Quotulatiousness

August 19, 2024

If you’ve never worked in the private sector, you have no idea how regulations impact businesses

Filed under: Bureaucracy, Business, Government, Politics, USA — Tags: , , , , , , , — Nicholas @ 04:00

In the National Post, J.D. Tuccille explain why Democratic candidates like Kamala Harris and Tim Walz who have spent little or no time in the non-government world have such rosy views of the benefits of government control with no concept of the costs such control imposes:

The respective public versus private sector experiences of the 2024 Presidential/Vice Presidential candidates.
New York Times

In broad terms, Democrats have faith in government while the GOP is skeptical — though a lot of Republicans are willing to suspend disbelief when their party controls the executive branch.

The contrast between the two parties can be seen in stark terms in the resumes of the two presidential and vice-presidential tickets. The New York Times made it easier to compare them earlier this month when it ran charts of the career timelines of Trump, J.D. Vance, Kamala Harris and Tim Walz. Their roles at any given age were colour-coded for college, military, private sector, public service or politics, federal government and candidate for federal office.

Peach is the colour used by the Times to indicate employment in the private sector, which produces the opportunities and wealth that are mugged away (taxation is theft by another name, after all) to fund all other sectors. It appears under the headings of “businessman” and “television personality” for Trump and as “lawyer and venture capitalist” for Vance. But private-sector peach appears nowhere in the timelines for Harris and Walz. Besides, perhaps, some odd jobs when they were young, neither of the Democrats has worked in the private sector.

Now, not all private-sector jobs are created equal. Some of the Republican presidential candidate’s ventures, like Trump University, have been highly sketchy, as are some of his practices — he’s openly boasted about donating to politicians to gain favours (though try to do business in New York without greasing palms). I’m not sure I’d want The Apprentice on my resume. But there must be some value to working on the receiving end of the various regulations and taxes government officials foist on society rather than spending one’s career brainstorming more rules without ever suffering the consequences.

In 1992, former U.S. senator and 1972 Democratic presidential candidate George McGovern penned a column for the Wall Street Journal about the challenges he encountered investing in a hotel after many years in government.

“In retrospect, I … wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day,” he wrote. He bemoaned “federal, state and local rules” passed with seemingly good intentions but little thought to the burdens and costs they imposed.

The lack of private sector stints in the career timelines of Harris and Walz means that, like pre-hotel McGovern, they’ve never had to worry about what it’s like to suffer the policies of a large and intrusive government.

That said, it’s possible to overstate the lessons learned by Republicans and Democrats from their different experiences. Vance, despite having worked to fund and launch businesses, has, since being elected to the U.S. Senate, advocated capturing the regulatory state and repurposing it for political uses, including punishing enemies.

Not only does power corrupt, but it does so quickly.

August 6, 2024

The CrowdStrike outage and regulatory capture

Filed under: Business, Technology, USA — Tags: , , , , , , — Nicholas @ 03:00

Peter Jacobsen discusses the July technical and financial fiasco as a faulty software patch from CrowdStrike took down huge segments of the online economy and how regulatory capture may explain why the outage was so widespread:

“CrowdStrike outage at Woolworths in Palmerston North” by Kiwi128 is marked with CC0 1.0 .

On July 19th, something peculiar struck workers and consumers around the world. A global computer outage brought many industries to a sudden halt. Employees at airports, financial institutions, and other businesses showed up to work only to find that they had no access to company systems. The fallout of the outage was huge. Experts estimate that it totaled businesses $5 billion in direct costs.

The company responsible, CrowdStrike, was also severely impacted. Shareholders lost about $25 billion in value, and some are suing the company. The outage has led to expectations of, and calls for, stricter regulations in the industry.

But how did the blunder of one company lead to such a massive outage? It turns out that the supposed solution of “regulation” may have been one of the primary culprits.

Regulatory Compliance

CrowdStrike, ironically, is a cybersecurity firm. In theory, they protect business networks and provide “cloud security” for online cloud computing systems.

Cloud security, in and of itself, is likely a service that businesses would demand on the market, but the benefit of increased security isn’t the only reason that businesses go to CrowdStrike. On their own website, the company boasts about one of its most important features: regulatory compliance.

[…]

When experts who have relationships with companies are called in to help write regulations, they may do so in a way favorable to industry insiders rather than outsiders. Thus, regulation is “captured” by the subjects of regulation.

We can’t say with certainty that this particular outage is the result of an intentional regulatory capture by CrowdStrike, but it seems clear that CrowdStrike’s dominance is, at least in part, a result of the regulatory environment, and, like most large tech companies, they’re not afraid to spend money lobbying.

In any case, without cumbersome regulations, it’s unlikely that cybersecurity would take on such a centralized form. Despite this, as is often the case, issues caused by regulation often lead to more calls for regulation. As economist Ludwig von Mises pointed out:

    Popular opinion ascribes all these evils to the capitalistic system. As a remedy for the undesirable effects of interventionism they ask for still more interventionism. They blame capitalism for the effects of the actions of governments which pursue an anti-capitalistic policy.

So despite the reflexive call for regulation that happens after any disaster, perhaps the best way to avoid problems like this would be to argue that in terms of regulation, less is more.

March 23, 2024

QotD: The SCIENCE was SETTLED in the 1970s

Filed under: Environment, Food, Government, Health, USA — Tags: , , , , , , , — Nicholas @ 01:00

When it comes to Leftie, it’s really hard to sort out what’s intentional from what’s merely wrong, or outdated, or stupid, or some combination of the above. So while there really does seem to be some kind of coordinated push to get us to eat grass and bugs, the red meat thing is, I think, just old misinformation that Leftie can’t admit has been overtaken by events (because, of course, Leftists can never be wrong about anything). And I’ll even kinda sorta give them a pass on that, because I know a lot of medical people who learned the “red meat is bad for you” mantra back in the days and still haven’t gotten over it …

For younger readers, back in the late 70s the nutritional Powers That Be got in bed with the corn lobby. It sounds funny, but they were and are huge, the corn lobby — why do you think we’re still getting barraged with shit about ethanol, even though it’s actually much worse for the environment than plain ol’ dinosaur juice, when you factor in all the “greenhouse emissions” from growing and harvesting it? Anyway, ethanol wasn’t a thing back then … but corn syrup was, and so suddenly, for no reason whatsoever, the PTB decided that fat was bad and carbohydrates were good.

Teh Science (TM) for this was as bogus and politicized as all the other Teh Science (TM) these days, but since we still had a high degree of social and institutional trust back then — living in a country that’s still 85% White will do that — nobody questioned it, and so suddenly everything had to be “fat free”, lest you get high blood pressure and colon cancer and every other damn thing (ever notice how, with Teh Science (TM), everything they decide is bad suddenly correlates with everything that has ever been bad? Funny, that). But since fat is what makes food taste good, they had to find a tasty substitute … and whaddya know, huge vats full of corn syrup just kinda happened to be there. Obesity rates immediately skyrocketed; who’d have thunk it?

… but again, this isn’t a deliberate thing with your average Leftie. You know how they are about Teh Science (TM), even Teh Science (TM) produced by people who thought polyester bellbottoms were a great look, which alone should tell you everything you need to know. They just learned “red meat is bad”, and so, being the helpful sorts they are, decided to boss you around about it. You know, for your own good.

Severian, “Friday Mailbag / Grab Bag”, Rotten Chestnuts, 2021-06-25.

February 4, 2024

QotD: American railroads and the Interstate Commerce Commission

Filed under: Business, Government, History, Quotations, Railways, USA — Tags: , , — Nicholas @ 01:00

The railroads [in the decades immediately following the U.S. civil war] saw advantages to regulation. Unstable prices, disliked by rail customers, could also be detrimental to the railroads. A recession in 1884 led to the failure of a number of railroads, and the railroads wanted to undertake pooling arrangements for their mutual profitability. Thus, the railroad industry, which was very competitive, wanted the ICC [Interstate Commerce Commission] to stabilize rates, regulate routes, and protect their profitability. Essentially, the ICC cartelized the industry, allowing it to be more profitable than it could have been in a more competitive unregulated environment.

Randy Holcombe, Liberty in Peril: Democracy and Power in American History, (2019).

June 4, 2022

Bill C-18 might as well be called the “Keep legacy media alive at all costs, even if nobody wants it anymore” act

Filed under: Cancon, Economics, Government, Media — Tags: , , , , , , — Nicholas @ 03:00

The Line‘s Jen Gerson lays out the case against the federal government’s plans for permanent corporate welfare for the big Canadian legacy media organizations:

How Jen Gerson might visualize Torstar and Postmedia during the lobbying effort for Bill C-18.
“Zombie nuns” by Michael Cavén is licensed under CC BY-NC-SA 2.0

This week, The Line signed on to a campaign put together by a coalition of independent media publishers calling for amendments to the panda trash fodder piece of legislation known as C-18. To be fair, I mostly signed on; my co-founder Matt Gurney had some reservations, and I figured it would be best to hash them out in full here.

The bill is a hot mess created by a clearly well-intentioned government that appears to have been bamboozled by a group of media industry lobbyists helmed by organizations like Postmedia and Torstar — companies that despite extraordinary history and resources have largely failed to sustainably transition to a digital media environment. These large outlets are now using the last of their dying power and influence to champion legislation that will force big technology companies like Facebook and Google to compensate them for linking to their content.

This is a straightforward case of regulatory capture, the very thing we would condemn in any other industry; big media companies are using their credibility and political power to pressure the government into forcing “Big Tech” to sustain their dying business models — the very “Big Tech” that they’ve spent years deriding and defaming in their very own newspapers and outlets.

This whole process is corrupt. I don’t say that lightly. Perhaps inevitably, I’ve grown totally disillusioned with the industry to which I have devoted all of my adult life. We used to consider journalism a calling or a vocation — manipulative terms that justified the low pay, harassment, and sometimes abusive management. How can the church of journalism and its holy mandate to preserve democracy continue to take itself seriously when the very catechism of the craft are nowhere present in its own self-created lobbying arm, New Media Canada?

I think the leaders of this initiative have convinced themselves that the business model they enjoyed in the ’80s and ’90s is so totally central to the survival of democracy and liberal values that they’ve committed to keeping it afloat by any means necessary regardless of the ethical and philosophical cost. In doing so, I believe that they’re only ensuring their own failure.

By driving legislation in this way, they are not proving their worth to the broader public. Rather, they are conceding that what they produce has so little value that they need to evolve into parasites of the state. It demonstrates that commitment to democracy and accountability is secondary to their primary functions; running a business. They have stockholders to please and interest on loans to pay. Big loans.

Meanwhile, the legacy media they have managed is little more than a zombie in nun’s drag. It is in a state of terminal decline, and keeping it alive poisons the earth for the generations to come after.

November 27, 2021

Americans fear the power of “Big Oil” and other cartels. Canadians rejoice under the buttery thumb of “Big Dairy”

Filed under: Business, Cancon, Food, Government — Tags: , , , , — Nicholas @ 06:00

Jen Gerson hates Canada’s supply management “system” with the heat of a thousand suns. And she’s perfectly right to do so:

Former federal Conservative Party leader Andrew Scheer, paid tool of Big Dairy, chugs some milk during a Press Gallery speech in 2017. I’ve called him the “Milk Dud” ever since.
Screencapture from a CTV video uploaded to YouTube.

Many of you readers have listened to the likes of me complain about supply management over the years, but for those of you whose eyes glazed over until you started to notice your rent money disappearing into your grocery bill, here’s a very quick primer.

The supply management system insulates eggs, dairy, and poultry from the vicissitudes of the free market, assuring established farmers in these few sectors a guaranteed return to produce a pre-ordained supply of these products. The federal and provincial governments oversee the system via various dairy commissions.

Some government involvement in dairy has been a feature of our agricultural system since the late 19th century, however the system as it exists today came into effect in the ’70s. It consists, broadly, of three policy mechanisms. Prices are set internally to assure farmers receive a healthy profit for their labour, farmers are protected from competition though ruinous import tariffs, and then supply is managed via a quota system.

As one might expect, this has created extraordinary economic distortions, assuring that a container of milk in Canada is radically more expensive than an identical product south of the border. (Yes, American milk is subsidized too, although less than it once was. And from a consumer’s perspective, so what? If the Americans want to subsidize cheap milk to send north, all the better for shoppers.)

In order to keep production at a steady level, the system has to keep newer, cheaper players from entering the market, and this is accomplished via a quota system that has led to absurd economic incentives and outcomes. According to this report from the Canadian West Foundation from 2016, the quota was valued at about $28,000 per cow. That means that the value of the right to own one milk-producing cow far outweighed the actual value of the animal — and someone seeking to start a dairy farm would need to pay for millions of dollars worth of quota in addition to cows, land, food, and farm equipment.

The quotas themselves are a multi-billion dollar racket; this is roughly akin to the way a license to run a taxi costs hundreds of thousands of dollars in some cities, many multiples of the value of the car itself. When a government creates a regulatory system that imposes artificial scarcity, the value of the thing regulated radically increases.

Since the supply management system was introduced, much of the agriculture has consolidated; this, combined with the value of the quotas they possess mean that most dairy farms — far from being quaint, picturesque family homesteads — are multi-million dollar operations, with farmers themselves making six-figure profits after paying their own wages.

The system has also proved a obstacle in multiple free-trade deals, arguably making it difficult for other agriculture sectors to compete globally.

And who pays for all of this?

Well, of course, you do.

February 1, 2021

In the wake of l’affaire GameStop, frantic regulators call for more power to intervene in the market

Filed under: Business, Government, Politics, USA — Tags: , , , , , — Nicholas @ 03:00

“Regulatory capture” is the term for situations where the regulators and the regulated begin to get too close and the regulated industries or organizations begin to indirectly control the actions of the regulator for their own benefit. A topical example would be the sudden, agonized cries of politicians and market regulators for new powers to clamp down on disruptive players like the Redditors or other small investors who triggered the rise in GameStop share prices causing potentially ruinous financial losses for regulated hedge funds.

“GameStop” by JeepersMedia is licensed under CC BY 2.0

Although the story has garnered the attention of regulators and even the White House, the wrong takeaway is to suggest options for retail investors should be restricted more than they already are. Yet this is precisely what William Gavin, Secretary of the Commonwealth of Massachusetts, has called for. Gavin argued that there should be a 30-day trading suspension on GameStop to protect “small and unsophisticated investors.”

Gavin’s suggestion would have serious extended consequences. First, consider the knowledge problem that is involved in constructing such a restrictive regulation. When exactly would a rally become unacceptable? Despite years of decline, Kodak experienced a rally after its announcement that it would move into pharmaceuticals. Would this be permissible? If so, one could simply point to GameStop’s decision to appoint three new directors in an effort to turn the company around. If this is not enough, regulators must clearly state what identified the investments as unacceptable.

It is unclear if there is a perfect benchmark to distinguish rallies. But without such a measure, the suspension proposal would put every rally at risk of wrongful closure — potentially halting the growth of companies and industries, alike. Worse yet, the fear of missing out on a rising stock may push some investors to rush in with less information than they would otherwise acquire. Even if it is in a traditional rally, an uninformed decision could cause more harm than good.

Yet suppose the knowledge problem is solved and there is a perfect measure in place. Should other protections be put in place? One could make the case for a law against allowing “unsophisticated” gamblers from going to Las Vegas and losing money. And although this may seem like a leap, Gavin himself told Reuters, “This isn’t investing, this is gambling,” when he spoke of the GameStop rally.

The rally has attracted the world’s attention, but it does not require it. Rallies are a normal part of financial market activity. The only difference here is that it was Main Street that pulled one over on Wall Street.

July 18, 2020

QotD: Peace can also be the health of the state

Filed under: Bureaucracy, Economics, Germany, History, Japan, Quotations, WW2 — Tags: , , , — Nicholas @ 01:00

War, we libertarians are fond of telling each other, is the health of the state. Peruse the most recent posting here by our own WW1 historian, Patrick Crozier, to see how we often think about such things. So, what about that increasingly obtrusive and kleptocratic Brazilian state that has been putting itself about lately, stirring up misery and libertarianism? There have been no big wars to make the Brazilian state as healthy as it now is, and especially not recently. What of that?

The story Bruno Nardi told made me think of the book that explains how peace is also the health of the state, namely Mancur Olson’s public choice theory classic, The Rise and Decline of Nations. It is years since I read this, but the story that this book tells is of the slow accumulation and coagulation of politics, at the expense of mere business, as the institutions of a hitherto thriving nation gang up together to form “distributional coalitions” (that phrase I do definitely recall). The point being that if you get involved in a war, and especially if you lose a war, the way Germany and Japan lost WW2, that tends to break up such coalitions.

The last thing on the mind of a German trade unionist or businessman, in 1946, was lobbying the government for regulatory advantages or for subsidies for his particular little slice of the German economy. Such people at that time were more concerned to obtain certificates saying that they weren’t Nazis, a task made trickier by the fact that most of them were Nazis. Olson’s way of thinking makes the post-war (West) German and then Japanese economic miracles, and the relative sluggishness of the British economy at that time, a lot more understandable. Winning a war, as Olson points out, is not nearly so disruptive of those distributional coalitions, in fact it strengthens them, as Crozier’s earlier posting illustrates.

Brian Micklethwait, “The view from Brazil is that peace is also the health of the state”, Samizdata, 2018-04-13.

September 17, 2019

QotD: Rent-seeking

Filed under: Economics, Government, Quotations — Tags: , , , , , , — Nicholas @ 01:00

[Progressives] should also be delighted by public choice scholars’ development of the theory of privilege-seeking (or “rent-seeking“). It’s an old observation, really: when the state’s personnel have favors to dispense, people in the private sector will invest resources to obtain them. Such favors are by nature impositions on third parties. They may take the form of cash subsidies, taxes and regulations that hamper or quash competition and raise incomes in a non-market manner, and other devices. But the principle is the same: private- and government-sector individuals collude to use the state’s coercive power to obtain what they could not obtain through voluntary exchange for mutual benefit. It’s a theory of exploitation the good-faith left should embrace.

By the same token, the state’s personnel, seeing opportunities to sell favors, are just as likely to initiate the privilege-seeking process. In this sense, public choice scholars are right when they see the political arena as a series of exchanges. The big difference with the marketplace, however, is that in the political arena the largest group of people is forced to participate.

The bottom line on privilege-seeking, which should interest the left, is this: the people with the greatest access to power will not be those the left cares most about, but those who run Boeing and ExxonMobil and GE and Lockheed Martin. Wealth transfers will tend overwhelmingly to be upward.

Sheldon Richman, “TGIF: What the Left Should Like about Public Choice”, The Libertarian Institute, 2017-07-28.

April 4, 2019

Of course Facebook is now in favour of government regulation … it’ll keep out their competition

Filed under: Bureaucracy, Business, Government, USA — Tags: , , , , , — Nicholas @ 05:00

The recent calls for the government to regulate social media got support from Mark Zuckerberg, which seems to have surprised some in the media. It’s not at all uncommon for established firms to not only welcome government oversight but to actively support it — because it’s a highly effective strategy to strangle smaller competitors and keep new competitors from entering the field:

On Saturday, Mark Zuckerberg appealed to the government for increased regulation of the internet including his company Facebook. According to Zuckerberg, increased government action is needed to protect society from harmful content, ensure election integrity, protect people’s privacy, and to guarantee data portability. If enacted, the government would possess a wide range of control over internet businesses. For Zuckerberg, this is for the public’s best interest.

But make no mistake about it, Zuckerberg’s cries for regulation is not an appeal to his humanitarianism. On the other hand, it solves glaring issues that Facebook has faced since the 2016 election.

[…]

With increased government oversight, Facebook’s leadership will finally be able to pass the buck to someone else. The government will provide them with a clear set of rules that they will be accountable for. Any negative press coverage that occurs outside of those guidelines, will not be attributable to their company but to the rule-making body of the government. This will allow Facebook’s leadership to regain credibility within a clearly definable framework that they are not responsible for creating.

But perhaps Zuckerberg’s appeal for regulation is even more cunning. Government regulation will undoubtedly be met with higher costs. Internet companies will have to spend more on staffing to be in compliance with the increased burdens implemented by the rule-making body. We saw this play out in the banking industry after the Great Recession. A study conducted last year found that since 2009, banks have been fined a total of $345 billion dollars in penalties and noncompliance costs. Further, another study found that in 2016 banks spent $100 billion dollars on regulatory compliance alone.

Large internet companies like Facebook and Google will easily absorb the strain of increased regulatory costs. It is the smaller businesses that will feel the financial squeeze. With increased regulatory compliance spending, smaller startups will face an even bigger hill to climb to compete with the likes of Facebook.

Another “feature” of government regulation is what is known as “regulatory capture”, as the regulating body and the regulated organizations, after an initial period of ostentatious “conflict”, settle down into a cosy symbiotic relationship … in only a few years, many of the regulatory staff will find themselves working for one of the regulated organizations, and vice-versa. The regulatory body will — like all bureaucracies — start to care more about keeping itself alive and growing than about the original reason it was set up. Small organizations will stall or go extinct, and only the existing dinosaurs will carry on, protected from competition by their regulator’s powers.

March 2, 2018

QotD: Cronyism

Filed under: Business, Economics, Government, Quotations — Tags: , , , , — Nicholas @ 01:00

… I would argue that we don’t have truly free trade or, increasingly, a free economy in the United States. The Progressives always look at the rising income inequality and maintain that it’s the inevitable result of capitalism. That’s hogwash, of course, and Proggies believe it because they’re dolts. But the problem in this country isn’t free trade — we have precious little of it — or unrestricted capitalism, since we have precious little of that as well. The issue behind rising income inequality isn’t capitalism, it’s cronyism. Income isn’t being redirected to the 1% because capitalism has failed, it’s happening because we abandoned capitalism in favor of the regulatory crony state and its de facto collusion between big business/banking interests and a government that directs capital to favored political clients, who become “too big to fail”. It doesn’t matter, for instance, whether the president is a Democrat or Republican, because we know the Treasury Secretary will be a former — and future — Goldman Sachs executive.

Indeed, what we call “free trade” nowadays isn’t the Theory of Comparative Advantage in action. It’s corporations being allowed to ship jobs to low wage countries overseas to offset the cost of regulatory burdens in the US that restrict competition from new entrants to the market. That works great for large corporations. Not only do they get to offset the regulatory costs by overseas production, but slower job growth in the US flattens domestic wages, too, and sends millions out of the labor force altogether. For working people, the biggest financial rewards from the current “free trade” regime seem mainly reaped by large business and banking interests. Again, people know if their own lives are better or worse than they used to be, and if the promises of elites have been born out by their own experience.

Dale Franks, “Vote Properly, You Virulent Racist!”, Questions and Observations, 2016-06-28.

February 21, 2018

QotD: Regulation

Filed under: Bureaucracy, Economics, Quotations — Tags: , , — Nicholas @ 01:00

… “regulation” could also be described as high-handed and ignorant interference in the mutually advantageous deals contracted voluntarily among the miserable serfs of the state, interference at best inspired by antique theories of natural monopoly and using antique policies appropriate to obsolete technologies, and at worst by conspiracies to benefit existing rich people, backed by state violence. Much of regulation, looked at coldly, would fall under such a definition, if not immediately on its passage, then after a few years of technological change or regulatory capture.

Deirdre N. McCloskey, Bourgeois Equality, 2016.

September 20, 2017

QotD: Government meddling stifles innovation in energy

Filed under: Government, Quotations, Technology, USA — Tags: , , , — Nicholas @ 01:00

It is unfortunately the case that government meddling on a global scale has massively distorted energy markets through pervasive subsidies, mandates, and price controls. The result is retarded innovation in the technologies of energy generation. A big first step toward renovating our energy supply systems would be to eliminate those impediments to understanding the real comparative benefits and costs of the production and use of energy. Ultimately, the better and far more effective way to ameliorate and avert future climate change is to mobilize human ingenuity through market processes to drive down the costs of no-carbon energy sources. Despite the constraints on innovation caused by government interference, notable advances in no-carbon energy generation technologies have already been made, ranging from innovative nuclear reactor designs to more efficient and cheaper solar panels. New technologies and wealth produced by human creativity will spark a vast environmental renewal in this century.

Ronald Bailey, The End of Doom: Environmental Renewal in the Twenty-first Century, 2015.

July 30, 2017

It’s time to eliminate the ethanol fuel mandate (and all those corporate welfare subsidies)

Filed under: Business, Environment, Government, USA — Tags: , , , , , — Nicholas @ 05:00

Paul Driessen explains why now might be the best time to get rid of the Renewable Fuel Standard (RFS) which requires a proportion of ethanol be incorporated/blended into almost all petroleum fuels in the US (Canada has similar requirements):

The laws require that refiners blend steadily increasing amounts of ethanol into gasoline, and expect the private sector to produce growing amounts of “cellulosic” biofuel, “biomass-based diesel” and “advanced” biofuels. Except for corn ethanol, the production expectations have mostly turned out to be fantasies. The justifications for renewable fuels were scary exaggerations then, and are absurd now.

Let’s begin with claims made to justify this RFS extravaganza in the first place. It would reduce pollution, we were told. But cars are already 95% cleaner than their 1970 predecessors, so there are no real benefits.

The USA was depleting its petroleum reserves, and the RFS would reduce oil imports from unstable, unfriendly nations. But the horizontal drilling and hydraulic fracturing (fracking) revolution has given the United States at least a century of new reserves. America now exports more oil and refined products than it imports, and US foreign oil consumption is now the lowest since 1970.

Renewable fuels would help prevent dangerous manmade climate change, we were also told. This assumes climate is driven by manmade carbon dioxide – and not by changes in solar heat output, cosmic rays, ocean currents and other powerful natural forces that brought ice ages, little ice ages, warm periods, droughts and floods. It assumes biofuels don’t emit CO2, or at least not as much as gasoline; in reality, over their full life cycle, they emit at least as much, if not more, of this plant-fertilizing molecule.

[…]

A little over 15 billion gallons of corn-based ethanol were produced in 2016 – but only 143 billion gallons of gasoline were sold. That means using all the ethanol would require blends above 10% (E10 gasoline) – which is why Big Ethanol is lobbying hard for government mandates (or at least permission) for more E15 (15% ethanol) gasoline blends and pumps. Refiners refer to the current situation as the “blend wall.”

But E15 damages engines and fuel systems in older cars and motorcycles, as well as small engines for boats and garden equipment, and using E15 voids their warranties. You can already find E15 pumps, but finding zero-ethanol, pure-gasoline pumps is a tall order. Moreover, to produce ethanol, the United States is already devoting 40% of its corn crop, grown on nearly 40 million acres – along with billions of gallons of water to irrigate corn fields, plus huge amounts of fertilizer, pesticides and fossil fuels.

Much of the leftover “mash” from ethanol distillation is sold as animal feed. However, the RFS program still enriches a relatively few corn farmers, while raising costs for beef, pork, poultry and fish farmers, and for poor, minority, working class and African families. Ethanol also gets a third less mileage per gallon than gasoline, so cars cannot go as far on a tank of E10 and go even shorter distances with E15.

The problem with getting rid of targeted subsidy programs is that the benefits are highly concentrated while the costs are widely dispersed. As a whole, the North American economies would benefit greatly from eliminating the RFS mandates, lowering overall fuel costs, improving international food availability, and reducing or eliminating crony capitalist benefits to “Big Ethanol”, but most individuals’ gains would be small — too small to gain much active support — and the current beneficiaries would have vast incentives to fight to the death to keep those subsidies flowing.

May 14, 2017

QotD: Big business, crony capitalism and regulatory capture

Filed under: Bureaucracy, Business, Economics, Government, Quotations — Tags: , , , — Nicholas @ 01:00

Now, Pope Francis has the beginnings of a point about large “private corporations” (note the oxymoron), which in their wealth may grow (though only temporarily) to a size rivalling the smaller national governments. And I would add, they become nearly as centralized and monopolistic (through “regulatory capture”), and faceless and bureaucratic as the agencies of State. Whenupon, unlike the self-perpetuating agencies of the State, they begin to disintegrate from their own lack of enterprise.

It is not enough, as the libertarians suppose, to leave them to their fate, in the knowledge that if they are inefficient they’ll be gone tomorrow. For new large corporations rise to take their place, and at every moment the great majority of people are reduced to wage-slaves of one large corporation or another. Indeed, part of the power of large corporations comes from their scale as employers. A democratic government which tries to stand up to them will quickly relent, and switch to subsidies instead, when they threaten to create mass unemployment.

The question must be asked: What makes vast, morally obtuse, centralized corporations possible? And the answer should be easy to see. It is vast, morally obtuse, centralized governments, which command regulatory regimes that are consistent over huge areas. That has actually become our model for global “free trade”: making regulations and taxation consistent not only across nations, but across continents. This creates an order which large corporations, and only large corporations, are well-equipped to exploit.

Imagine instead they were to face different regulatory regimes, parish by parish. They could still operate, but would have to adapt each franchise to local conditions, as defined by the sovereign local authority. This immediately flips the onus, and gives the local merchant or producer the advantage over his multinational competitor, in being on the spot. It reduces that competitor’s economy of scale, while also imposing upon him a new model of corporate governance, as network, that must of necessity become decentralized and responsive (just as creatures in nature) to every single environmental niche.

The re-focusing on what is local, and what is doable locally, would have tremendous ramifications on “the environment” at large — overwhelmingly positive, given some time. Yet it would also have the happy effect of disempowering the ecological whack cases.

David Warren, “Five thousand max”, Essays in Idleness, 2015-06-19.

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