Mittwoch, August 26, 2009

Why You Should Listen To Economists...

Well, my guild is not called the Dismal Science for nothing.

Here are two links: read 'em and weep.

Here's a freebie: both people and companies react to both incentives and market behavior. Duh, right?

Well, consider this:

Misdirected federal subsidies since 1965 have bid up the inflation-adjusted price of medical care for everyone.

Since the 1980s, ever-increasing government grants and subsidies for selected college students have induced commensurate increases in the tuition charged by schools. The result has been to leave subsidized students little better off than before and, in the case of everyone else, to make postsecondary education almost unaffordable.

In the name of promoting home ownership, Washington helped cause a mortgage crisis that has put many families on the street. In the name of the environment, the government won't let us drill for oil — and forces us, instead, to make ethanol out of our food and the Earth's limited supply of water.

Washington bans most immigrants who have education and skills that would create new wealth in America and make us all better off — but since 1975, it has willfully admitted millions of unskilled immigrants who take from America far more than they add.

This is the law of unintended consequences, but at least a few of the unintended consequences are foreseeable (even without hindsight...). Subsidies are not the answer to inequalities: they distort markets and lead to the problems listed here.

Have the fools in Washington learned anything? Short answer: no.

With climate-change hype taking legislative form in HR 2454 and the Waxman-Markey cap-and-trade bill, and with fossil fuels on the endangered species list, not many in Washington seem concerned that Waxman-Markey, among its other costs to jobs and growth, will further endanger our gasoline supply.

In 1981, the U.S. had 324 refineries with a total capacity of processing 18.6 million barrels of crude a day. A study by global consulting firm EnSys Energy shows that Waxman-Markey would reduce that figure to 12.2 million barrels a day from its current production rate of 14.5 million from just 141 active refineries.

Without Waxman-Markey, U.S. production rates would grow to 16.4 million barrels a day. With it, not only will refinery production rates drop but utilization rates as well, from about 83% today to about 63.4% in 2030.

The drop would have to be made up by foreign imports, the study finds, meaning the U.S. could end up relying on other countries for some 19% of its refined fuel, nearly twice the amount it imports today.

In other words, in the misguided belief that you can legislate climate change (the idea itself is patently absurd, but we are talking about Democrats in Washington, after all.), the legislation, in its current form, does nothing to actually change things, but rather simply ensures that when those mean, evil and nasty refineries just have to operate, then the important thing is that they don't do that in the United States.


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