Friday, May 30, 2008

Why I'm not a member is economically retarded.

They sent me this:

Dear MoveOn member,

We all know gas prices have skyrocketed over the past year, but it's just supply and demand, right?

Everybody's taking a hit, aren't they?


As millions of Americans struggle to make ends meet, thousands of oil company executives are struggling with a different problem: what to do with all their extra money.

We get record prices, they get record profits. And it's gotta stop.

Tell Congress to pass a windfall profits tax. If big oil companies continue over-charging Americans, some of their ridiculous profits should be invested in green jobs and alternative energy research.

Clicking this link will add your name:

The oil industry's profits are absolutely staggering. In 2007, the industry netted $155 billion. In profit. For context, Barack Obama's plan for a clean energy future calls for $150 billion. Over 10 years.

Thanks for all you do.

I totally disagree with this. First, the logic is terrible. If this is a windfall, then it's temporary: There's expectation that circumstances are abnormal, and will revert to normality. The profits are due to an aberration, and thus are a "windfall". So if there's reason to believe things will get back to normal, that this is an exceptional moment, and that the profits are a windfall, then the tax won't have any effect: Things will revert to normal with or without the tax. Do we we really want a government that raids profitable businesses? It provides incentive to hide success or squander resources to make sure a business is never too profitable, lest Uncle Sam come and take your "extra" money. "We leave the lights on all night so we don't make too much money. Don't want to have one of those 'windfalls'".

If it's not a windfall, and it's in fact because of a fundamental shift in economics, how will taking a company's profits accomplish anything we want to see happen? Taking profits surely won't give them any incentive to lower prices: "Gee, thanks for taking all our extra money. Now that we don't have it, we realized, we're better off practicing detachment from material things, and will hence lower our prices to be sure we never are surrounded by money again. Also, we are late for yoga class."

The only way prices will come down is if demand drops or competition enters. And competition enters an industry when profits are high. High prices for traditional energy make newer, greener energy more economically attractive. Let the cycle play out, and we'll get where we want to go. People will buy greener cars, drive less. Public transit will get funded and built. All of these things are capital infrastructure shifts, and will take time to come about. High prices for gasoline will keep us moving in that direction. If gas goes back to $2/ gallon, folks will keep driving hummers.

Lastly, have some perspective. Gas is more than a pound per liter in the UK. With 1.96 dollars per pound, and 3.79 liters per gallon, that's pushing $8/ gallon. So we need to stop whining and trying to get someone else to pay for what is our common burden of moving our economy towards a new and better system of energy and transportation.

Move On needs to hire some economists.