One of the critiques of any trade deal of late is that there should be penalties for countries guilty of “currency manipulation.” The concern is that countries will devalue their currency in an effort to make their own exports cheaper to other nations while making it harder for other countries to export back to them. As an example, if the Chinese were to do something that cuts the value of the Yuan in half vs. the dollar, their products look very cheap to American consumers while American-produced goods suddenly look a lot more expensive to Chinese consumers.
I have two brief responses to this:
- I find it hilarious that anyone in the United States government, which has a Federal Reserve that has added nearly $2 trillion to its balance sheet in the service of cramming down the value of the dollar, can with a straight face accuse other nations of currency manipulation. In practice in today’s QEconomy, currency manipulation means another country is doing exactly what we are doing, but just doing it faster.
- As an American consumer, to such currency manipulation by other countries I say, Bring it On! If China wants to hammer its own citizens with higher prices and lower purchasing power just to subsidize lower prices for me, I am happy to let them do it. Yes, a few specific politically-connected export businesses lose revenues, but trying to prop them up is pure cronyism. Which is one reason I think Elizabeth Warren is a total hypocrite. The constituency of the poor and lower middle class she presumes to speak for are the exact folks who shop at Walmart and need very price break on everyday goods they can get. Senator Warren’s preferences for protectionist trade policies and a weak dollar will hurt these folks the most.
Warren Meyer, “Currency Manipulation”, Coyote Blog, 2015-05-26.
January 1, 2017
November 30, 2016
Minnesota taxpayers contributed nearly half of the costs to build the new stadium that the Minnesota Vikings call home (“one of the largest public subsidies ever given to a sports facility”). The state government appointed a six-person board to negotiate the state’s share of the costs. Now, it comes to light that those six people get free luxury suite tickets to not only Viking home games, but every event held at the stadium:
Six government appointees, including the son of a vice president, who negotiated how much public money would be spent building the Minnesota Vikings’ new football stadium get free access to luxury boxes for all events in the stadium.
Which, you know, might call into question how hard they really negotiated for the taxpayers on that one.
The Minneapolis Star-Tribune reports that the six members of the Minnesota Sports Facilities Authority (MSFA), the quasi-government agency created in 2012 to oversee the public subsidies for the building of U.S. Bank Stadium, get free tickets to two lower-level luxury suites for all events held there. Even though taxpayers covered more than half of the cost of the $1.1 billion stadium, which opened earlier this year, the public is being kept in the dark about who occupies those 36 seats and the adjoining luxury suites during Vikings home games and other events.
The team claims that the suites are used for “marketing purposes,” but the Star-Tribune‘s investigation found that family and friends of the board members are usually in attendance too.
Maybe the best part of the story is the moment when two members of the MSFA board (chairwoman Michele Kelm-Helgen and executive director Ted Mondale) try to justify their sweet, free, and secret perk by arguing that they “work long hours on game days and spent long nights negotiating on behalf of taxpayers during construction of the building, so having friends and family there is reasonable.”
For anyone who isn’t part of this special cadre of insiders getting special access to the suites for free would have to shell out more than $20,000 for season tickets in similar suites at the stadium. Since the six members of the MSFA board also have access to the suites for all other events at the stadium, the actual value of their seats is in excess of that figure.
The whole thing raises ethical questions since public officials in Minnesota are not allowed to receive gifts, including special privileges or access not otherwise available to the general public. That gift ban has a loophole allowing public officials to accept such special freebies if it’s part of their official duties.
As I wrote back in 2012:
As you’ll know if you’ve read the blog for any length of time, I’m a big fan of the Minnesota Vikings, despite never having lived there or even visited the state. I’d be very upset if they became the L.A. Vikings. But I also totally sympathize with Minnesotans who don’t want their taxes being used to give corporate welfare to the billionaire owner of the football club. Pouring money into facilities for professional sports teams is one of the very worst ways to use tax dollars, as the lads at Reason.tv explain:
August 25, 2016
At Reason, Glenn Garvin looks at the role government subsidies had in the survival of the Cunard Line and the building of the RMS Queen Mary:
The most interesting thing about the Queen Mary, which for several decades was the largest passenger ship ever built, is not the 20-foot propellers so perfectly balanced that they could be spun with a flick of the wrist; or the 35,000 tons of metal that went into its construction; or the 10 million rivets that hold the whole thing together. It’s not even the still-mysterious question of how the ship became the springboard for the very first cheap-shot joke about Joan Collins. (Q. What’s the difference between Joan Collins and the Queen Mary? A. It takes a few tugs to get the Queen Mary out of her slip.)
No, the really special thing about the Queen Mary is that it was one of the epic government bailout boondoggles of the 20th century. In 1931, barely a year into the ship’s construction, the Cunard line went broke. The British dutifully forked over a loan of a staggering 9.5 million pounds — that’s $684 million in 2016 dollars — to keep the company afloat (dreadful pun not intended until I actually typed it). Which, as the documentary Mighty Ship at War: The Queen Mary notes, saved a whopping 2,000 jobs — at $342,000 a pop, I can only conclude that shipping lines employ a lot more neurosurgeons than I was aware — and, more importantly, England’s image: “Great Britain was at risk of losing its reputation as the world’s leading maritime nation.”
Its wide-eyed admiration of pork-slinging statecraft aside, Mighty Ship at War is a peppy and quite watchable little documentary about an oddball chapter in maritime history: the conversion of luxury liners into troop transports during World War II. When war broke out in Europe in 1939, unleashing German submarine wolfpacks on commercial shipping in the Atlantic, the cruise ships were drafted just like able-bodied men. They even got the maritime equivalent of a GI haircut, repainted a dull naval gray while their posh staterooms were ripped out to make way for towering stacks of bunks.
Even before its military makeover, Mighty Ship at War relates, the Queen Mary had found its business model remade by Europe’s gathering war clouds. Because the ship’s London-to-New York route included a stop in Cherbourg, France, it became the escape route of choice for many Jews fleeing Europe. Even families of modest means often traveled in plutocratic splendor, blowing their life savings on first-class tickets, because the Germans would confiscate any money or valuables the refugees tried to carry with them. “Give the money to the Brits, not the damn Nazis,” one refugee who made the crossing as a small child remembers his parents saying. By early 1939, every London departure of the Queen Mary was sold out.
August 21, 2016
Of the numerous and occasionally contradictory techniques used to ration demand and supply [when monetary prices are not used], perhaps the most common is past behavior: persons already in apartments are given preference under rent control, or past acreage determines current allotments under agricultural price support programs. Another common technique is queuing or first come – first served: taxicabs, theater tickets, medical services, and many other goods and services are rationed in this way when their prices are controlled. Of course, discrimination and nepotism are also widely used; the best way to get a rent-controlled apartment is to have a (friendly) relative own a controlled building. Other criteria are productivity – the least productive workers are made unemployed by minimum wage laws;…. collateral – borrowers with little collateral cannot receive legal loans when effective ceilings are placed on interest rates.
Each rationing technique benefits certain groups at the expense of other groups relative to their situation in a free market. Price controls are almost always rationalized, at least in part, as a desire to help the poor, yet it is remarkable how frequently they harm the poor.
Gary Becker, Economic Theory, 1971.
August 18, 2016
Ever since the beginning of the ethanol mandate it was obvious to anybody with eyes to see that the whole thing was a boondoggle and a huge waste for everybody except ADM. What the Greens failed to understand is that if you prop up corn prices by buying, distilling and burning massive amounts of corn whisky in cars, two things are going to happen. One the price is going to go up, making things like cow feed and other uses of corn more expensive and 2. farmers are going to, without restraint, plant ever larger amounts of corn, which will 1. push out other crops like wheat and 2. require more land use to plant even more corn. Which is why you can now go from Eastern Colorado to Western NY and essentially see nothing but corn. Millions of acres of corn, across the country, grown to burn. Somehow this was supposed to be environmentally friendly?
J.C. Carlton, “The Law Of Unintended Consequences Hits Biofuels”, The Arts Mechanical, 2016-08-07.
May 31, 2016
Anyone who reads the blog knows I’m not a Trump fan, so it might seem a bit odd that I’m in full agreement with Tim Worstall that Trump is actually right about fixing California’s chronic water shortages:
Much amusement around and about the place as Donald Trump tells California that there is no drought and that when he’s President then there will be plenty of water for everyone. The amusement being that of course, how could anyone spout such nonsense, everyone knows that California’s had a drought for years now!?! Except, of course, that Trump is actually correct here. There is no existential shortage of water in the state, not at all. What there is is misallocation of water and that misallocation is because water is incorrectly priced there. The solution therefore is to get the pricing right: then the allocation will be. We also know something more about this: it doesn’t matter what the current or original allocations are. Getting the price right will solve the problem.
The answer is, as any passing economist would tell you, that water has to be priced and priced properly. Those activities that do not cover the cost of water will not be done. That frees up water to do the things that add more value than the cost of the water. And that’s it, that’s all that needs to be done. Yes, it will mean radical changes in farming practices for some people: almost certainly a reallocation of water away from alfalfa, rice and almonds over to higher value added crops like vegetables and other fruits. More importantly, water pricing that actually bites will free up vast amounts of water for both industry and domestic use.
Changing the price system will mean that people stop doing the things which are worth less to do than the value of the water needed to do them. Thus, by definition, there’s enough water to do everything that people want to do with the amount of water that is available. It’s a cute system, it works really well. So, obviously, that is what should be done. Whoever owns water rights now (and I’m aware that water rights out West can be a nightmare) should be allowed to sell it to whoever at whatever price anyone offers. That’s all we need do.
May 13, 2016
The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital. It is operated privately, and runs without taxpayer subsidies. And, it is by far the greatest rail system in the world. It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s). But here is the real key: it is almost all freight.
As a percentage, far more freight moves in the US by rail (vs. truck) than almost any other country in the world. Europe and Japan are not even close. Specifically, about 40% of US freight moves by rail, vs. just 10% or so in Europe and less than 5% in Japan. As a result, far more of European and Japanese freight jams up the highways in trucks than in the United States. For example, the percentage of freight that hits the roads in Japan is nearly double that of the US.
You see, passenger rail is sexy and pretty and visible. You can build grand stations and entertain visiting dignitaries on your high-speed trains. This is why statist governments have invested so much in passenger rail — not to be more efficient, but to awe their citizens and foreign observers.
But there is little efficiency improvement in moving passengers by rail vs. other modes. Most of the energy consumed goes into hauling not the passengers themselves, but the weight of increasingly plush rail cars. Trains have to be really, really full all the time to make for a net energy savings for high-speed rail vs. cars or even planes, and they seldom are full. I had a lovely trip on the high speed rail last summer between London and Paris and back through the Chunnel — especially nice because my son and I had the rail car entirely to ourselves both ways.
The real rail efficiency comes from moving freight. As compared to passenger rail, more of the total energy budget is used moving the actual freight rather than the cars themselves. Freight is far more efficient to move by rail than by road, but only the US moves a substantial amount of its freight by rail. One reason for this is that freight and high-speed passenger traffic have a variety of problems sharing the same rails, so systems that are optimized for one tend to struggle serving the other.
Freight is boring and un-sexy. Its not a government function in the US. So intellectuals tend to ignore it, even though it is the far more important, from an energy and environmental standpoint, portion of transport to put on the rails.
March 13, 2016
Published on 8 Feb 2016
Are electric cars greener than conventional gasoline cars? If so, how much greener? What about the CO2 emissions produced during electric cars’ production? And where does the electricity that powers electric cars come from? Environmental economist Bjorn Lomborg, director of the Copenhagen Consensus Center, examines how environmentally friendly electric cars really are.
February 14, 2016
Until March 1933, these were the years of President Herbert Hoover — the man that anti-capitalists depict as a champion of non-interventionist, laissez-faire economics.
Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.
The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war.
Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.
Foreign companies and their workers were flattened by Smoot-Hawley’s steep tariff rates, and foreign governments soon retaliated with trade barriers of their own. With their ability to sell in the American market severely hampered, they curtailed their purchases of American goods. American agriculture was particularly hard hit. With a stroke of the presidential pen, farmers in this country lost nearly a third of their markets. Farm prices plummeted and tens of thousands of farmers went bankrupt. With the collapse of agriculture, rural banks failed in record numbers, dragging down hundreds of thousands of their customers.
Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP increased by about one-third.
Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”
To compound the folly of high tariffs and huge subsidies, Congress then passed and Hoover signed the Revenue Act of 1932. It doubled the income tax for most Americans; the top bracket more than doubled, going from 24 percent to 63 percent. Exemptions were lowered; the earned income credit was abolished; corporate and estate taxes were raised; new gift, gasoline, and auto taxes were imposed; and postal rates were sharply hiked.
Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.
January 30, 2016
People who oppose Soviet-style collective farms, government subsidies to agriculture, or public ownership of grocery stores because they want the provision of food to be a private matter in the marketplace are generally not dismissed as uncivilized or uncaring. Hardly anyone would claim that one who holds such views is opposed to breakfast, lunch, and dinner. But people who oppose government funding of the arts are frequently accused of being heartless or uncultured. What follows is an adaptation of a letter I once wrote to a noted arts administrator who accused me of those very things. It articulates the case that art, like food, should rely on private, voluntary provision.
Thanks for sending me your thoughts lamenting cuts in arts funding by state and federal governments. In my mind, however, the fact that the arts are wildly buffeted by political winds is actually a powerful case against government funding. I’ve always believed that art is too important to depend on politics, too critical to be undermined by politicization. Furthermore, expecting government to pay the bill for it is a cop-out, a serious erosion of personal responsibility and respect for private property.
Those “studies” that purport to show X return on Y amount of government investment in the arts are generally a laughingstock among economists. The numbers are often cooked and are almost never put alongside competing uses of public money for comparison. Moreover, a purely dollars-and-cents return — even if accurate — is a small part of the total picture.
The fact is, virtually every interest group with a claim on the treasury argues that spending for its projects produces some magical “multiplier” effect. Routing other people’s money through the government alchemy machine is supposed to somehow magnify national wealth and income, while leaving it in the pockets of those who earned it is somehow a drag. Assuming for a moment that such preposterous claims are correct, wouldn’t it make sense from a purely material perspective to calculate the “average” multiplier and then route all income through the government? Don’t they do something like that in Cuba and North Korea? What happened to the multiplier in those places? It looks to me that somewhere along the way it became a divisor.
Lawrence W. Reed, “#34 – ‘Government Must Subsidize the Arts'”, The Freeman, 2014-12-05.
September 15, 2015
… every time the Ex-Im Bank gets involved in a deal, there are only two possibilities: The government is needlessly subsidizing something that would have happened anyway, giving away cheap money to a huge corporation. Or else it’s subsidizing a deal that wouldn’t have happened anyway, in which case we are defending the use of taxpayer dollars to sell cheap manufactured goods to foreigners. It’s not even as if we’re picking out especially needy foreigners, who may require a charitable contribution from the prosperous citizens of the United States; the subsidy is distributed on the basis of who is willing to, say, buy cut-rate U.S. airframes. And guess who benefits? U.S. corporations that export a lot.
This is not a good use of taxpayer dollars, and conservative ideologues, bless their hearts, are quite right to want to get rid of it. Their passion is a little out of proportion to the harm that this agency does, but even a small step in the right direction is better than none. The bank’s opponents concede that. For them, the appeal of taking on Ex-Im is that they might be able to take it down.
Against this impeccable economic and political logic, the bank’s supporters marshal a few arguments. First, they often claim (as Nocera implies) that the Ex-Im Bank generates a lot of money for the Treasury. Which is sort of true … except. First of all, it doesn’t account for the opportunity costs of the distortion; resources are diverted into production of certain goods, and away from others. And second of all, government accounting for loans is rather weird. According to the Congressional Budget Office, if we used a fair value accounting method, which would account for the risk of changing market conditions, the Ex-Im Bank’s six largest programs would be generating a deficit, not a surplus.
We are also told that Ex-Im is a vital matter of national security. I’m going out on a limb here, but I’m pretty sure that if the U.S. government needs to find some money to give foreigners as a vital matter of national security, they will manage to find it even if the Ex-Im Bank is shuttered and its silent halls hold only the lingering ghosts of departed exporters.
Megan McArdle, “Ex-Im Bank Is a Tiny But Tempting Target”, Bloomberg View, 2015-08-03.
August 25, 2015
Oh, sorry, he actually said Musk is “crazy like a visionary“:
I am an unlikely fan of Elon Musk, the flamboyant, Steve Jobs-like (some would say Tony Stark-like) entrepreneur behind SpaceX, SolarCity, Tesla Motors, and other enterprises that seemed like starry-eyed impossibilities a scant decade ago. Musk’s two governing passions, he has said repeatedly, are “sustainable transport” to battle “global warming” and finding a way to make mankind an interplanetary species, beginning with a space colony on Mars.
For my part, the word “sustainable” has me reaching, if not for my revolver, then at least for an air-sickness bag. I regard the whole Green Lobby as a cocktail composed of three parts moralistic hysteria mixed with a jigger of high-proof cynical opportunism (take a look at Al Gore’s winnings from the industry) fortified with a dash of beady-eyed left-wing redistributionist passion. You can never be Green enough, Comrade, and if the data show a 20-year “hiatus” in global warming (so much for Michael Mann’s infamous hockey stick), that’s no reason not to insist that capitalist powerhouses like the United States drastically curtail their CO2 emissions right now, today, while giving egregious polluters like China a decade or more to meet its quotas.
No, when it comes to energy, I often quote, sometimes with attribution, the Manhattan Institute’s Robert Bryce: what the world needs now is cheap, abundant energy, period, full stop, end of discussion. My motto is: frack early, frack often. Do you want to help the poor/clean up the environment/save the spotted wildebeest? Then you need economic growth, and to achieve that you need energy, which at the moment means you need fracking. Q.E.D.
When it comes to interplanetary travel, I suspect that Musk’s passion for transforming us into “space-faring” creatures was heavily influenced by his youthful reading of Isaac Asimov, Robert Heinlein, and (one of his favorites) The Hitchhiker’s Guide to the Galaxy. Not that those adolescent chestnuts necessarily argue against the plausibility of his ambitions. Behind Musk’s enthusiasm for space colonization is a worry that a future “extinction event” might delete human consciousness from the emporium of the universe.
For what it’s worth, I’m very much split on Musk and his works: I generally agree with his desire to help get humanity expanding beyond our single, frail planet … I just wish he wasn’t guzzling down government subsidies to get there. I’ve read the book Kimball is reviewing (Ashlee Vance’s Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future), and I certainly feel I got my money’s worth from the purchase … Musk is potentially a very great man. Right now, he’s a pretty good man who still takes everything he can get from the government.
July 14, 2015
Warren Meyer isn’t a fan of streetcars in general, but he views the Washington DC streetcar project as being particularly deserving of scorn:
I am increasingly convinced that the appeal of streetcars and light rail has everything to do with class. From any rational perspective, these systems make no sense — they are 10-100x more expensive than buses and lack the flexibility that buses have to adjust to shifting demand patterns over time. A single extra lane of highway adds more capacity than any light rail line.
Streetcar’s single, solitary advantage is that middle and upper class whites who would not be caught dead on a bus seem to be willing to ride streetcars. I don’t know if this is because of some feature of the streetcars (they are shiny and painted pretty) or if it is some sort of self-segregation (the upper classes want to ride on something that is not filled with “riffraff”).
He also points out that even Vox.com can’t make the case for streetcars particularly well:
The arguments are:
- Tourists like them, because you can’t get lost like you can on buses. My response is, “so what.” Unless you are one of a very few unique cities, tourists are a trivial percentage of transit riders anyway. Why build a huge system just to serve out-of-town visitors? I would add that many of these same cities (e.g. Las Vegas) considering streetcars are the same ones banning Uber, which tourists REALLY love.
- Developers like them. Ahh, now we are getting somewhere. So they are corporate welfare? But not so fast, they are not even very good corporate welfare. Because most of the studies they cite are total BS, of the same quality as studies that say sports stadium construction spurs all sorts of business. In fact, most cities have linked huge tax abatement and subsidy programs to their streetcars, such that the development you get with the subsidy and the streetcar is about what you would expect from the subsidies alone. Reminds me of the old joke that mimicked cereal commercials: “As part of a breakfast with juice, toast, and milk, Trix cereal has all the nutrition of juice, toast, and milk.”
- Good for the environment. But even Vox asks, “as compared to what.” Since they are generally an alternative buses, as compared to buses that have little environmental advantage and often are worse (they have a lot more weight to drag around when empty).
- The Obama Administration likes them. LOL, that’s a recommendation? When you read the text, what they actually say is that mayors like the fact that the Obama Administration likes them, for it means the Feds will throw lots of Federal money at these projects to help mayors look good using other peoples’ money.
- Jobs. This is hilarious Keynesianism, trying to make the fact that streetcars are 10-100x more expensive than buses some sort of positive. Because they are more inefficient, they employ more people! One could make the exact same argument for banning mechanical harvesters and going back to scythes. Left unquestioned, as Bastiat would tell us, is how many people that money would have employed if it had not been seized by the government for streetcar use.
- Je ne sais quoi. I kid you not, that is their final argument, that streetcars add that special something to a neighborhood. In my mind, this is Vox’s way of saying the same thing I did the other day — that the streetcar’s appeal is primarily based on class, in that middle and upper class folks don’t want to ride on a bus with the masses. The streetcar feels more upscale than buses. The poor of course, for whom public transit is most vital, don’t want to pay 10 times more for sexiness.
Every argument I have ever been in on streetcars always boils down to something like “well, all the cool kids like them.”
June 30, 2015
Sean Noble says that the subsidies Elon Musk’s high-tech Tesla and Solar City firms are much higher than he implies:
Tesla, SpaceX, and Solar City head Elon Musk lashed out at the Los Angeles Times following an article that totaled up all the government support that his three-headed corporate-welfare monster receives. The number the Times reported was nearly $5 billion in combined support for his companies, including subsidies for those who purchase Musk’s products, such as the high-priced solar panels of Solar City and the supercars of Tesla.
Musk responded by arguing, “If I cared about subsidies, I would have entered the oil and gas industry.” He further asserted that his competitors in the oil-and-gas industry haul in 1,000 times more in subsidies in a single year than his companies have received in total. Such statements reveal that Musk seems to care as little for facts as he purports to care about the taxpayer dollars propping up his various businesses.
Earlier this year, the U.S. Energy Information Administration (EIA) released the most recent data available regarding energy subsidies provided by the federal government. The data, covering the year 2013, broke down total taxpayer subsidies across the different sectors of the energy industry. While fossil fuels did enjoy some government support through various direct expenditures, tax credits, and R&D programs, the data stands in sharp contrast to Musk’s claims.
Data from the EIA report, combined with numbers from an anti-oil advocacy group regarding state-level government support, reveals that total state and federal support for the oil-and-gas industry is no more than $5.5 billion each year. As stated, Musk’s companies combine for $5 billion in subsidies, a number that he has yet to dispute. Clearly, the difference is much smaller than Musk’s outlandish 1,000-to-one claim.
June 1, 2015
At Real Clear Science, Alex B. Berezow issues a clarion call to stop the US government’s (hidden) subsidy to pornography producers:
You might be asking, What federal porn subsidy? Fair question. Technically, there isn’t a federal porn subsidy. However, if we borrow some of the logic commonly used by politically driven economists, we can redefine the word subsidy to mean whatever we want.
Pornography is enjoyed by many people, but it comes with a very real social cost: it can break up families and perhaps even become an addiction, which are profound losses of productivity. Economists refer to these as negative externalities — i.e., bad side effects that affect people other than the person making the decision. One way to deal with such decisions is to tax them. This should, in theory, reduce the negative side effects, while simultaneously forcing the decisionmaker to bear the “true cost” of his actions. Clearly, if anyone should have to pay for this societal cost, it should be porn watchers, in the form of a porn tax. If they don’t pay such a tax, they are getting an indirect subsidy.
As it turns out, we don’t have a federal porn tax. Thus, we could say that the American government has issued a federal porn subsidy.
Obviously, that reasoning is absurd. Not only does it dubiously redefine the word subsidy, but it unconvincingly claims to be able to accurately place a price tag on every conceivable externality created by watching porn. Accepting that argument would require a nearly complete suspension of disbelief.
Yet, that is essentially the argument that a group of economists at the International Monetary Fund (IMF) just made about fossil fuel subsidies. (See PDF.)
The Guardian, which penned the most influential coverage, began its article with an eye-popping statistic:
“Fossil fuel companies are benefitting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day…”
Wow. $5.3 trillion in fossil fuel subsidies? That sounds insane. But, how do they arrive at that number? The Guardian goes on to explain:
“The vast sum is largely due to polluters not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change.”
Ah, okay. The subsidy isn’t a direct financial calculation, but is instead based on a bunch of externalities whose costs are nearly impossible to derive with any sense of believability. To give you an idea of just how much fudging exists in these kinds of calculations, a similar report issued in 2013 (PDF) concluded that the fossil fuel subsidy was $1.9 trillion. A discrepancy of $3.4 trillion should raise red flags in regard to methodology.