2 Responses to “You can reduce oil importation by how much?”

1. RCAR says:

   February 20, 2009 at 5:19 pm

   Here’s an example of “local” decision making;the results are a bit different:On 4-28-2004,5 major wall street broker dealers met with the SE to explain that they knew their own business better than the regulator,and their point was that they needed more leverage on their capital to maximize their profits and their competitive advantage. The broker dealers – Bear Stearns, Merrill Lynch, Goldman Sachs, Morgan Stanley and Lehman Brothers got their wish,because of their greater knowledge of their business,the SEC was swayed.
   You finish the story.
2. nokarmahere says:

   February 20, 2009 at 5:39 pm

   So in other words RCAR, the regulator was swayed by their arguments and despite the fact that in hindsight SHOULD have made a better decision let them proceed anyhow. I fail to see how that supports your implied theory that “centralized” decision making is better than local. And we won’t even get into the fact that the market distortions that they were trying to take better advantage of were caused by more government regulations and/or action. As a matter of fact, a rather powerful argument can be made that government vs any business is equivalent to central vs local decision making is a straw man. In terms of economic efficiency, the larger a corporation is the more it tends to resemble the government in that it takes on the inefficiencies and lack of a specific purpose that are endemic in government bureaucracy. Anyone who has worked for a large corporation can attest to the inefficiencies and stupidities that occur within. Unfortunately, the only organization more inefficient and stupid is a government bureaucracy. If you think your health insurance company is inefficient, go try to get something done with CMS or your local DMV. Your local DMV has a SIMPLE and FINITE set of problems to solve – -yet they are hugely inefficient and slow.
3. RCAR says:

   February 20, 2009 at 5:47 pm

   #2,

   it’s really about a very basic principle,don’t gamble with borrowed money. But I do agree with the part about bigger being stupider,and that the separation of big organizations from big government is often quite slim.
4. nokarmahere says:

   February 20, 2009 at 6:02 pm

   #3 Well you offered it up as a counter example to local decision making. It falls apart there for a number of reasons – -but your point about making reckless decisions with borrowed money is well taken. I think you underestimate the extent to which gov’t created the problem which it then failed to regulate properly. Which begs the question – -I can’t resist misusing that phrase in light of some earlier commentary: Isa centrally planned economy capable of reacting fast enough to the unanticipated distortions it causes in the market?
5. Anonymous says:

   February 20, 2009 at 6:22 pm

   Mom Blogs – Blogs for Moms…

   …
6. nefiperez says:

   February 20, 2009 at 6:24 pm

   Let it go, Dave. How long are you going to beat a dead straw man?

   There’s more on heaven and earth than efficiency. There’s also fostering democratic and republican values, or protecting them, against some of the harsh effects of unregulated markets and the concentrations of wealth and power they tend to create.

   The robber barons of the 1890s and thereabouts brought regulation on themselves because of their excesses. Unregulated markets tend to concentrations of wealth that then seek to diminish competition and even your cherished efficiency in the name of efficiency. As Rockefeller used to say, cooperation is better than competition. Bill Gates said the same thing. Why have a number of different operating systems when one standard platform will make development and interoperation that much more, wait for it … efficient.

   These concentrations of wealth, not to mention many of the values fostered by the market, undermine democratic values and the institutions that make free living and the pursuit of happiness possible. Big business, by its very scale and bottom line approach, is inhumane; it is inimical to the intermediate institutions of family and community; it fosters greedy sort of self-interestedness that is inimical to and threatens to drown out the enlightened self-interest necessary to democracy and even free markets themselves. It also uses its resources and power to squelch start up competitors, or coopts them to kill them.

   Granted, we owe much of our wealth and well being to the blessings of free markets. But, and despite the problems of regulation, free markets are prone to excess and need to be reined in, just as much as zealous regulators and do-gooders need to be humbled from time to time. As many and great as the faults of the FDA are, for example, I’m sure you wouldn’t want to go back to the days of the Jungle or just take whatever drugs big-pharma might decide to throw on the market to meet their analyst’s predictions.
7. nokarmahere says:

   February 20, 2009 at 6:34 pm

   @6
   “Big business, by its very scale and bottom line approach, is inhumane; it is inimical to the intermediate institutions of family and community; it fosters greedy sort of self-interestedness that is inimical to and threatens to drown out the enlightened self-interest necessary to democracy and even free markets themselves. It also uses its resources and power to squelch start up competitors, or coopts them to kill them.”
   This is true to a certain extent – -although inhumane is an extreme description – -however, how do you reconcile the fact that big business USES big government to get its way? Kinda like the cat watching the hen house.
8. nacl says:

   February 20, 2009 at 6:55 pm

   Dave scores a bullseye here:

   – looking after your neighbor to be a good neighbor is a defensible emotional or political decision, not a rational economic one –

   Not only is that the truth but it explains why govt intervention is so attractive and easily defended.
9. J.E. Dyer says:

   February 20, 2009 at 8:47 pm

   Actually, nefiperez, you make a common mistake in attributing monopolies to the free market. True monopolies that have economic power over customers or stockholders require government intervention to eliminate competition. The few “robber barons” who sometimes did wield monopolistic power did so because government granted them monopoly concessions. Another way the biggest industry actors squeeze out smaller competitors is by getting behind costly government-mandated regulations that the smaller companies can’t afford.

   For the most part, however, the tale of “robber barons” doing terrible, terrible things is much exaggerated.

   Regarding Bill Gates and Microsoft, I wonder if you can name an excess perpetrated by Microsoft’s market power. What things have the world’s peoples been suffering under because of the market ascendance of Windows? How would the lot of humanity be better if larger percentages of computer users had the Macintosh OS, or LINUX? Who is poor today — who has been denied opportunity — who has had his life savings unjustly confiscated — because Microsoft has the lion’s share of the market in PC operating systems? What IS this appalling, unjust effect Microsoft has on us?

   Microsoft is just one example. The fact that our antitrust laws call something “collusion in restraint of trade” doesn’t mean that thing is, objectively, bad.
10. Cas Balicki says:

    February 20, 2009 at 9:16 pm

    There is a huge difference between “Greed” and self-interest. The beauty of capitalism is that it moves the locus of decision making to the lowest level, the consumer, who pursues his perceived self-interest.

    What we describe as the market is the accumulation of this vast series of individual choices. The Market as described here is totally neutral. Like Nature, it is neither good nor bad; this despite its ability to do great harm, which is counter-balanced by its ability to confer great reward. That the Market can prove at times a crap-shoot goes without saying. There is after all a reason why Risk must be rewarded, and that is to compensate for all the losers an investor must sift through to find the one in tenth winner.

    Sentiment suggests that we, the greater community, attempt to moderate the harm market forces can wreck, much as we would protect ourselves from the unfettered effects of Mother Nature. It is at this point the story of the Three Little Piggies should come to mind, but ‘nuff said on that topic.

    From an economic point of view, such ameliorating moves tend, at the very least, to make the Market less efficient, which is to say less punishing and at the same time more rewarding. As an example, insider trading becomes a crime for some, but not for others, or in another obvious case Bears are constrained in their “shorting.” Still, perhaps the greatest inefficiency is comes in the form of cost, the cost of passing capital from savers to users increases. Cost increases are not a good thing under any circumstance, but all the worse when it comes to moving money around. Add to this the cost of complying with regulation designed to protect and you have in a nutshell the major problem with modern markets. Robber Barons notwithstanding, these pernicious more subtle market costs hurt the small to middle-sized capital users the hardest as they can least afford the expense of hurdling the barriers to capital market entry. This, of course, should not be interpreted as an argument for unfettered capitalism, but as an aversion of the simple principle that there is no free lunch, especially on Wall Street.
11. Robert Lee Hotchkiss, Jr. says:

    February 20, 2009 at 9:37 pm

    Command economies don’t work, except of course when they do. The slight market interventions that the Obama administration is proposing pale in comparison to the War socialism of WWII. Of course we did get stuck with ultimate welfare baby, the defense industry. But all in all things turned out quite fine.

    And nothing that Obama is considering borders the kind of broad interference that the Chinese government has played in its economy. The defacto wage controls, the whole sale ownership of agricultural land, and the huge companies ran either by the government or the Military are hardly a free market dream.

    I think that there is actually a lot not to like about the Chinese system, but many things people do fine positive such as the rapid industrialization and superior technological and communication infrastructure in industrial centers is because of not despite of government intervention.

    There are good arguments to be made against command economies, but that the argument that they never work is not a good one. The argument has to be at the most, they almost never work, especially in a democratic society.l
12. Robert Lee Hotchkiss, Jr. says:

    February 20, 2009 at 9:53 pm

    Mr. or Ms. Dyer

    In its investigation of Microsoft as a Monopoly, I think was the European Union, that found and I think it was Windows 95 would have cost half as much as it did but for the Monopoly. If this were true than that means Billions of dollars where transferred to Microsoft from its customers and would certainly make union wages at the big three seem like nothing at all.

    If, again this estimate was true, it would be an especial burden on developing nations. It certinly would be greater than the dollar amount of donations Gates has given to the developing nations. Sure the true value of many of these programs which I read are very well run may be much more valuable than the dollars spent.

    It is an almost hopelessly complex system. How do you balance the reduced cost of training associated with a single operating system, with the inflated price. Did Bill Gates spend the money better or would local entrepreneurs have better spent the money. These are things that can’t be known. But there is reason to believe the Microsoft monopoly did adversely affect the economy.

    And, the increased reach of patents on things as basic as our own genetic code bode for a rapid expansion in the number of monopolies and their effect on our economy. Whether you view a patent as a government issued monopoly, which of course in a sense it is, or not; monopoly economics is going to play a bigger and bigger, and not necessarily positive role in our future.
13. J.E. Dyer says:

    February 20, 2009 at 10:33 pm

    Mr. Hotchkiss, Jr — the day the European Union produces a computer operating system that does what the now-antique Windows 95 OS did is the day the EU will have any standing to decide how much it “should have” cost to produce Windows 95.

    It is simply silly for government to say Windows 95 could have been produced at half the cost. We don’t know that. In the absence of Microsoft as it was organized and as it operated in the early 1990s, we have no reason to think Windows 95 would ever have been developed at all. Something else no doubt would have been — although, again, in the absence of Microsoft at any time prior to the early 1990s, there is no guarantee that human trends and the IT market would have combined to generate demand for a product with those features. If the PC had developed on the Apple paradigm, it would look different now from almost every aspect.

    I am still, I note, looking for the suffering and injustice incident to Microsoft’s market share. It is actually funny to hear people say Microsoft was making too much in the 1990s, when its OS, combined with the PCs produced to host it, were the cheapest ones on the commercial market. It would have cost me 40% more to buy a Mac in 1996 than it cost to buy a Windows PC.
14. Robert Lee Hotchkiss, Jr. says:

    February 20, 2009 at 11:32 pm

    Mr. or Ms. Dyer,

    That is indeed the rub. It is impossible to know these things. The impossibility of determining the value of things is indeed one of the main justifications for market forces. All, I was saying was that the potential effects of a monopoly as large as Microsoft could easily be huge. And, if more and more of the economy becomes monopolized it is something to be concerned about.

    I have long made my peace with Microsoft, it is certainly no more evil than Apple which takes every market advantage that comes to it.
15. Cas Balicki says:

    February 21, 2009 at 12:06 am

    Let us now turn to the words of Howard Hughes, who in commenting on the monopoly Hughes Tool supposedly had on the 61 point cutting drill bit which Howard’s dad invented: “I don’t hold a monopoly on oil well drilling. If someone wants to dig a well they can always use a pick and shovel.”

    Ah! value for money. Where would we be without it.
16. miniDITKA says:

    February 21, 2009 at 8:34 am

    Mr Dyer – Go take a look at the multi-district litigation docket In re Microsoft. So many companies with innovative products — Word Perfect, the Netscape browser, Sun Microsystems servers, the Blast OS, RealNetworks media players, Adobe — sued Microsoft that the cases were consolidated for pre-trial. The docket reveals a graveyard of business and inventions that were crushed or stolen through anticompetitive practices as MS sought to keep anyone from moving off the its OS or from using other than its Office Suite. The EC and the Korean regulators similarly tagged MS for the same litany of anticompetitive practices, as did the US DoJ, and MS simply defied their orders. Nice rule of law there. And notice that once MS defeated the Netscape browser, new updates.

    As for the tender mercies of big business and unregulated markets, I’m sure you’d love the let your kids buy toys from China without any oversight or standards, or would like to buy stocks from companies that didn’t have to disclose to the SEC.

    At the end of the day, the creation of wealth entails the concentration of wealth, and with it abusive powers as well as a callous indifference to the rule of law and product standards. This is evident to anyone who does not dwell in the high tower of theory or who has spent a good part of their waking, and what should have been their sleeping, hours defending these companies and their practices. Government is far from perfect as a regulator, but a regulator there must be.
17. bumpcity says:

    February 21, 2009 at 8:46 am

    Dyer has no clue when it comes to Microsoft. He forgets, or never knew, how MS leveraged its dominant market share in the OS to shake down computer manufacturers and caused them to charge more for their products. In the early 90s, MS nearly brought down Gateway by delaying its release of its new OS to them because Gateway wanted to give consumers a choice in OSs by carrying another, long since forgotten OS.

    And yes, products work better on MS’s OS. That’s because when a company like Netscape or RealNetworks invented a product that ran on the OS, MS would say invent an inferior copycat and then lock out the other companies -by not releasing all the APIs needed for interoperability, by using its leverage and big bucks to buy off software developers and websites, etc. That’s just one way in which MS stole inventions or crushed upstarts, resulting in less consumer choice, higher prices, and less innovation. As soon as MS would win, its updates stopped.

    It’s because of the tendency of companies to engage in these sorts of practices that the feds and states have both antitrust and FTC agencies.

    But don’t let bad facts get in the way of a good theory.
18. chuck martel says:

    February 21, 2009 at 9:31 am

    _____________________________
    #16
    As for the tender mercies of big business and unregulated markets, I’m sure you’d love the let your kids buy toys from China without any oversight or standards, or would like to buy stocks from companies that didn’t have to disclose to the SEC.
    _____________________________

    The concept of “buying toys from China” is something I don’t care to wrap my mind around. Let’s talk about something else, education for instance. In the U.S., institutions of higher learning are accredited by organizations to which they belong. For instance, Grinnell College, Grinnell, Iowa is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools. This organization says that Grinnell College is, indeed, a school and the graduates of this school are real college graduates. Five other regional organizations perform a similar function in other locales. They are not governmental entities.

    The investment that a student or his family makes in education is substantial and getting more so, yet people are willing to make this investment in both money and time, without any government guarantee that they are receiving value. This is, ultimately, because of a private accreditation process. Furthermore, other private interests, such as U.S. News and World Report, rate colleges and universities on a number of different scales.

    These are facts that lead to conclusions. Among them are: A business (Grinnell College) can successfully supply a product (educated graduates) for a fee, without government “approval”. You may hire a graduate of Grinnell College and be confident that the individual did attend and graduate from a real college, but there is no guarantee that this particular individual is suited for the position an any way. However, if Grinnell College continued to release uneducated graduates upon the world, their accreditation would be withdrawn and their diplomas would become valueless. There is no reason why other business relationships cannot operate on a similar basis, and, in fact, many do. There are companies that rate the value of stocks and companies. In a free market society, these companies would be rewarded according to their success. If they continued to recommend failing companies and failing business strategies, they themselves would fail. The Consumers Union rates various products as to value and safety. ANSI, Underwriter’s Laboratories, and the National Fire Protection Association develop standards independently of government, although though standards may be used by government bodies in making regulations.

    The point is that government regulation is not essential for successful operation of business and markets. The idea that the SEC did not have enough regulations in place to prevent the financial issues confronting us now is naive.
19. chuck martel says:

    February 21, 2009 at 9:38 am

    By the way, the computer that I’m working on at this moment has never known Windows. Various Linux operating systems are easily available and do everything that a normal user requires. And, of course, there’s the Apple option. I’ve nothing particular against Microsoft but there’s a very good chance that a company so dominant in its field might be facing an uncertain future. Witness Schwinn bicycles, U.S. Steel, even General Motors.
20. Robert Lee Hotchkiss, Jr. says:

    February 21, 2009 at 11:12 am

    Mr. Martle the selection of Universities as an example was perhaps an unfortunate one. The value of an undergraduate education in the United States has been plummeting relative to its costs for some time now. Given the vast differential in cost between employing an Indian, Chinese, or even European worker with a 4 year degree, it is very likely that the cost of an American undergraduate education, tuition + interest on debt + four to six years of reduced work and seniority, will be more than the increased earning potential provided by the degree. It may already be true true for current graduates. Not, really the poster child for self regulation.
21. chuck martel says:

    February 21, 2009 at 2:49 pm

    #20

    Terrific response. The key word is “willing”, “people are willing to make this investment”. Government coercion is not part of the transaction. The actual value of a higher education is open to dispute, as you imply, even though, as always, it is up to the individual to develop his own talents regardless of his learning environment. Lincoln didn’t go to law school.
22. J.E. Dyer says:

    February 21, 2009 at 3:01 pm

    bumpcity — please stop mixing apples and oranges. “Government regulation” is not the same thing as “antitrust law.” The latter is in one sense a subset of the former, but is also a pretext for lawsuit and investigation, more than a positive prescription for operations.

    Apparently you’re not aware that many investors do invest in private companies that don’t have to disclose to the SEC, because they don’t sell stock to the public. My interest in investing with such companies would depend on the company profile and reputation.

    Government regulation didn’t prevent toxic toys from entering the US from China. The market solution is to hold the US retailer responsible. Consumers sue the snot out of Toys R Us and WalMart — or even just let the bad press cut into their sales — and the retailers set up better testing and vetting of their foreign suppliers.

    I am well aware of the basis on which other companies sued Microsoft. My question remains how the consumer was gravely harmed by that.
23. bumpcity says:

    February 21, 2009 at 6:46 pm

    The point is not that government regulation is exactly the same as antitrust law, though antitrust law was present at the founding of the modern regulatory state. The point of antitrust law is that unfettered markets are not simply efficient or competitive but result in all sorts of anticompetitive practices that are harmful to consumers and businesses alike. The FTC and FTC statutes are more of the same.

    And in antitrust more so than in most other areas of civil law, government regulation and civil enforcement blend and overlap; hence the civil suits against Microsoft were an extension of the DoJ action, and themselves spilled over to the EC action; hence the treble damages award, which is punitive, and the entire private attorney general aspect of antitrust law.

    And true, many investors do invest in private companies without SEC mandated disclosure. But this just proves the point. Not only do these investors like to rely on public disclosures when they’re available — because there are penalties for misinformation, public disclosures tend to be reliable — but investors in private companies are usually able to perform due diligence as a condition of their investment. The SEC disclosure regime allows smaller investors, who cannot force companies to open their books as a condition of their investment or don’t have the time to do full due diligence themselves, to obtain similar information and make their investments on the basis of superior information. I thought that information and knowledgeable allocation of resources was the cardinal virtue of free markets.

    If you really are aware of the basis of what is not simply the suits — but the judgments against Microsoft — you would know how you’ve been harmed by Microsoft’s conduct. It’s spelled out in the above posts, too. Your feigning of ignorance is either disingenuous or, though I think it unlikely, genuine ignorance.

    Finally, many people’s experience of what really goes on in the name of free markets and free “competition” is enough to convince them that government regulation is a necessary evil and that conservatives, or those who seek to protect conservative values and institutions, should re-think their often unthinking allegiance to big business and the free market. In particular, they should not debate government regulation as an either/or proposition or good v. ill situation; regulation is here and it’s not going away. Rather, they should consider taming the regulatory beast so that it furthers conservative values and protects institutions worth saving, and not leave it simply to liberals and liberal agendas.
24. chuck martel says:

    February 22, 2009 at 5:40 pm

    ****
    Finally, many people’s experience of what really goes on in the name of free markets and free “competition” is enough to convince them that government regulation is a necessary evil and that conservatives, or those who seek to protect conservative values and institutions, should re-think their often unthinking allegiance to big business and the free market.
    ****

    Unthinking allegiance to big business? Who has that? Allegiance? The fact is that certain tasks can only be done and certain products only produced by “big business”. If you had to buy an automobile built by a fellow down the street in his garage, how much do you suppose it would cost? And would it matter if oil was produced, refined and distributed by a family in the next town. However, in a free market economy, there is the possibility that a single individual like Frank Stronach, can arrive virtually penniless in Canada and become one of the largest auto component manufacturers in the world. Government regulation doesn’t encourage or facilitate that sort of thing, it inhibits it. The “unthinking allegiance” is to a pre-industrial Marxist cant that visualizes a Garden of Eden produced by shackling human potential in the name of equality.