Andrew Sullivan, yesterday, The Trouble With Lower Gas Prices:
At the same time, however, let's not accept the foregoing less-than-rigorous articles as to how the government should "create a market," then sit back and watch the free market do its amazing thing.
Because the very act of government creating a market, whether through a gas tax or a cap-and-trade system or innovation incentives or whatever scheme, means that the free market is no longer operative. When you impose a tax simply for the reason that you want to reduce demand (which, by the way, lowers the price, but we'll ignore that effect today), you're interfering in the real market. You're creating an artificial price, one that has little to do with supply and demand.
I'm not saying that these measures aren't necessary or desirable, simply that those people who tout them as proof that we can make the market work aren't telling the truth. We have a political body attempting to flout the will of the market for other ends, then spouting the nonsense that it is evidence of the wonders of the market. It's rubbish, and I would like to see the rhetoric stop.
The market, as it is currently constituted, is not capable of dealing with the long-term effects of running out of oil. There's no way to look ahead and price those effects, that's not what markets do. If we want to take into account those long-term costs, well, that's probably necessary, but it does constitute interference with the glorious free market. We need to stop fetishizing the free market as the source of all good; it has its problems, and we should focus on best solutions for those problems, not on babbling about foolish orthodoxy.
But the sad truth is: only high gas prices will ever wean us off Middle Eastern oil and provide the real market incentives to pioneer non-carbon energy. Falling oil prices could derail a serious move toward energy independence, which will be achieved in the end by the private sector, not the government. My own view is that the one thing the government can do right now is keep gas prices high, by raising gas taxes.Sullivan then quotes Robert Samuelson (whose full post is here) to the effect that we should raise fuel taxes by one cent in each of the months over the next four years, for a total of 48 cents. Congress "must also create a market in which buyers favor fuel efficiency." Sullivan concludes:
The point of this is not big government trying to find a solution to our energy needs. It is for government to provide the context and incentives for us to innovate.I'm not going to rattle on as to what we "should" do about energy; the likelihood of a Manhattan Project or an Apollo project is pretty much nil. Anyway, I wrote a post on this subject just last week, and in it I laid out some of the limitations the free market has in dealing with long-term issues.
At the same time, however, let's not accept the foregoing less-than-rigorous articles as to how the government should "create a market," then sit back and watch the free market do its amazing thing.
Because the very act of government creating a market, whether through a gas tax or a cap-and-trade system or innovation incentives or whatever scheme, means that the free market is no longer operative. When you impose a tax simply for the reason that you want to reduce demand (which, by the way, lowers the price, but we'll ignore that effect today), you're interfering in the real market. You're creating an artificial price, one that has little to do with supply and demand.
I'm not saying that these measures aren't necessary or desirable, simply that those people who tout them as proof that we can make the market work aren't telling the truth. We have a political body attempting to flout the will of the market for other ends, then spouting the nonsense that it is evidence of the wonders of the market. It's rubbish, and I would like to see the rhetoric stop.
The market, as it is currently constituted, is not capable of dealing with the long-term effects of running out of oil. There's no way to look ahead and price those effects, that's not what markets do. If we want to take into account those long-term costs, well, that's probably necessary, but it does constitute interference with the glorious free market. We need to stop fetishizing the free market as the source of all good; it has its problems, and we should focus on best solutions for those problems, not on babbling about foolish orthodoxy.
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