Strengthening Constitutional Self-Government

No Left Turns

Throwdown with Bobby Flay Hayward and Deneen

I’ve posted the following challenge on Pet Deneen’s blog, in response to his response to my earlier response (got all that?):

First of all, I’m not a market-worshipping purist. To the contrary, I’ve publicly advocated a carbon tax (http://www.aei.org/publications/pubID.26286/pub_detail.asp). But as to your question--"would you consider that the market was working 20+ years after the oil shocks of the 1970s?"--the answer is an emphatic Yes if you know what you’re looking for. This is a large story with many parts, but ask why the oil price rise of the last few years has had much less of an impact on the economy than the comparable oil price rises of the 1970s. The short answer--the full data take a while to walk through-is that oil is a much less of a factor in the U.S. economy than it was in the 1970s. One stat: in the 1970s, oil accounted for 2/3rds of total U.S. energy consumption; today it is only 1/3rd, with electricity (and gas and coal) accounting for the other 2/3rds. Between 1949 and 1973 energy efficiency in the U.S. only improved by 12 percent; between 1974 and 1999 U.S. energy efficiency improved 40 percent (usually in advance of government mandates such as auto CAFE standards); between 1949 and 1973 per capita energy consumption increased 64 percent; between 1974 and 1999, by only 2 percent. Pretty good evidence to me that markets and prices work, and that in fact we did make big changes as a result of the new energy world of post-1973. And I suspect we’re going to make big changes in the years just ahead, with or without (almost surely better without) government mandates (see: ethanol debacle). In other words, the dynamic restraints of the marketplace will almost always (note: I said "almost") be superior to politically-imposed restraints.

Regarding McMansions: many of them (not the Gore/Edwards monster-size) use exactly the same amount of energy as the average new house in 1970; in other words, we traded energy efficiency gains (better insulation and appliances, etc) for more square feet in which to live. Is this really such a sin?

I could go on and on (I’m a maven for these stats, and I’ve practically memorized the exhaustive tables of the Energy Information Administration), but let’s make this interesting: How about a Simon-Ehrlich style wager. I say that three years from now, oil will be below $75 a barrel. Let the loser of this wager buy the winner his choice of any hardbound book in the Liberty Press catalogue. Shake?

Discussions - 3 Comments

I agree with economic reasoning...but I don't think oil will be bellow $75 in three years. I think you are being too generous. Technically to predict out three years at 90% certainty I would put oil in between $30 and $600 a barrel. I argue this on the basis that human beings are always more certain of facts than evidence should allow. The reason why commodity markets are necessary and why speculators are good is that they provide certainty. People that arrogantly claim that speculators are foolish are precisely the type of people who are speculators in the first place...in other words they arrogantly believe that they know better. But in keeping with the spirit of wagering I make the assumption that people who are willing and able to wager sums far in excess of a book must have systems or feel for the situation that is far superior to that of the public.

In my opinion Monroe Trout is correct in saying: "Also, I think it's amazing what you can do when you have real money on the line. A person in an academic setting might think that they have tested all possible types of systems. Howhever, when you have real money on the line, you can start to think pretty creatively. There is always something to test. I think the academic community just hasn't tested mnay of the approaches that are viable. Certainly if you spend just a short time doing academic study, you are not going to find anything significant. It can't be any other way. If it were, everyone would be rich."

Hi Steve,

It's probably not a secret that Deneen is a crunchy. To his credit, he actually acknowledges that he finds conspicuous consumption immoral, which some crunchies won't openly do.

The problem is, it's very difficult to pin crunchies down on what's conspicuous and what isn't. (Your point about McMansions is a good one in that regard.) To what extent should the government use "incentives" aka coercive tax or regulatory policies to "discourage" people from building houses larger than 5,000 sf? Boulder County, CO is forcing new houses of this size to have a carbon footprint of zero -- meaning they must not consume any energy from the main power grid.

And if 5,000 sf is sinful, why not 4,000? Or 3? My three sisters and I grew up (with our parents) in the top floor of a 19th century home that was about 1,200 sf. And one bathroom. We did fine. Why should any other family of six need more space? Why not tax them to prevent that?

See where this crunchy nonsense leads?

I think there's an underlying assumption here that technology will somehow makes everthing come out all right. For instance, that it will lead to increases in efficiency, and creation of new sources of energy.

But science does not work that way. It's very possible that new breakthroughs will not occur, and that increased population, and (more importantly) increasingly wealthy poplulations, will lead to demand for energy which continues to outstrip supply. The current system cannot work if everyone lives like an American.

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