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 Absent the giant subsidies, oil might have been replaced by much more lightly subsidized “renewables” long ago.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

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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.

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“Papers, Please” is Now Reality

Even more than it has been, I mean.

And how much do you want to bet the “please” is a lie?

Local employers are now giving employees “travel papers” so they can prove to cops who might stop them for being out on the road that they are traveling “legitimately”. I personally know that Walmart, Family Dollar, a cattle feed producer, and other businesses have issued such papers. Probably everyone whose business is deemed “essential” enough to be allowed to stay in business is doing the same.

So far, only the New Mexico parasites have clamped down on the right to travel, but the Texas employers around here are also issuing the papers because many people cross the state line, in both directions, for work.

How long until some Blue Line Gang scum murders someone for being on the road without permission?

Some statists seem shocked by this Nazi-ish turn of events. Yet it’s their fault! Totally! Their ongoing support of the state, for their whole lives in most cases, has led directly and inevitably to this.

Who are these political thugs to decide which jobs are essential? They wouldn’t recognize something essential if they stepped in it.

Every job is essential to those who perform it, and to those who rely on it.

The ONLY “jobs” which are non-essential are government “jobs”— because they aren’t actual jobs. Some of those “jobs” are even worse than non-essential; they are actively harmful. Keep these people off the roads if you have to keep anyone off.

Police officers, specifically– your “job” is not essential by any stretch of the imagination. It is harmful and parasitical. You are a drain on society. The same goes for every bureaucrat, politician, and whatnot. YOU are the vermin who need to be out of a “job”, now and forever. Let the productive people work while you rot in a hole in the ground.

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Caplans of the Caribbean

I just returned from cruising the Caribbean on Anthem of the SeasMaybe you’ve heard of it? Fortunately, no coronavirus panic marred our vacation, and the concluding scare at the dock turned out to be a false alarm.  Though I’d seen a little of the Caribbean before, this trip was a heavy dose: after a stop at San Juan, Puerto Rico, we sailed on to St. Maarten, Antigua, St. Lucia, and St. Kitts.  My social science reflections:

1. I’ve been writing about Puerto Rico for years.  Its great open borders experiment doesn’t just put an upper bound on the dangers of “brain drain”; it also shows that liberalization makes migration serenely “snowball” rather than frighteningly “flood.” I was excited, then, to finally see Puerto Rico with my own eyes.  San Juan, at least, met my high expectations.  It’s a rich and beautiful city – and I didn’t merely visit the tourist areas.  The country is packed with Walmarts and other big-box retail.  Uber works well.  I saw near-zero remnants of Hurricane Maria, and – through my bilingual sons – had two fun chats with jovial Uber drivers.  Next time, I’d really like to drive the Ruta Panorámica.  No doubt I’d witness some serious poverty, but I doubt it’s more disturbing than driving around rural Mississippi or West Virginia.

When I invoke Puerto Rico, immigration skeptics often scoff.  Hurricane Maria aside, they deem Puerto Rico a disaster zone.  After all, if it were a U.S. state, Puerto Rico (with a per-capita GDP of just $32,000) would be even poorer than Mississippi, right?

I call this a willfully misanthropic comparison.  To grasp the effects of open borders on Puerto Rico, you have to ask, “How would Puerto Ricans be doing if they didn’t enjoy free migration to the U.S.?”  To answer that question, you’ve got to look not as Mississippi, but at other Caribbean islands.  Which I then proceeded to do.

2. Our next stop was St. Maarten (the Dutch side).  Official estimates of its per-capita GDP vary very widely.  While the CIA absurdly sets it at $66,800 (PPP), Wikipedia provides only a 2008 estimate of $15,400 (nominal).  Compared to Puerto Rico, in any case, the island looks quite poor.  A good chunk of this admittedly stems from low population; 42,000 people plus tourists aren’t enough to sustain more than a few restaurants or entertainment venues.  Even taking population into account, however, living standards look low.  Desperate peddling of tourist wares is a common job.  Roads are bumpy.  The shiniest business we saw was a KFC.  The biggest grocery store we found wasn’t bad, but about a third of the refrigerated shelves were empty.  There’s no Uber, but since there are plenty of taxis, I blame regulation.  After SNUBA diving (awesome), we taxied to the local tropical zoo, which sadly turned out to be shuttered since Maria.

What explains the gap between the official economic statistics and what we saw?  The simplest story is that a few super-rich expats drive up the average, but it’s hard to believe that’s close to the whole story.  The next explanation is that I’m such a spoiled American that almost everywhere on Earth looks impoverished to me.  Another is that the statistics are fake; but wouldn’t countries want to overstate their poverty to get extra foreign aid?  Last, CPI bias is plausibly astronomically unfavorable in small islands where there’s not much to spend your money on.  (As I told Tyler, there are odd parallels between small Swiss towns and these Caribbean islands; in both places, even the rich have little to buy).

While we’re on the subject of CPI bias, the Internet has clearly been a nearly unmeasured godsend for the whole region.  In 1990, islanders would have been cut off from 99% of humanity’s cultural bounty.  Today, the curious can sample and savor this bounty for modest connection fees.

3. Then we sailed on to Antigua (a subset of Antigua and Barbuda), with recent per capita GDP estimates of $17,500 nominal and $28,000 PPP.  It did indeed look a little richer than St. Maarten, though that too could be confounded with higher population.  The downtown was fun to see, but the roads were bumpy and even the main sidewalks poorly maintained.  While shuttling to snorkeling, we saw a huge sports stadium (10,000 seats!) largely funded by the government of mainland China.  (Other islands, in contrast, seemed oriented toward Taiwan).  There were fewer desperate peddlers, but almost no businesses even in the historic downtown.  As Richard Scarry famously inquired, “What do people do all day?”

4. Next, we saw St. Lucia.  Geographically, it was the most beautiful of the islands.  The Pitons are splendid, and we passed some scenic harbors and resorts.  Economically, though, St. Lucia looked the worst.  This fits with official statistics, which put its per-capita GDP at $10,000 nominal and $15,000 PPP.  Even though it has roughly twice the population of Antigua and Barbuda, the KFC was again the shiniest business we saw.  The main downtown church was closed, and the nearby park contained about a dozen apparently homeless men, though perhaps they were just relaxing and drinking alone.  Desperate peddling was intense.  The local police seemed to be one of the main employers.

5. Our last stop was on St. Kitts (a subset of St. Kitts and Nevis), whose per capital GDP of $19,000 nominal and $31,000 PPP make it the richest island we saw after Puerto Rico.  Since we spent six hours hiking Mount Liamuiga, the local volcano, we never walked the town.  Yet we did get to see a long stretch of one of the main coastal highways, and the country did indeed look marginally richer than Antigua.

My hiking guide described himself as “fascinated by economics,” and we had a good amount of time to chat.  He suffered from severe pessimistic bias; I tried in vain to calm his fears that U.S. agro-business faced imminent crisis.  When he playfully accused me of having naive faith in mankind, I told him, “No, I just believe in business.”  He mentioned his Netflix subscription, but I didn’t have time to rhetorically build on that foundation.

My guide knew a handful of islanders who worked in the UK, but viewed his countrymen as deeply provincial.  Cruise ships dock all the time in St. Kitts, but when I asked him if he knew anyone who worked on such a ship, he insisted, “It’s not something they would ever think about as a possibility.”  This surprised me, because workers of Caribbean origin were fairly common on my ship, especially relative to their countries’ populations.

6. Are the latter four islands the ideal comparison group for Puerto Rico?  Not really.  Antigua, St. Lucia, and St. Kitts are all former British colonies, and St. Maarten’s is so anglophone that it might as well be.  A better approach is to compare Puerto Rico with other former Spanish colonies; the Dominican Republic is the most obvious counterpart.  Since the latter’s per-capita GDP is only $9000, Puerto Rico’s open borders experiment look even better.

7. I’ve repeatedly heard people claim that open borders would turn the U.S. into Haiti.  On this journey, I was struck by the fact that almost nowhere in the Caribbean is remotely as awful as Haiti.  St. Maarten, Antigua, St. Lucia, and St. Kitts all have roughly the same demographics has Haiti – all are 90%+ black.   They all have roughly the same history of hellish slave plantations.  Furthermore, according to the least-bad estimates, their national average IQs are all extremely low.  St. Lucia comes in second-to-last on Earth, with an average national IQ of 62 (versus Haiti’s 67).  Despite these parallels, St. Lucia roughly matches average global per-capita income, and St. Maarten, Antigua, and and St. Kitts are comfortably above this average.

8. With the able assistance of Nathaniel Bechhofer, I’ve pointed out that “Deep Roots” theories of national development are highly sensitive to population-weighting.  If you count China and India as two data points, the empirics say that national ancestry matters a lot.  When you weigh countries by their populations, however, national ancestry barely matters at all, because the two most-populous countries on Earth have done poorly in modern times despite their illustrious histories.  Critics have pushed back; each country should count as a separate “experiment,” so we should base our worldviews on the unweighted results.

Yet in that case, each and every tiny upper-middle-income Caribbean country should statistically count as much as China and India.  I just checked Putterman and Weil‘s data, and found that none of my last four islands is actually in their sample.  (Haiti and Jamaica are, but even the Bahamas fell through the cracks).  If we re-did Deep Roots estimates with ten more Caribbean data points, I predict that their results would markedly attenuate.  So would Garett’s main findings in Hive Mind.

Personally, I continue to think that population-weighting is the way to go in cross-country regressions.  If you disagree, though, you’d really better add the island nations of the Caribbean to your sample and watch what happens.

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In Praise of Home Delivery Culture

Writing at Reason magazine, Liz Wolfe lauds home delivery culture — the increasing tendency of Americans to Netflix and chill while relying on Amazon Prime, Instacart, Grubhub, and other services to drop the goods we consume off on our front porches.

Wolfe nails some of the individual benefits, and beneficiaries, of this “late-stage capitalism” phenomenon. It allows working people to spend more of their limited “free” time with their families instead of trudging up and down store aisles. It eases the shopping problems and increases the options of the elderly and disabled.

But Wolfe doesn’t mention a couple of the biggest SOCIAL benefits: Delivery culture is also a huge potential boon for the environment and in terms of reduced infrastructure costs.

Fewer individual shoppers means fewer cars clogging the roads and filling store parking lots (in fact, given Wolfe’s inclusion of ride-sharing services like Uber, it may mean fewer cars, period).

Fewer individual shoppers also means less retail space to heat, cool, and light.

And those two things translate into three other things: Fewer greenhouse emissions, less money spent building and maintaining roads, and more land potentially left as “green space.”

One Amazon or Instacart delivery van bringing groceries to 20 households reduces the number of vehicles out on the road for that purpose, during that time frame, by 95%, and the number of total miles driven for those shopping needs by some smaller factor.

One Uber vehicle transporting ten individuals or parties per day means at least five fewer cars taking up parking spaces for hours at a time at the non-home ends of round trips.

And because those services are operated with an eye toward maximizing profit, the vehicles used are likely to be more fuel-efficient and better maintained than your jalopy, and the drivers are likely to choose the most efficient routes, reducing miles driven, wear and tear on roads, and overall emissions.

Much of the focus on home delivery culture, both positive and negative, is on lots and lots of stuff becoming more and more accessible. That’s true, and relevant, whether you’re a fan of consumer culture or bemoan it.

But home delivery culture also incentivizes businesses to do things that are good for all of us. And it does so through market mechanisms rather than through political haggling.

The iron laws of profit and loss are more reliable motivators of business behavior than public scolding or government regulation.

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The Artists Who Are Challenging The Education Status Quo

On a recent weekday morning, the first floor of Tiffany Pierce’s home in Queens, New York, was abuzz with activity. Six children, ranging in age from five to 12, were making art, learning about mathematical asymmetry and digging deep into topics ranging from geography to science. Pierce runs an art-inspired, micro-learning homeschool co-op, bringing together local families who want a more personalized approach to education for their children. Together, the families hired a teacher four days a week to craft an inviting and intellectually-engaging learning environment, while Pierce volunteers her space and support.

Challenging the Status Quo

An artist with a master’s degree in teaching and prior classroom experience, Pierce was thoughtful about her son, Liam’s, education. He went to a small, private preschool nearby,Artists have historically played a crucial role in challenging dominant systems and inspiring change. but when Pierce sent Liam to a public school for kindergarten, she realized it wasn’t a good fit for him. “It was a high-performing school,” Pierce recalls, “but when I visited I saw his back turned and him just looking out the window. His affect was so low, his confidence was shot, he didn’t want to play. I knew it wasn’t just kindergarten blues. This wasn’t his fit. Then he said: ‘Mommy, will you teach me at home?’”

The timing was right, as Pierce happened to be between jobs and she and Liam’s dad thought they would give homeschooling a try. “We like the freedom of choices and options,” says Pierce. “We like to have a say in how our child operates. This person is so precious to us.” In the beginning, says Pierce, she simply replicated school at home and it became a power struggle between getting her son to do things and him resisting. She was also busy running art classes and doing graphic design work for various clients.

Pierce knew she needed a different model and began posting to neighborhood Facebook groups about launching a co-op out of her home. The response was positive, with many parents expressing interest in alternative learning options for their children. Today, eight-year-old Liam learns with other children in the co-op, along with his mother and their teacher, Mary-Lynn Galindo, who provide structure while emphasizing self-directed learning and ample outside time. According to Pierce:

Homeschooling, micro-learning and co-teaching as a small neighborhood-based co-op allows for us to be fully involved with our kids’ learning experience and we weave it through our neighborhood, community, borough and city.

Pierce sees hybrid homeschooling models and the larger micro-school movement as a harbinger of education innovation: “I see us moving towards education that is self-directed,” she says. “Education does not have to be seen as coming from four walls in a conventional, traditional way.” To that end, she launched a mobile arts studio and is working on purchasing an art bus, to help others to view art and education differently. Inspired by the Harlem Renaissance, and in particular the Harlem Community Arts Center that sprouted from it and nurtured African American artistic talent during the late-1930s and early 1940s, Pierce envisions her mobile studio as a modern off-shoot of the center.

It is my mission for the mobile arts studio to serve as a 21st century version of a neighborhood-based arts studio where art is mobile and meets children and adults where they are to create, express and connect,

she says. In art, education and the intersection of the two, Pierce is looking to challenge longstanding conventional settings and practices and design something new.

An Art Apprenticeship Model

Designing something new is also what drives Gabriel Valles, a professional artist and entrepreneur in Austin, Texas who runs an art apprenticeship studio. Like Pierce, Valles homeschools his children and works closely with other local homeschoolers, while building an innovative art education model. He also began his homeschooling journey by trying to replicate school-at-home and witnessing how coercion had a detrimental effect on his children’s learning and their family relationships. By granting his children more autonomy and opportunity for self-direction, their learning flourished. His older son, now 15, has a passion for stop motion animation and has a successful YouTube channel with over 50,000 subscribers and almost 32 million views.

As Valles observed how his children’s creativity and competence grew when they were allowed to drive their own learning while being supported by adults, he decided to launch an art studio, MentorWings, that would run on a self-directed apprenticeship model for aspiring young artists. “Our program is principle-based and self-directed,” says Valles.

Students come in with their particular interest, such as superheroes, anime, fantasy art or cartooning, and we meet them where they are. There is no curriculum. Instead we focus on building upon foundational art principles, such as shape, form, design and color.

Valles sees how young people quickly build their skills, and become highly competent, doing college or professional-level work as teenagers. “We need to give kids more credit than we’re giving them and acknowledge that they can be doing real-world work before or instead of college,” says Valles. He says that art school is too expensive and often doesn’t lead to the kind of career in-roads that can result in fulfilling work.

This work is increasingly in-demand, says Valles, as digital content development and marketing become ubiquitous and new mediums emerge. “I am trying to make it less expensive to attain professional-level competence and also build bridges into the industry,” says Valles. He has established an endorsement system for young artists based on their portfolios that can provide an alternative signaling mechanism for employers.

That endorsement versus a general degree really means a lot. It doesn’t guarantee a job, but it shows confidence in a particular student and becomes a much more powerful signal to the people who are hiring,

he says.

Artists have historically played a crucial role in challenging dominant systems and inspiring change. It’s not surprising that today some of them are building unconventional education models and imagining new possibilities for learning. As Valles says:

My passion is experimenting and inventing things. Art is just the medium that I do that through. Creating educational structures that are a little more just for kids is the problem I am really trying to address.

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