Tuesday, January 24, 2012

"Dependence on XXXXXX Oil" and the State of the Union

A recent npr story talks about the US dependence on foreign oil. It misuses a quote from the Bush state of the union address in 2006 that probably no one except for a handful people recognize the significance of, but was part of a significant debate when I was at the White House.

The quote npr uses is that the US is "addicted to oil which is often imported from unstable parts of the world."

The original quote which the economists successfully changed was "addicted to foreign oil"

If you go back and look at all major federal speeches during my tenure at the White House from 2006 to 2007 you should find that the words "dependence on foreign oil" or "addicted to foreign oil" were never used. It was part of my job at the White House to change all such references to "dependence on oil" and "addicted to oil."

The reason is that the fundamental economic problems associated with oil (national security, environmental, etc.) do not depend at all on whether the oil is produced domestically or abroad.

If the price of oil suddenly spikes, consumers in the United States are hurt just as much as consumers in Canada which is a net oil exporter. It doesn't matter whether the oil is foreign or domestic.

The problem is that we use oil, not whether the oil is foreign or domestic.

Thus the White House economists worked hard to change that language in the State of the Union. It's clear from that npr story that nobody noticed.

Sunday, January 15, 2012

Is Government an Inferior Good?

There seems to be a assumption by most Democrats and indeed a tacit assumption by most economists that government is a normal good in the formal economic sense (i.e. the share of income we spend on government should be constant as we get richer) when they say that right now taxes are too low because the percent of GDP devoted to taxes has been decreasing.

But a perfectly reasonable alternative assumption that most economists might agree to is that if government is primarily to provide for the necessities in life, and not the luxuries, then government should be an "inferior good" in that the share of income we spend on government should be decreasing as we get richer.

Sunday, January 08, 2012

Marvel wins 10 year federal court case to assert that mutants (e.g. the X-men) are not human.

There was a nice radio lab story about a recent court case where Marvel asserted that the X-men are not human--the irony being that the X-men story line is all about them fighting to be recognized as human.

The reason for the court case is that human shaped dolls (e.g. Barbie) are taxed at 12%. While non-human shaped dolls (e.g. Furbies) are taxed at 6%. So Marvel was fighting for X-men dolls to be classified as non-human.

The important economic point is just to highlight the inefficiencies and the dead weight loss (e.g. court fees, but also too many xmen and too few barbies being sold, as well as the lobbying costs) from the arbitrary import duty system.

Thursday, January 05, 2012

thoughts: game of thrones

Just finished volume 3 of Game of Thrones, my favorite fantasy novel from college that just became an impressive HBO adaptation. One scene struck a chord with me that highlights a central theme of the book.
“May I leave you with a bit of a riddle, Lord Tyrion?” He did not wait for an answer. “In a room sit three great men, a king, a priest, and a rich man with his gold. Between them stands a sellsword, a little man of common birth and no great mind. Each of the great ones bids him slay the other two. ‘Do it,’ says the king, ‘for I am your lawful ruler.’ ‘Do it,’ says the priest, ‘for I command you in the names of the gods.’ ‘Do it,’ says the rich man, ‘and all this gold shall be yours.’ So tell me—who lives and who dies?” 
“The king, the priest, the rich man—who lives and who dies? Who will the swordsman obey? It’s a riddle without an answer, or rather, too many answers. All depends on the man with the sword.” “And yet he is no one,” Varys said. “He has neither crown nor gold nor favor of the gods, only a piece of pointed steel.” “That piece of steel is the power of life and death.” “Just so . . . yet if it is the swordsmen who rule us in truth, why do we pretend our kings hold the power?
The question it really is asking has been posed by political philosophers for centuries: What is the source of power?

Calvert (1992) and Gibbons and Rutten have nice mathematical models to illustrate the answers of folks like Hobbes and Hume. Fun to think about these questions again.

The other thing that struck me about the books was that they remind me of Diplomacy and other war strategy boardgames from childhood. Diplomacy mostly because it was the most pure and you could be so confident in the marshalling of your strength and yet be totally unaware that a hidden alliance could in 1 turn totally wipe you out by capturing your homeland.

Tuesday, January 03, 2012

Protesters and Information

Just read the nice Time Magazine Persons of the year story. They picked the protester and picked a gripping narrative connecting the Arab Spring to the european proto-communist revolutions of the 1860's or the social upheavals of the 1960's. Of course I heard about it in bits but to hear the whole year from Arab Spring to Occupy Wall St connected into a narrative does make the whole thing sound impressive. Though maybe Time is too early to judge properly as the Color revolutions (rose, orange, cedar, blue, etc.) of 2004 was less monumental than they first appeared, at least at first. Though the importance of social media, both in spreading the ideas of revolution in the 1860's (newspapers and telegraphs back then), to connecting the Arab Spring to Occupy Wall St today (3/4 of Tunisian internet users are on facebook?!) reminded me of Neal Stephenson's (my favorite novelists) prescient 1999 novel Cryptonomicon whose premise was that if you found a way to make information free, autocracy cannot survive. Now if there were only a way to sneak internet into North Korea.

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