by Tyler Cowen
on January 5, 2011 at 12:03 pm
1. Eliminate energy subsidies.
2. Donald Marron's top posts of 2010.
3. How to lie.
4. Are the best officers leaving the U.S. military?
5. At the top end, eBook sales outdo print.
6. Be very afraid (airline pricing and auctions; indirect application of Stahl and Alexeev?).
6. 2011 books to look forward to.
The Lying article once your travel the link chain is interesting.
#4 seems awfully naive. The American Army of WWII, on which he lavishes praise for its enterprise, was an army of civilians, the regular army having been tiny before the war. History would teach you to expect that the Officer Corps of a professional army would fill up with jacks-in-office, especially if they don't have a steady stream of little wars in which the officers can learn independent command. Whether, in a world of instant communications and micro-management, officers will ever again be able to learn from indepenent command, is an interesting question.
Didn't LBJ select bombing targets in the Vietnam war?
#6 Can't wait for Murakami's new book. I gave one away as a birthday present (the most inappropriate for a birthday — Norwegian Wood!!!). But I noticed the others are actually turning yellowish on the bookshelf it's been so long since a new one arrived. I guess eBooks don't turn yellow, only maybe the old computer itself, the jacket.
Indeed, John Thacker. Maybe Tyler should change the descriptor of link #1 to "tax fossil fuels more", since that's the bulk of what the author is suggesting. Calling the deduction of business expenses from earnings a "subsidy" is sophistry indeed, especially considered that every firm in every line of business does it.
But if the landowner – the royalty recipient – happens to be a government it's labeled a tax and thus eligible for foreign tax credit, rather than being treated as an ordinary expense.
Yes, I think we agree. But in general those types of royalty payments paid to governments are like taxes, aren't they? The government isn't like an ordinary private party landowner– it's much more like a monopolist and the prices it can charge for royalties can be higher. The royalty payments can substitute for taxes taking another form that would be more obviously taxes to you.
The Foreign Tax Credit actually doesn't let you take full credit for taxes on foreign oil and gas income (including extraction income).
The US system of taxing worldwide income leads to necessary loopholes like this; well, necessary unless you want to ensure that companies headquartered in the US also do foreign business. (Whether they divest foreign arms or simply move their headquarters, either would work.)
4. Is an excellent article. Too bad it's 15 years too late.
Officers both good and bad began leaving in droves in the mid-1990s. The fast growing economy seeking management skills was one explanation. The evolution of the Zero Defects Army was another. Budget and personnel cuts were a third reason.
Every year from 1991 through 2000, Bush then Clinton cut military personnel. Some of the decline was through attrition, while other officers were hit by career killers such as DUIs.
The most highly skilled officers generally had better opportunities. Poor officers could slowly but surely rise through the ranks merely by bootlicking.
So by the 2000s, almost all of the senior officers were products of that culture. They took minimal risks, micromanaged, and stifled creativity. That's why good mid-career officers are getting out now. That, and because the rigors of combat do take a physical, emotional, and social toll.
The Post 9/11 GI Bill benefits are also extraordinary. For the first time they were extended to officers. Critics of the newest version of the GI Bill warned that it would have a negative impact on retention. It's hard to isolate the effect from other causes, but it seems the critics may have been right.
Luckily, we're also training some great, dedicated combat leaders and commissioning people who joined to serve during wartime, not merely for benefits.
Thacker is right. The upstream side of the oil industry isn't very dependent on the U.S. Chase them and they will run away.
Energy independence in the U.S. is the mantra of fools and politicians.
Though in general I support the removal of energy subsidies across the board, #1's focus on total subsidies paid obscures their potential importance at the margin. Federal renewable energy subsidies are much, much larger than fossil subsidies on a per unit basis. So an individual firm hardly notices the fossil subsidy when considering which type of power plant to invest in, but beleive me the renewable subsidies have a HUGE impact on their decision. Dumping the renewable subsidies would definitely cause a large decline in renewable energy investment in the short-term.
Also I think it's interesting that the author claims that renewable energy is maturing on its own. In fact, federal and state subsidies coupled with renewable energy mandates are the primary drivers. The author talks about renewable energy standards, but doesn't seem to connect that those aren't market forces, they're government forces!
The utility I work for is a leader in renewable energy located in a very green-minded part of the country… but there is no way in heck we'd have a fraction of our current renewable generation (if any) were it not for subsidies and state renewable mandates. Right now a new wind facility would provide us electricity at about $130/MW vs. about $65 at current market prices (and the market power would be a fixed-price firm volume, whereas the wind product is variable, providing near zero risk mangement benefit in the hour ahead physical market). In fact it costs us quite a bit to backstop the variability of wind with hydro and natural gas units.
#6 is partly wrong not scary because it neglects the impact of supply and demand on initial ticket purchases. If the airline overbooks (sells more tickets) the supply has gone up so the price must go down.
If I (as a customer) then still choose to fly I receive greater consumer surplus from the lower price. The airline can also benefit because it reduces lost value from flying empty seats ("the world's most perishable commodity") by more frequently being able to fill the seats of no-shows.
RE #3: On *Seinfeld*, when advising Jerry how to lie, George said, "It's not a lie if you believe it."
Comments on this entry are closed.
Previous post: Very good sentences
Next post: Thwarted markets in everything
Email Tyler Cowen
Follow Tyler on Twitter
Email Alex Tabarrok
Follow Alex on Twitter
Subscribe in a reader
Follow Us on Twitter
Marginal Revolution on Twitter Counter.com
Get smart with the Thesis WordPress Theme from DIYthemes.