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Sunday, December 13, 2015

Miscellany: 12/13/15

Quote of the Day
For myself, losing is not coming second. 
It's getting out of the water knowing you could have done better. 
For myself, I have won every race I've been in.
Ian Thorpe

 Tweet of the Day
Rant of the Day: Boudreaux on the Climate Pact Conspiracy
A more accurate headline would be “Politicians from Nations Unite in Global Agreement on Climate Change.” This more-accurate headline helps to reveal the ugly underlying reality: government ‘leaders’ – duplicitous and opportunistic people who specialize in winning popularity contests called ‘elections,’ whose ideas of improving the world involve little more than ordering others around by threatening to cage or kill them, and who are notable as a group for possessing precious little understanding of economics or of commerce – are conspiring with each other to ensure that their citizens can’t escape any additional, costly, and counterproductive commands that are imposed upon them in the name of the environment.
Image of the Day

Coalition for Obsolete Industries



Variable Tolls/Congestion Pricing



Autarky and Trumpism

Autarky is basically a concept of economic self-sufficiency; to its logical extent, we have a closed economy, one that doesn't trade. In some cases, when there are trade boycotts or embargoes, this may be imposed on a country (e.g., think of apartheid South Africa or Nazi Germany with limited oil resources/trading partners and the Fischer-Tropsch process to generate fuels). As I mentioned in today's tweets referencing a Mises text, the Great Depression of the 1930's was exacerbated by a global trade war, particularly under Smoot-Hawley Tariff passed under Hoover.  Note that a closed economy is not necessarily efficient or effective; for example, in the South Africa case, the generation of fuels from locally-available coal deposits is more expensive vs. production costs in Saudi Arabia. This is a variation of the law of comparative advantage. Note that the US is the Saudi Arabia of coal (about 27% of global reserves), but we don't have a sufficient contagion of our own C2L facilities; production costs a decade ago ran somewhere in the $27-45/barrel range with a steep capital investment. (Consider, for example, how Saudi Arabia declared economic war on higher-cost US shale production.) Then there is the example of massive farm subsidies in the US and Europe for autarkic reasons, making it difficult for developing nations to compete with relevant exports.

There was a time earlier in the blog where I sometimes discussed autarkic themes, e.g., when China which dominates rare earth production (used in sophisticated technology); at the time, the last domestic producer had gone out of business, unable to compete. But since then I've adopted a position more consistent with free markets, e.g., as Shuh describes here:
"Everyone reacts to it. Mines open. Companies stockpile. People try and recycle it or find alternatives, like nanomaterials." China's control is, he believes, "particularly vulnerable" to innovation.
I don't get unduly concerned over fears of banana or cocoa bean embargoes, although there are few, if any, domestic suppliers. Trump's obsession with low-skilled jobs lost through unsustainable factories is misplaced; we are focusing on higher-value manufacturing. We are still making about two-thirds of what American consumers buy--down from about 80% 30 years ago, but far from the Donald's intellectually dishonest, anecdotal observations. 

 For example, we made about 98% of the footwear sold in America to about 90% imports today (led by China, Vietnam, and Italy). It's complex because labor is only part of the story; regulations, technology, logistics, availability of local materials, energy, and skilled labor, and flexible production, among other factors are also in play:
The US shoe industry has struggled to contend with imports over the last few years and faces an import level of some 1000m pairs. Production is around 280m pairs, much of which is made or part-made offshore in the Dominican Republic, Puerto Rico and elsewhere. Exports of American lifestyle brands such as Timberland, Sebago, Bass, Wolverine and Dexter are seen in the high streets of Europe and elsewhere – not to mention its athletic shoe contributions world wide...Mexico will enjoy proximity to the market, ability to react to market demands and supply, and repeat orders more quickly. It is also ‘putting its house in order’ with Government support, to improve quality, skills of the workers, marketing and design.
Trump seems to suggest that he can bring back well-paying, lower-skilled jobs through government fiat. In fact, domestic factories have inherent competitive advantages, e.g., logistics, labor supply, management control, ample natural resources, etc. But Trump can't put the genie back into the bottle. The global market for consumer goods is more competitive than it was 3 decades ago. The last thing we need is some economic illiterate trying to meddle/regulate the economy, imposing additional hiring mandates, etc. A trade war would hurt exporters, who would lose economies of scale from exports to the other 95% of the global population. Trump is the problem, not the solution.

Facebook Corner
(FEE). U.S. energy policy remains stuck in the 1970s, when tight restrictions were imposed by Washington on the export of US crude oil in the wake of the 1973 Arab oil embargo.
By this account we (America) has all the oil it needs. If that is true how come we have seen this reflected the price to the consumers (home heating oil, gasoline, etc) I guess, like the rest of the economy, it is a fraud.
Economic illiterate nonsense, leftist troll. You should at least be familiar with the markets. Most of US refinery capacity is aimed at processing heavier, sour oil we've been importing. Domestic oil is lighter, sweeter, easier to refine. In the meanwhile, foreign refineries able to process our oil have a hard time remaining in operation. Domestic oil producers have to compete with foreign producers for US refinery capacity. Why do you think superior US oil sells for less than Brent? Refined products, on the other hand, are not similar restricted and reflect the more competitive global market. Lower prices for domestic oil also mean less incentive to explore and drill--not great news for domestic consumers depending on volatile foreign suppliers to make up the difference--and the consumer pays for the more expensive oil.
Instead of getting your crackpot conspiracy theories from leftist propaganda, try registering for Econ 101.

 (Jeffrey Tucker). We need a gigantic global police state and massive government spending to save the world from terrorists who are threatening.... wait cut cut. That was last week. This week we need a gigantic global police state and massive government spending to save the world from climate change. What's on tap for next week?
Well, Bernie Sanders has your back, Jeffrey. He's managed to link climate change to terrorism.

Choose Life: Bless the Beasts and the Children









Political Cartoon
Courtesy of Chip Bok via Townhall
Musical Interlude: Christmas Hits

Elton John, "Step Into Christmas"

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