tag:blogger.com,1999:blog-3829599.post112589074507830576..comments2024-01-28T00:20:40.933-08:00Comments on Agoraphilia: Economics of Disaster-Prone RegionsUnknownnoreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3829599.post-1126243560632481712005-09-08T22:26:00.000-07:002005-09-08T22:26:00.000-07:00"The interruption of Hollywood movies would hardly..."The interruption of Hollywood movies would hardly qualify as a national catastrophe severely affecting the nations energy and food supply."<BR/><BR/>Hold on a minute -- you're shifting the argument. Remember your original argument was, in essence, "everyone who benefits from an activity should have to support it with taxes." My Hollywood example clearly refutes that point. You, as a moviegoer, pay for the cost of movies through your ticket price, so no subsidy is necessary.<BR/><BR/>But now you're shifting to a different argument, which is "these products are really important, and that's why government should be involved." As the present disaster shows, however, government involvement does not necessarily make the supply of these products any more secure. Indeed, subsidies encourage the placement of more industry in harm's way.<BR/><BR/>With the bike example, you're implicitly admitting my point by indicating that bike riders should pay their fair share for the roads (and that it's wrong for them to get a free ride). You're basically saying, "bike riders get a subsidy, so car drivers should, too." I'm saying no one should get a subsidy, and that way they'll face the true cost of their decisions. (And yes, I would like to see more pricing of road use, which would also help to deal with traffic congestion.)<BR/><BR/>Your response on seafood is a red herring. If non-seafood-eaters demand other foods, they also have to pay the costs of producing those other foods (through their prices). But if the production of seafood is subsidized, then seafood eaters don't face the full cost of their choices. Instead, they foist some of the cost of producing seafood onto those who don't eat it. (And if I'm willing to forgo the health benefits of seafood, that's my own business!)<BR/><BR/>Education is clearly a special case. I'd like to see much less gov't involvement there as well, but there's at least a case for subsidizing education on grounds that it produces positive external benefits for people not involved in the transaction -- specifically, those of us less likely to be victimized by future criminals. But the analogy to petroleum products just isn't there. There aren't any positive externalities; all of the benefits are experienced by the producers and the buyers of petroleum. (To anticipate your response: yes, petroleum products are used in the production of other goods and services, like transportation of food -- but then it's included in the price of those other goods and services, so the ultimate users still end up paying.) On the other hand, petroleum products arguably *do* create negative externalities in the form of pollution. There's a better case for heavily taxing oil and gas than subsidizing them.<BR/><BR/>"Again, I don’t care whether I pay for something through taxes or prices, as the money is fungible." Well, you *should* care, for exactly the reasons I said. The fungibility of money is irrelevant to the two arguments I made. First, when good X is subsidized with general tax revenues, that means money is being transferred from those who don't consume X to those who do. Fungibility doesn't alter that fact. Second, when faced with a lower price at the point of sale, people will tend to consume more of the product. The portion of the cost that they feel in their tax bill, on the other hand, does not affect their consumption of the good (because they have to pay the tax regardless). And that means subsidized goods will be over-consumed -- people will consume them even when the true costs are greater than the benefits. That's wasteful.<BR/><BR/>Dad, you've told me many times that petroleum is an industry that will eventually have to die as we switch from oil to other kinds of fuel. Well, how do you think that will happen? If you let the market work, prices for oil will keep rising, which will (a) give people an incentive to economize, and (b) give investors an incentive to invest in alternative products. When the government subsidizes the petroleum industry, it stymies both of those market incentives -- and then politicians blame the market for not producing alternative fuel sources! This is clearly nonsense. If the gov't wants people to economize on oil and develop fuel alternatives, it should STOP SUBSIDIZING OIL!Glen Whitmanhttps://www.blogger.com/profile/01425907466575991113noreply@blogger.comtag:blogger.com,1999:blog-3829599.post-1126068275301665382005-09-06T21:44:00.000-07:002005-09-06T21:44:00.000-07:00"Well, I have no objection at all to the producers..."Well, I have no objection at all to the producers of the seafood and the energy and the petrochemicals and the other agricultural and manufactured goods paying for reclamation and passing on the costs in the form of higher prices. The problem with this position is, WHAT IF THEY DON’T/WON’T DO IT?"<BR/><BR/>You mean, what if they lobby for subsidies? Then we ought to oppose them. But the whole question is whether you and I should support subsidies. Saying, "They'll get them anyway" doesn't refute the argument that they shouldn't. <BR/><BR/>"On this point, Glen notes that in this event it should be the job of local and state governments, not the federal government. I don’t understand this argument at all, since Louisiana and the other Gulf Coast states export most of their fish, energy, and petrochemicals to other states."<BR/><BR/>Hollywood produces movies watched by the rest of the country and, indeed, the world. Is this an argument for subsidizing Hollywood? No -- Hollywood has to pay to make movies, and the rest of us cover the cost through ticket prices. The fact that consumers benefit from a good is not an argument for making consumers subsidize it with tax dollars. If it were, then we'd have an argument for subsidizing *every* good (because consumers benefit from all the goods they buy).<BR/><BR/>"Personally, I don’t care whether I pay the costs in the form of taxes or in the form of higher prices, just so long as the resources and the people responsible for providing them to the rest of us are protected."<BR/><BR/>Well, I do care whether I pay through taxes or higher prices. Why? First, because higher prices target exactly the people who benefit, instead of forcing other people (e.g., someone who rides a bike or doesn't eat seafood) to pay. Second, because higher prices make consumers face the true cost of their economic choices. When the gov't subsidizes oil (or anything else for that matter), prices don't reflect the real cost of production, and consumers will tend to consume more of the product than makes economic sense.<BR/><BR/>With all that said, there's a difference between whether the gov't should help rebuild now (given past promises the gov't has made) and whether the gov't should continuing making promises to help rebuild in the future. My point in this post was to say that future promises should not be forthcoming. I still want the Katrina victims to get help, in large part because they were at least implicitly promised the help before the fact.Glen Whitmanhttps://www.blogger.com/profile/01425907466575991113noreply@blogger.comtag:blogger.com,1999:blog-3829599.post-1125923710647079772005-09-05T05:35:00.000-07:002005-09-05T05:35:00.000-07:00One quick point Glen: I think the point about loc...One quick point Glen: I think the point about local responsibility for levees is correct. And your possible counter-argument ("don't they benefit those who consume the goods elsewhere in the country?") can also be refuted by a reductio. How much of what gets produced or transported through New Orleans is exported? Would we/should we somehow charge foreign consumers for part of the cost of the levees?Steven Horwitzhttps://www.blogger.com/profile/00470758334242360804noreply@blogger.com