From: Matthew Welland (matt@essentialgoods.com)
Date: Sun Feb 02 2003 - 20:49:12 MST
On Saturday 01 February 2003 01:32 am, Lee Corbin wrote:
> Matt writes
>
> > i. Tax oil *at the barrel* (i.e. not at the pump)
>
> All right, the picture you're painting is becoming a little clearer.
> You suggest that the oil-importing company tax oil before it's
> refined, on its way into the consuming country. (Let's say that
> for the sake of argument, it's refined in the destination country.)
>
> You also claim that the oil-producing countries enjoy "windfall
> profits". I'll agree that Rafal's bananas weren't a very good
> example, but to me, the only possibility of an "undeserved", or
> "windfall" profit is one that obtains upon collusion, i.e., not
> out of the action of a free market. Indeed, OPEC has tried to
> obtain precisely these profits. So it's unclear to me whether
> or not you agree on this restricted meaning of "windfall".
No, you are right, I was thinking of a windfall as being something good that
comes through chance. In the context of this discussion I intended it to
refer to the nature of the Middle Eastern oil reserves. The Middle East
wealth from oil is not due to any particularly proclivity to productivity on
the part of the people but rather to the happenstance that put a hugh
percentage of the worlds oil reserves under their feet.
> > We know windfall profits take place just by taking a look at
> > the money being made by the oil producing nations from oil
> > sales. That money is not the result of human labour: [Labor:
> > Brain power and or muscle power applied to some productive end.]
>
> It's evident that you see these profits as undeserved. But
> capitalism and free markets, of course, aren't about that at
> all. They're about sending signals: the signal here is "FIND
> AND DEVELOP OIL OR CHEAP REPLACEMENTS!!". But maximal progress
> always appears to be attended by maximal freedom: the oil
> producers should have the soul motive of making as much money
> as they can, up to but not including collusion. For example,
> you'll probably agree that if oil had flowed to the world from
> the Middle East the way it should have, our civilization would
> be much progressed from what it is now.
No, I don't have a problem with such profits. However I do tend to think that
the price of oil reflects a very short sighted view. It seems likely that my
childrens children will live in a time of very expensive oil and it also
seems somewhat likely that their lives will be of lower quality because of
that. I see this as a threat to long term progress.
I do tend to look at the planet and its resources as being something
"belonging" to all mankind. I realize that is not a popular perspective -
especially in the eyes of those who control significant resources. Take the
situation of Middle Eastern control over a large portion of the worlds oil
resources to an extreme - what if not only did a small group of people
control all the oil reserves but all the land, mineral and water resources of
the world. That group of people then effectively enslaves the remaining
people. I think that from the perspective of taking mankind to the next
level, however you envision that process, the aforementioned situation is
harmful. What I would like is a way to keep the natural resources of the
planet effectively being used for the benefit of all AND ensure that those
who work the most effectively and the hardest reap the benefits of their
efforts. Taxing income is exactly the wrong signal to send to achieve that
goal. Taxing natural resources and land allows folks to fully benefit from
their smarts or labor and to _choose_ (to an extent) how much tax they wish
to pay.
For me the musician, actor, ASIC engineer (thats me!), garbage truck driver,
school teacher, investment banker, lawyer, McDonalds minimum wager and
massage therapist are all contributing to the advancement of humankind, each
to the best of their ability at a point in time. However the person who
controls a resource (perhaps keeping it out of the market and preventing
someone else from making economic use of it) contributes nothing. The land
speculator, the oil magnate, generally these folks are not doing anything for
the economy and I think they probably slow it down. They generate personal
wealth at the expense of economic activity and in my opinion that cost to the
economy is far greater than the benefit of their windfall profits money being
available for investing.
> But whatever; to understand the market mechanics, I'll continue
>
> to follow your intriguing line of thought:
> > ii. Prices of oil based products; fuel, plastics, etc. naturally rise.
>
> So, though it's not directly relevant, the whole society is placed
> on a slightly slower exponential growth curve.
>
> > iii. Alternatives to oil based products appear a little
> > cheaper. I.e. wood or metal instead of plastic, bicycling
> > instead of driving etc.
> > iv. Some consumption shifts away from oil to alternatives
> > v. Demand for oil decreases slightly
> > vi. To maintain revenues oil producers drop prices a little (*)
>
> Yes, say that the tax increases were infinitesimal, and so your
> price drop here is infinitesimal (by looking at the derivatives,
> we might see the cause/effect relationship more easily). But
> did you say what happened to the consuming economy? Does (vi)
> result in as much oil as used previously or not? I guess that
> either way, your point is that the oil producing countries get
> less money.
There would no doubt be unintended consequences. Are those unintended
consequences greater than the unintended consequences of a tax on income?
> Now if the *level* of oil consumption returns to its previous
> level, then no economic harm has been done. Money has simply
> gone out of the oil-producers' pockets into those of the taxing
> government's. But I can't quite believe that the equilibrium
> would work like that---it seems to me that an almost Le Chatelier's
> effect kicks in here, and less oil would be consumed. That would
> be bad, naturally.
Why must the consumption of oil return to its previous level for economic
harm to be prevented? What if I replace my aged boiler with a more efficient
model since oil "feels" more expensive (it really isn't under my scenario).
I'm using less oil and now I have more money for the movies and a US boiler
making company just made a healthy sale to me. What if I choose an item on
the grociery shelf that had 10g less plastic in its packaging because it is
now a little cheaper than the equivalent item sitting next to it? (*)
I don't remember Le Chatelier's principle, I'll have to go look it up! I
think taxing income is far more harmful to the econonmy than taxing oil
imports. I admit I don't (yet) know how to substantiate that opinion but your
questions and comments are helping me think about it!
Thanks Lee, and to the other contributers to this thread, I apologize for not
addressing all your comments directly but I must revert to lurking for a few
days.
Matt
-- (*) I have been developing a wood fired steam engine co-generation system in my spare time over the past too-many-to-count years and I suppose I must come clean and admit that I might have a selfish reason to see oil imports taxed! But hey! It would mean more jobs if I could turn the blinking thing into a product. :) With heating oil at $1.50 a gallon its only another .50 to go to economic viability. Time to get back to work on the prototype...
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