Just Stop Saying That Department

I am really, really tired of hearing people say that if it weren’t for the Electoral College, Al Gore would have won the 2000 election. Aside from the fact that Gore-supporters need to finally just *get over it*, the truth is that we *don’t know* who would have won under a different system. Why? Because different rules create different incentives. It’s true that Al Gore won the popular vote in 2000, but that only means he got a majority of the votes actually cast that day – and there is every reason to believe a different set of votes would have been cast under different rules. First, there are many Republican states, like Utah, where it was virtually guaranteed that Bush would win the statewide vote. As a result, many conservatives in Utah probably felt no particular need to visit the polls that day, because Utah’s electoral votes would go to Bush anyway. But if they had known their votes could counter Democratic votes in New England or California, as would have been true in a popular vote, they might have voted after all. Second, there are other states with Democratic majorities but substantial Republican minorities, like California. In those states, some conservatives may have avoided the polls because it was pointless, California being a virtual shoo-in for Gore. But if there had been a popular vote, Republican Californians’ votes might have mattered after all.

Of course, we can make similar arguments for why more Democrats would have visited the polls under a popular vote system as well. Democrats from Utah might have cast votes with the hope of countering Republican votes cast in the South. More Democrats in California might have voted because a larger margin of victory in that state wouldn’t have been superfluous. The point, again, is that we just don’t know, and we never will. We’ll never know what voters would have done if they’d had different incentives.

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Guns, Alcohol, and Lawsuits

In an excellent post, Eugene takes the arguments in favor of holding gun manufacturers liable for the criminal actions of some gun users and applies them to the alcohol industry, with naturally absurd results.

What I fear, of course, is that this will turn into another instance of reductio creep. Eugene’s facetious arguments might sound crazy now, but I won’t be at all surprised to hear Eugene’s facetious arguments being made in all seriousness a few months or years from now.

It’s also worth adding an economic perspective to Eugene’s legal one. Quite aside from the inequity of imposing liability on the makers of a product with lawful uses, thereby punishing the law-abiding users of the product through higher prices, it’s also likely that imposing liability on manufacturers will fail the efficacy test. When the price of any product rises, the first customers to cut back their purchases will be the most elastic, i.e., price sensitive, customers. Other customers, the less price-sensitive ones, will continue to buy. With respect to guns, my strong suspicion is that it will be mostly lawful gun buyers who restrict their gun purchases, whereas most criminals (whose livelihood depends on possession of guns) will continue to buy at the higher price. With respect to guns, it will mostly be the moderate drinkers who will reduce their alcohol consumption, while the irresponsible binge drinkers continue to buy at the higher price. The result? Placing legal liability on the manufacturers of guns and alcohol will deter exactly the wrong groups of people from using them.

It is true that gun and alcohol manufacturers could adopt more targeted marketing and pricing schemes, but I doubt most people would like the consequences of their doing so. Lacking better information, the manufacturers would have to rely on statistical correlates of the undesirable behaviors -- by, for instance, charging African-Americans higher prices for guns because African-Americans are more often convicted of violent crimes. Or, if they couldn’t do that, maybe they’d just shut down the gun shops in areas of town where the “undesirables” live. And even if they managed to adopt such policies without raising public outcry, the effect on crime would still probably be negligible or opposite that intended, as blackmarkets would emerge to transfer the products from the preferred to the unpreferred buyers. Ultimately, products will move to the buyers who value them most, through illegal channels if necessary.

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Snake Oil Update

Turns out the forum I mentioned below was televised. I saw a couple of camera crews, including one from CBS, and later someone told me they’d seen me on Channel 7 (ABC). But I have no idea how much of the forum they showed. Very exciting!

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Oil and Snake Oil

I’ve been invited to speak tomorrow (Tuesday) at a Teach-In/Forum here at CSUN, on the topic, “The U.S. at War: How Did we Get Here?” The organizer asked me to join the panel because she wanted someone who could address the economic aspects of the conflict. I interpreted this to mean, “Is it really about oil?”

Well, I’m not really an expert on the petroleum industry, but far be it from me not to hold forth based on whatever limited knowledge I have. I threw together some thoughts, and I figured I might as well post them here. Note: Since these were intended as notes to myself, they don’t have the links and citations that I would normally include. My apologies for any unintentional plagiarism, as my views have been informed by various articles and blog posts I’ve read over the last few months. I do wish to give credit to this page, though, as it stimulated my thinking on the issue.

Is this war really about oil? This question is usually presented in the form of an accusation: “No blood for oil.” But there seem to be two competing accusations at work here:

• One is that the U.S. is fighting this war to increase the supply of oil for the purpose of fueling our oil-dependent economy. This is seen as bad for environmental reasons.
• The other is that the U.S. is fighting this war because Bush wants to enrich his Texas oil cronies. This is bad because it risks American lives for the benefit of a select few.

But these two accusations are contradictory -- you can’t really have it both ways.

• If the war leads to an increase in the world price of oil, that would indeed benefit Bush’s friends, but it would not increase the availability of oil to the U.S. economy. In any case, this outcome is highly unlikely.
• If the war leads to a decrease in the world price of oil, that will increase the availability of oil to the U.S. economy, but mostly to the detriment of the U.S. oil industry. Middle Eastern oil is high quality and cheap to produce, whereas American oil is much more expensive to produce. When the price of oil falls, the first wells to shut down are the ones most costly to operate.

Iraq would happily have sold plenty of oil without a war, and the only thing preventing that was the sanctions put in place after the first Gulf war, and Bush could easily have persuaded the U.N. to keep the sanctions in place. At least, he would probably have met with greater success than he did in getting U.N. authorization for an invasion. So it seems unlikely that Bush is trying to inflate the price of oil to benefit his friends.

Yes, U.S. oil companies will be contracted to help rebuild the Iraqi oil industry. But that is a short-run gain. Once the contracts are fulfilled, it’s over. If there’s political cronyism going on here, I suspect it’s of the compensatory variety: American oil companies will take a hit from lower world oil prices, but the rebuilding contracts will soften the blow.

How effective will the war be in lowering the price of oil? My best guess is “not very.” The price may fall, but not much. Once the Iraqi oil industry is rebuilt (and it needs to be rebuilt regardless of the war, because it’s old and dilapidated), it could add about 1.3% to the world oil supply. Whether that has any substantial effect on price will depend on whether a post-war Iraq is a member of OPEC, which seems very likely. If so, then increases in Iraqi production might be balanced by reductions in production elsewhere to hold up the price.

Assuming that the goal of the war is indeed to secure access to oil at low prices for the U.S. economy, that outcome would not necessarily be a bad thing (although it might not be sufficient to justify war). It’s true there are externalities from the use of fossil fuels, but that doesn’t mean *any* increase in price is desirable. The price of fossil fuels needs to be enough higher than the private cost of production to account for the external costs imposed by their use. But OPEC has managed to keep oil prices far above the marginal cost of production for a couple of decades now, and that would not change as a result of a free Iraq. Prices will likely remain much, much higher than the marginal cost of production.

Has oil motivated other countries’ positions on Iraq? It’s certainly the case that France and Russia, two very prominent opponents of the war, have long-term contracts with the current Iraqi regime for the development of their oil fields. Those contracts would likely be voided upon the toppling of the Iraqi regime. Iraq also owes Russia a great deal of money which it planned to pay off with oil rights, but that obligation might be voided under the Doctrine of Odious Debts. So, interestingly enough, the accusation of being motivated by oil may stick better on the opponents of war than the supporters. If the war protesters are to be consistent, they should at least mention this.

Bottom line: oil slogans get thrown about as ad hominem arguments. They are typically made by people who are opposed to the war for other reasons, and who feel the need to demonize those who favor it. I think it would be better to focus on the actual reasons given. Were those reasons sufficient? I happen to think not, but I also think the oil-related arguments are mostly red herrings. Even if this war was motivated by oil, it’s possible to do the right thing for the wrong reason.

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