the way real-world political incentives play out predictably.

I am ALL for big, massive, bold visions.

I want to terraform other planets. I want flying personal vehicles. I want limitless energy. But I know that such visions are only beneficial and not dystopian in a world where individual freedom trumps the desires of any small group of people. Those efforts and advances will only be wonderful if visionaries can persuade individuals to embrace and engage them voluntarily, and part with their resources to fund them without threat of force or artificial incentive.

Absent freedom, none of these big bold builder visions are inherently good and can quickly turn evil.

Some Silicon Valley types seem to want a world of endless tech innovation whether the market demands it or not and whether individuals choose it or not. A world controlled by the nerds. I am not accusing Andreessen of promoting this. But I do see an easy shift from his progress promotion to progress coercion, animated by the collectivist spirit of the age.

Anti-Silicon Valley types seem to want to steal all the money from the successful and prohibit people from progress. A self-defeating and soul-sick approach.

While I agree that anti-progress is awful, pro-“big ambitious projects” is not by itself a less scary ideology. Only individual freedom is. Progress nested in choice.

I once wrote about how Virginia Postrel’s Stasist vs Dynamist dichotomy (progress vs. tradition) is usefully paired with Thomas Sowell’s Constrained vs. Unconstrained vision (reality vs. utopia). I think it’s very applicable here.

Dynamism is only a force for good when nested in a constrained vision. Otherwise it becomes technocracy.

Article here. Chart below.

Open This Content

Freedom of Association

Why shouldn’t you be forced to marry and have children against your will? Why shouldn’t you be forced to join and support a religious organization? Why shouldn’t you be forced into friendships to spend your leisure time with people you don’t like? Why shouldn’t you be forced to do unimportant and unproductive work for an abusive boss? Why shouldn’t you be forced to comply with the demands of politicians who steal your money and use it in unethical and counterproductive ways?

The answer is simple: nobody has a higher claim on your life than you do.

Argument against freedom of association constitutes a rejection of ethics. Politics is what you are left with after you reject ethics. It is the systematic violation of consent. It is an endless fight over oppressive control and stolen resources in which association must be either forced or prohibited.

When civilized people disagree, they don’t claim the moral high ground while violating consent to enforce their unprincipled demands on others. They respect the right of individuals to self-select into associations that seem most likely to result in their safety and happiness. If the internalized cost/benefit ratio is not satisfactory, they are free to disassociate.

Open This Content

Government-Supremacist Assumptions

You don’t need to be Sherlock Holmes with a magnifying glass. Government-supremacists are easy to spot by the bad assumptions they naturally make and wave around in public.

They’ve always argued over how to spend “tax” money; they won’t consider the fact that “taxation” is theft.

They’ve argued over what should be taught in government schools, but never questioned government control over (and destruction of) education.

And now they argue over whether it was the right move to issue stay-at-home orders and cripple the economy, but they never consider that no one has the right to do so.

It’s not government’s place to decide to shutter the economy to “save” lives from coronavirus or anything else. They don’t have that right and they shouldn’t be allowed to have the power.

It’s never an “adult decision” to govern other people (the political means) rather than letting them work it out for themselves (the economic means/the market). It’s the most childish thing anyone can do. No one should be allowed to make those decisions and decide for you what you will be permitted to do with your own life.

They also substitute government-supremacism for thinking in other ways.

If you are making the dishonest argument that to fail to sufficiently cripple the economy on account of the coronapocalypse is going to kill 50,000 additional people (or whatever your number might be), without taking into account those who will die because the economy is being destroyed, you aren’t contributing anything useful.

You can’t know how many the virus will kill, nor do you know how many will die from the effects of a shut-down. The number of dead from the shut-down could well vastly outnumber those who die from the virus, making the “net deaths from coronavirus” being tossed around a completely fake number. Any discussion of “net deaths from coronavirus” without taking those a shut-down will kill into account is– as of now– a lie calculated to limit the discussion to government-supremacist answers.

To pretend that someone has sufficient information to make such a decision, or the right to impose it, is to be dishonest. It’s what makes one a government-supremacist.

Government edicts and orders are the opposite of responsibility. You have the responsibility to not violate the life, liberty, or property of anyone else. Government-supremacy is explicit irresponsibility and is shameful. No matter who exhibits it or what excuse they grasp at to justify their violations. I have no respect for government-supremacists; they deserve none. They’ve worked hard to prove that.

Open This Content