Monday, August 11, 2008
When you purchase something, you are trading something of value, namely money, for some good which you value even more. It’s called your consumer surplus. The person selling the item is in the same situation, making the trade a win-win for both parties.
Except, apparently, when it comes to the purchase of foreign oil. That particular trade is described by the media and politicians as a “wealth transfer,” and it is seen as being harmful to one of the parties (Americans). Jerry Brown says that “we must stop the hemorrhaging of our national treasure, and we need to do it now (WSJ, 8/11/2008, p. A15).” I find it odd that we would voluntarily enter into a transaction that makes us worse off, and I don’t recall seeing Saudi warships forcing us to buy their crude.
Maybe people think it’s not fair because they just pump the stuff out of the ground. This fails to recognize the incredible technological expertise this requires, as well as massive amounts of capital expenditures. And that is no different from any other thing manufactured and sold, which involves the application of technology to transform a country’s natural resources into something useful which can be sold. Besides, when America sells billions of dollars of Kansas wheat abroad, is that a wealth transfer?
Not surprisingly, the solution to the so-called problem also requires the willful disregard of economics. It’s called energy conservation, and if you’re not in favor of it, you will never get laid again. I am a strong proponent of it.
Although I do recognize that when implemented as government standards for automotive, appliance, and building efficiency minimums, you are reducing the consumer surplus, by forcing people to accept a higher initial purchase price and lower level of quality in exchange for a theoretical future reduction of operating costs. This is known in the economic journals as the “thanks to government water rules I now have to flush twice when I take a shit so my water bill isn’t even lower” theory of efficiency by fiat.
Except, apparently, when it comes to the purchase of foreign oil. That particular trade is described by the media and politicians as a “wealth transfer,” and it is seen as being harmful to one of the parties (Americans). Jerry Brown says that “we must stop the hemorrhaging of our national treasure, and we need to do it now (WSJ, 8/11/2008, p. A15).” I find it odd that we would voluntarily enter into a transaction that makes us worse off, and I don’t recall seeing Saudi warships forcing us to buy their crude.
Maybe people think it’s not fair because they just pump the stuff out of the ground. This fails to recognize the incredible technological expertise this requires, as well as massive amounts of capital expenditures. And that is no different from any other thing manufactured and sold, which involves the application of technology to transform a country’s natural resources into something useful which can be sold. Besides, when America sells billions of dollars of Kansas wheat abroad, is that a wealth transfer?
Not surprisingly, the solution to the so-called problem also requires the willful disregard of economics. It’s called energy conservation, and if you’re not in favor of it, you will never get laid again. I am a strong proponent of it.
Although I do recognize that when implemented as government standards for automotive, appliance, and building efficiency minimums, you are reducing the consumer surplus, by forcing people to accept a higher initial purchase price and lower level of quality in exchange for a theoretical future reduction of operating costs. This is known in the economic journals as the “thanks to government water rules I now have to flush twice when I take a shit so my water bill isn’t even lower” theory of efficiency by fiat.
