Why All Good Capitalists Should Support a Gasoline Tax

The free market works because it allows people to decide for themselves what they value.   Suppose I buy a loaf of bread from the baker for $2.  I make the decision that the loaf is worth $2 -- or more -- to me.  Otherwise, I wouldn't buy it.  No one tells me what I like, want or need, nor what bread is worth or should cost.  Similarly, the baker decides that it is worth it to him to sell his bread at $2 per loaf.  He probably takes into account his rent, the cost of flour, labor costs and many other factors, but in the end both he and I conclude that the transaction makes sense -- otherwise there is no deal.

The baker decides how much bread to bake, and how much to offer for flour, based on what we are willing to pay for his bread.  The combined effect of everyone's willingness to pay for goods and services sets prices and allocates resources across the entire economy.  It is a bottom-up method, which allows everyone to make their own decisions, but it results in the most efficient allocation of resources and the greatest good for the greatest number.

While this may sound like some new search method instituted by Google, it is in fact old news, famously summarized in 1776 by a Scot named Adam Smith, in The Wealth of Nations.  Smith was born in Kirkcaldy, Fife, about 25 miles from where I studied at St. Andrews.

But, like any theory, the "invisible hand" of the free market only works its magic under certain specified conditions.  This, too, is old news, dating back a couple of centuries and taught without controversy in every Econ 1 class across the nation and indeed around the world.

The most important exception, for the purposes of this post, is something economists call "externalities," i.e., the impact of my buying decisions on other people.  There are few, if any, externalities related to my purchase of bread.  I buy the bread, I make toast, I have breakfast -- end of story.  I pay the $2 price; you pay nothing and my decision to eat bread does not change your life.

But let's say I decide to pay my gardener to remove the leaves from my driveway, using a leaf blower.  I pay $50, and I put up with the infernal racket those leaf blowers make.  It is worth it to me to get the leaves out of my yard.  Unlike my purchase of bread, however, my decision has consequences for ten of my neighbors.  They, too, must put up with the outrageous sound made by that leaf blower, but their concerns are not mine and do not play a role in my buying decision.  This externality blows away more than just leaves, it blows away the entire theory of the free market.  The free market's "invisible hand" no longer works.

As I said, this is not advanced economics, far from it.  It has been known since 1776, if not before, and is not in the least controversial.  You cannot find an economist who would not agree with this analysis, although you could no doubt find many who could explain it more eloquently!

Let's apply the concept of externalities to gasoline.  Burning gasoline dirties the air, air which we all breath.  If you burn a gallon of gas, the impact on you is small.  But, the combined impact on the millions (or billions) of people who breath the air is millions (or billions) of times greater.  You also raise the temperature of the entire planet, however slightly.  This may not matter to you, but multiply your decision by the 6,000,000,000 people who must live with it, and the math changes significantly.  And, your decision to buy gas also drives our foreign policy.  Your decision to buy a gas-guzzler impacts the entire world, not just you.

If it were just you and your one gallon of gas, it wouldn't make any meaningful difference.  But the situation is different when we all buy gasoline.  Billions of us make the same decision to burn a gallon of gas; each of us worries only about the gallon we are burning because, after all, that is all we can control with our buying decision. The result is a market that is massively out of whack.

There is a way to adjust for this imperfection in the free market: impose a tax on the consumption of gasoline.  The tax must be high enough to balance the harm caused to others by your decision to burn a gallon of gasoline.  Ideally, the money would go to eleviate the impact, i.e., to clean the air or to combat global climat change, but even if the money just goes into the general tax fund, it still serves the purpose of keeping the free market in balance.

But our government actually subsidizes oil production.  If you believe in the free market, that decision makes no sense.  Burning oil does not benefit others; it harms others.  The government should not subsidize oil, it should tax it heavily, enough to compensate for the harm done by the consumption of oil.

Tragedy Amplified; Lessons Not Learned

The shooting in Aurora, Colorado has dominated the national news for the past week, but why?  Yes, the shooting was a tragedy for those involved, their friends and their families.  I do not mean to minimize that.  But we are a country of 300,000,000 people, while 12 people died in Aurora.  Approximately the same number die ever day in car accidents.  Those deaths are just as painful and tragic.  Even more people die each day from cancer, heart disease and other causes.  So why do we spend so much time focusing on an incident like what occurred in Aurora, while the real dangers to public health are relegated to the bottom of the news?

The simple answer is that the theater shooting was spectacular and unusual.  An unusually disturbed man took action in a very unusual and violent way.  Such incidents get people's attention, sell newspapers, create hits on websites and get eyeballs on TV screens.  That is the obvious reason why the news media pays so much attention to Aurora.  It gets people's attention; it is entertainment that sells.

This perverse form of entertainment is not good for us as a society.  It scares the daylights out of some people, making them unhappy and causing them to do silly things like not got to the movies for fear of being shot.  It makes people believe that we live in an incredibly violent society.  Perhaps our society is violent, but the manner in which the media replays a single violent over and over makes it feel far more violent than it really is.  And, in the end, it may make society more violent; recent news reports reveal that gun sales are up almost 50% in Colorado since the shooting.

The real lessons of Aurora, such as they are, seem to go unnoticed.  The shooting occurred because a highly disturbed individual was able to get his hands on guns and ammunition.  The only ways to prevent future incidents is to limit access to guns and ammunition, and to improve our mental health care system.  But those lessons seem to have gone by the wayside.

An Old Story with a New Twist: Weapons of Mass Technology

Long ago,  the amount of harm a single individual could do was relatively limited.  A man with a club could kill, but not very efficiently.  Over time, humans developed arrows, metal armor, guns and tanks.  In the last century, we invented nuclear weapons that could destroy entire cities, and indeed threatened to wipe out all of human civilization.  Somehow, we managed to avoid that fate, at least so far.  Yet, the mere existence of nuclear weapons alters the way in which we respond to rogue states, such as North Korea.

Recently, the story of ever-increasing power to destroy has taken a new twist.  High tech weapons such as drone planes, cyber attacks and biological weapons have been in increasingly in the news.  This morning, NPR suggested that drone planes may soon be the size of insects.  While the specifics of these new weapons and methods of attack are unclear, at least to me, the overall path of history is plain for all to see.  As we humans become more sophisticated in general, we will become better and better at inflicting damage on each other.  It will become easier and easier for fewer (and less intelligent and less well-financed) individuals to inflict more harm on others.

Certainly, we can work on defensive measures.  Cyber security can counter cyber attacks, at least to some extent.  Radar can, one hopes, detect some drone planes.  But it seems clear that offensive weapons will always outstrip defensive ones.  And, as weapons become more effective, the damage done when just one offensive weapon gets through increases.  

The only solution I can see is to discourage people from using these weapons in the first place.  We must create a world in which people see all other humans as part of the "in-group."  We must create more wealth equality, so that everyone has something to lose.  It is not an easy solution, by any means, but it is the only one that can work.  

Why Words Hurt

I've had this post in my mind for some time, but have hesitated writing it because I am afraid some will find it unnecessarily offensive. I apologize in advance if your sensibilities are hurt; I assure you, that is not my intention, although perhaps that is inevitable in some cases. On balance, however, I believe it is important enough to justify some hurt feelings. So here goes:

This post is about the word "nigger," a word that has become so offensive that most people will not utter the word, nor write it down. For example, the media learned that presidential candidate Rick Perry owned a property that a previous owner had dubbed "Niggerhead." Perry owned the property for years before changing the name. In reporting the story, the media almost uniformly refused to use the word "nigger." Instead, they used euphemisms that suggested the real name.

I find the refusal to utter a word to be highly counterproductive because it only serves to make the word more offensive and shocked when it is used by those who seek to offend.

To be perfectly clear, I find the word "nigger" to be highly offensive, and I certainly do not condone anyone actually using the word, e.g., calling someone a "nigger" or referring to someone as a "nigger" behind their back. But saying the word, as in reporting that, "Rick Perry's failure to change the name of his ranch from 'Niggerhead' to something else shows that he is grossly incentive to Blacks" is not in the least bit offensive nor racist.

The word "nigger" comes from the word "negro," spoken with a Southern accent. While the word "negro" was not in any way offensive at the time, most Southerners who spoke the word no doubt held Blacks in disdain and treated them like sub-humans. It is easy to see how the Southern utterance "nigger" soon came to make people's skin crawl.

The socially correct word for people of African descent has changed over time, as has the socially correct for disabled people and many other groups. The reason for this is related to the origin of the word "nigger." A group of people is mistreated or looked down upon by society in general. As a result, when the then-current word is used in conversation, it is usually in a negative fashion. Eventually, negative connotations build up around the word. Those who are more sympathetic to the group in question become offended, and demand a new word.

But, if society does not change, the new word also eventually builds up negative connotations as well. Those who are more sensitive or sympathetic demand another new word. And so a word that was introduced in order to avoid an older and offensive word can itself become offensive. I love how Berkeley Breathed played on that cycle of new words in an old Bloom County cartoon. The dialogue below involves the character Steven Dallas, who is learning to be more sensitive, and his older parents, who just doesn't seem to get it:

Mom: That's the most adorable little colored girl playing outside.

Steve: "Colored"? You're saying "colored people" in 1988? You know better, Ma.

Mom: Then why the "National Association for Colored People? I don't think Negroes mind at all.

Steve: Don't say "Negroes," Ma! You can't say "Negroes"!

Mom: Can I say "United Negro College Fund"?

Steve: You are baiting me, Ma!

Dad: That's it. We're leaving.

Mom: Stay put, Reginald. "Mister Socially Sensitive"isn't finished shaming his parents into enlightenment.

Steve: Everybody just calm down. Let's agree to use the the New-Age term "People of Color."

Mom: People of Color.

Steve: People of Color.

Mom: Colored people.

Steve: NO!!

Dad: We're leaving.

An interesting counter-example is the word "queer." Gays took this word and made it their own, thus changing the negative connotation. Similarly, the Republican party has taken the positive word "liberal" and managed to give it a negative connotation by repeating the word in a negative light, over and over. I certainly do not believe that we need to try that with "nigger"; better to leave that word to die off. But we can understand that not saying the word is not making things any better.

Perhaps the bigger and more important lesson is that words only mean what we agree that they mean. Changing the words does not change reality. Calling the Navaho "Native Americans" or "First Nationers" rather than "Indians" is not going to get us anywhere if we do not start treating Navaho people better. Absent better treatment of the group, we can expect the name to keep changing every ten or twenty years.

Thought Experiment for my Straight Friends

Imagine that you grew up in a world dominated by gays, where straight people were called "fags" and teased mercilessly at school. Imagine that movies and television focussed almost exclusively on same-sex relationships, and that any straight characters who did appear were portrayed as stereo-typed weirdos. Imagine that the only straight people you ever actually saw were treated as outcasts by the rest of society, and that you attended a Church where the minister told you that a relationship with a person of the opposite sex was a sin in the eyes of God, punishable by spending all eternity in hell. Imagine that marriage between a man and a woman was illegal.

How do you imagine this kind of upbringing would have impacted you? Specifically, how do you think this would effect your ability to form and maintain a meaningful relationship with someone of the opposite sex, even assuming that you could find someone with the courage to have such a relationship with you? How would your life be different? How would you be different?

There is no question that the treatment of gays has improved tremendously over the past 20 years. Back then, gay marriage was not on anyone's radar. But then again, neither was a Black president of the United States. So things have changed, and it seems that the tide is moving inexorably in the right direction.

Republican Treason

Rick Perry, the leading Republican candidate, recently referred to social security as a "Ponzi scheme." He further stated that telling young people that they will receive benefits when they retire is a "monstrous lie."

It is Perry, and the rest of the Republicans, who are the scam artists. Perry knows that what he is saying is, at best, a gross overstatement. His goal is not to inform, but rather to misinform. He knows that if he can convince people that they cannot rely on social security, they will support reducing or eliminating the entire program, a key element in the Republican agenda.

Playing fast and loose with the truth is not treason, but other Republican tactics are. The Republicans are presently engaged in a war on our own economy, knowing that Obama's chances of reelection are far lower if we are still in a recession come Fall of 2012. The Republicans are willing to damage their own country to achieve the key item on their agenda: making sure that Obama is a one-term president. That is treason.

And these treasonous tactics are nothing new. The Republican party regularly sabotages government institutions -- ranging from public schools, to FEMA, to the EPA -- by shackling them with absurd regulations such as "No Child Left Behind" that are designed to cause failure. Similarly, the Republicans appoint incompetent or willfully negligent individuals to leadership positions within those institutions. The Republicans then point to the institutional failure they have caused and demand that the institutions be shut down.

Willfully causing our a government institution to fail to advance one's own agenda is treason, even if that institution is not the armed forces.

Republicans Seem Determined to Destroy the Economy in an Attempt to Keep Obama from Getting Re-Elected

The Republicans created the recent budget and debt ceiling crisis for one reason: they seek to destroy our economy, and thus prevent Barack Obama from being re-elected in 2012. What they did was tantamount to treason, and will cause untold misery in the United States and elsewhere by derailing the nascent economic recovery. We need to call the Republicans out on what they did, and hold them accountable in the next election.

The Republicans, like everyone else, know what it takes to get a country out of recession: spending. Yet, they insisted on just the opposite, demanding cuts in spending at what they knew to be exactly the wrong time. And, by acting irrationally, they intentionally panicked the stock market, with predictable results.

The basic economic facts are not complicated, nor in meaningful dispute. The solutions are fairly straightforward. I propose:

We need to spend money to get the economy out of the current recession. At the same time, our infrastructure -- roads, bridges, electrical power grids -- are in need of repair. In addition, there are projects, like the high-speed rail line from Los Angeles to San Francisco, that would be highly beneficial. The obvious solution is to get to work on these projects. In the short run, the spending will stimulate the economy, creating jobs at levels ranging from engineers to construction workers. In the long run, this kind of spending will leave us with capital improvements that will improve the economy and our standard of living for years to come.

Similarly, we should invest in education. Among other things, we should hire more teachers and pay them more. Teachers do not make much money, and they therefore spend a higher percentage of every additional dollar they receive (unlike the rich, who are more like to save a dollar they receive in tax cuts). And, education is just another form of investment. A child who is educated is more likely to earn a good living, pay taxes, invent useful things and otherwise be a benefit to society as a whole. We spend the money now, we get a return on our investment later.

Spending on war, by contrast, is of little or no economic benefit. War creates nothing. Bombs blow up, and they are gone. A solider who spends a year in Iraq could instead by creating something of value here, or anywhere else for that matter. A bomb or missile just blows up and is gone. Military hardware wears out, and while it is still operational, does not add to our economy anyway.

Cutting taxes on the rich is the least effective way to stimulate the economy. Give a poor man a dollar, and he will almost certainly spend it. That means someone else will earn that dollar. Give a rich man a dollar and he may well put it in the bank. At best, that lowers interest rates by making more money available to lend. But, interest rates are already low. And, some rich people will simply buy gold or other commodities, creating no jobs at all.

If you agree with me, please speak up. Vote. Don't watch Fox. Call the Republicans on what they do. Write a blog that no one reads. But please don't sit there quietly.