Midnight Thought on the Economics of Freedom (9 May 08)

( – promoted by buhdydharma )

Excerpted from

Burning the Midnight Oil for the Economics of Freedom (Fri May 09, 2008),

in the Burning the Midnight Oil blog-within-a-blog

(hosted by kos, though as far as I know, he doesn’t know it).

What is the Economics of Freedom?

The Economics of Freedom from Want?

The Economics of Freedom from Despair?

The Economics of Freedom from Tyranny?

The Economics of Freedom for our Children and Grandchildren to Enjoy the Same?

What the Economics of Freedom Is Not

Clearly, it is not what is commonly peddled in the name of Economics.

Sometimes what is peddled is the traditional marginalist economics, with the only deception involved the pretense that the traditional marginalist economics is adequate for any and all questions about the material provisioning of our societies.

Sometimes what is peddled is a bastardized version of traditional marginalist economics, retaining a surface similarity but playing shell games with meanings.

Sometimes what is peddled is naked pandering to the wealthy and powerful, with only the barest pretense to intellectual respectability, trying to hide naked grabs for more wealth to the wealthy and more power to the powerful behind smoke and more smoke accompanied by divinations of what “the markets” want in order to be sated.

So, a little simple truth-telling to cut through the smoke and mirrors:

• What we, as a nation, can do, can be done.
• “Financial limits” are rules we impose on ourselves.
• If “financial limits” tell the truth about what we as a nation can do, they are a useful tool.
• If “financial limits” lie about what we as a nation can do, then we can change the rules.

There are no financial rules we can impose that can repeal the fact that oil is a non-renewable resource: drill, pump it from the ground, burn it, then its gone, and it won’t be coming back. Gasoline will just cost more five years from now than it does today, and it will just cost more ten years from now than it will five years from now.

Wishing it different will not make it so.

Refusing to solve problems by pretending they cannot be solved

On the other hand, we have in excess of 9% unemployment in this country … the so-called “U6” measure, or full measure of unemployment. Things that can be accomplished by more people working at a task, can be accomplished. “We cannot afford to build wind generators”, “we cannot afford to build an electric freight rail system”, “we cannot afford to build dedicated transport corridors.”

Big steaming piles of horseshit, each and every one of them.

All of these activities require people working, and material resources. And for the material resources, they each either save or harvest more resources than they consume. So as far as material resources go, they are not net users … instead, they free up material resources to do more things.

“But we don’t have the productive capacity.” Productive capacity requires people working, and material resources. Start ordering the output, and provide an assured market for producing the output over the long haul, and businesses will invest in the productive capacity.

“We don’t have the productive capacity” is like a couch potato saying that they cannot climb two flights of stairs. Well, no, not until they climb one flight of stairs enough times that they get back into good enough shape to climb two. Not investing in sustainable energy independence “because we don’t have productive capacity” is exactly the same as someone not exercising because they are out of shape … if they start exercising closer to the edge of their capacity, their capacity will improve.

If we start producing what we need to come closer to Energy Independence, then our ability to produce will improve.

Even worse is “we cannot afford to finance” …

… well, anything that would put us closer to Sustainable Energy Independence. “We”, in the sense of our government, can produce as many dollars as it wishes to. The limit is not an ability to clear Treasury checks. The limit is that spending without restraint will throw too much purchasing power at a limited number of goods, leading businesses to raise prices to allocate limited productive capacity among buyers … and when everyone raises prices, its called inflation.

But which is worse … 5% or 6% inflation, or surrendering our nation’s economic independence?

There are two risks of serious costs due to inflation.

• The first is stagflation … economic stagnation combined with moderately high inflation, where people low down on the income ladder face depressed wages in tough job markets while they are being hammered by price increases.
• The second is runaway demand-driven inflation, where a currency loses its ability to act as money, and we lose many of the advantages of living in a modern industrial economy.

Are either a serious risk of the government spends to invest in Sustainable Energy Independence? In the first case, the most serious risk of stagflation over the next twenty years will be from the escalating cost of energy. The more and sooner we invest in Sustainable Energy Independence, the less we have to worry about stagflation.

And as far as runaway demand-drive inflation … over the last “recovery”, unemployment fell as low as 7.9%. More than 1 in 12 available labor hours idle. So we are far from the total limits of our human resources. And investments in Sustainable Energy Independence free up or harvest material resources.

Runaway demand-drive inflation happens when a country pushes up against the limits of its ability to produce, and then just keeps pushing. And investing in Sustainable Energy Independence will increase our ability to produce.

So, are people just stupid?

I go on the working assumption that people may be creatures of habit, and people may work on the basis of incomplete or inaccurate information … but over the long haul, “stupidity” is a very weak explanation for why people persist in pretending that we face limits that we do not in fact face.

Especially on this question, because in the Great Depression, in World War II, we tackled these kinds of problems and when financial rules said “we cannot afford to do this”, we changed the rules. Even currently, when a political decision is made to do something that we really cannot afford to do over the long haul, which is establish a police-station state on top of the Iraqi Oil Reserves … the financial rules are simply waved aside.

We can afford to invest in Sustainable Energy Independence, because it is in our nation’s capability, and because it increases, rather than reduces, the material resources available to our nation.

No matter what sophistry dressed up as economic theories or financial wizardry is trotted out to dress up the argument, when you encounter it, boil it down to its essence.

Can a business “afford” to devote assets it has on an activity that will yield a profit? Of course it can … indeed, that’s the only way it will ever be able to “afford” anything at all, including, in the long run, the essential exorbitant CEO salary.

So can the United States “afford” to devote human and material resources we have on investments in Sustainable Energy Independence that will increase our nation’s productive capacity? Of course we can … it is, indeed, the only way we will be able to “afford” to regain and then maintain a reasonable standard of living for the large majority of Americans.

The Economics of Freedom

The Economics of “We Cannot Afford To Do What We Must” … that is the Economics of a Downward Spiral for our Children and Grandchildren … the Economics of Oil Addiction … the Economics of Despair.

The Economics of Freedom from Want? The Economics of Freedom from Despair? That must at least in part be the Economics of having the capability to take care of our own. Which means, in part, Energy Self-Sufficiency.

The Economics of Freedom from Tyranny? We cannot be free of tyranny if we must tyrannize other nations for resources we need. We cannot grant our power elites the capability to be tyrants abroad while denying them the capability to be tyrants at home. Which means the the Economics of Freedom from Tyranny is, in part, the Economics of Energy Self-Sufficiency.

And the Economics of Freedom for our Children and Grandchildren to Enjoy the Same? This cannot be done on the foundation of exchanging Peak Oil in this generation for Peak Coal for our Children or Grand-Children. It must be the Economics of Sustainable Energy Self-Sufficiency or else we are consuming our children’s inheritance.

Now, it won’t be easy, but sometimes you’ve got to take the hardest line. As a consolation, at least we won’t have time to be bored.