Energy Economics
Reynolds, Alan
illustration: "In striking down capital punishment, this Court does not malign our system of government---on the contrary, it pays homage to it. In recognizing the humanity of our fellow...
...Obviously, our leader will have to do something, anything and everything, about the gap...
...Net l~'ofi ~ Exports Year in percent: (thousands of of Sales ixuTels...
...Politicians control the price of natural gas and discover that everyone abandons costly coal, and that the shortage of natural gas creates a shortage of bricks (dried by gas) and fertilizer...
...Long before the specifics of his new foreign policy became known, Nixon's promise of "an era of negotiation, not confrontation" had struck a responsive popular cord...
...China in particular has been the focus of American attention since the late eighteenth century, in considerable measure for economic reasons...
...Few such events have attracted the support and aroused the enthusiasm of such a wide spectrum of professional opinion...
...Proponents ot capital punishment argue that their adversaries have an unsophisticated and overly mechanical notion of how deterrence works, and claim that comparative murder rate studies prove nothing since the states involved weren't enforcing capital punishment when it was on the books...
...The point of all this is fairly straightforward...
...Pollticians control the price of fertilizer and find that it is being bought at higher prices by foreigners, along with the ammonia nitrate needed to blast more coal...
...At forty cents a gallon, the trade-off is between a twenty-eight cent monetary saving (7/10 of forty cents) and the loss of twenty minutes' time...
...Politicians force an arbitrary devaluation of the dollar, to stimulate exports, and then slap on export controls...
...he went so far as to suggest that "the period of harshness, of dogmatism, of extreme heavy-hm~dedness" in the Communist rule over China is drawing to a close...
...But time, income, and comfort are valuable too, and it isn't obvious to my children that Christmas lights are "inessential...
...It is almost embarrassing to translate that into a demand curve, showing how much is purchased at each price: The wealthy, on the other hand, have no needs, but they do "squander" energy regardless of price...
...Alsop was writing for most of them when he enthused that "everything in China has changed, in truth, except the endlessly resilient, hardworking and clever Chinese people...
...Another example of sloppy reporting is the widely-circulato:~ percentage increases over the oil cempames' profits and expels last yem', since last year was an extremely ~om~y yes~" on both ~eres (which is part of the pr(~blem, then and now...
...These are very bad times for economists...
...Visit to China," December 16, 1972, and January 15, t973, Boston Globe...
...If fuel were infinitely valuable, that would be all the more reason to let the price rise...
...Every public moment of the trip, appropriately embellished by rhapsodic commentary, was beamed home to enthralled television audiences...
...In short, the relative utility of the death penalty as a deterrent to murder does not answer the basic ethical question: Shall society, by its laws, deem that death is the appropriate punishment for one who takes htunan life...
...For Horuby's articles, see Congressional Fuecord, January 29, 1973, pp...
...Another Journal article (Nov...
...Hornby of the Denver Post, not to mention the members of the congressional delegations which quickly followed the President across the Pacific, were lavish in their praise of the "New China...
...Fo!itici.a~s conixol the price of beef and find we have not only a shortage of beef and freezers, but of substitute meats and of tallow us~t to make candles, soap, and rubber...
...And even if a state was willing to try, the effects of region, race, and class on murder rates are so important that, in Wilson's words, "the additional importance of the death penalty or its absence is likely to be slight...
...Steffens and the Shaws went only a little further in their praise of the Soviet system after their visits during the 1920s ~md 1930s...
...i 967 ~, 1.0 N.A...
...I have ever covered," Joseph Alsop wrote with characteristic hy~rbole: indeed, although nearly two years have elapsed since the event, it remains plausible to assert that the President's visit to Peking ranks among the most brilliant!y-staged foreign policy operations of the postwar period...
...It is an emotional, heated, occasionally angry dispute...
...The nation needs seventeen million barrels of petroleum a day, we're told, and only has fifteen...
...To any freshman in economics, such rhetoric looks like this: Burn your text if instead it says something like this: Next, we're told that prices (all prices...
...Example: A salesman who used to cover sixty-five miles in an hour now needs about an hour and twenty minutes to cover that distance at 50 m.p.h...
...and we act to our own detriment as a people when we dodge that task by falsely setting issues in either a '~utilitarian" or an overly formal, quasi-constitutional context...
...Nixo n 's "The biggest story...
...The idea that poverty can be solved by keeping prices at a level that discourages production and encourages waste is simply ludicrous...
...S1474-82...
...The sheer audacity of the undertaking itself was obviously crucial...
...The issue of "deterrence" is a much more common focus of debate than the constitutional one, but it is similarly flawed...
...that it was accomplished through super-secret diplomacy followed by" a week-tong presidential sojourn in a land never before visited by a ranking American elected official was truly astonishing...
...Finally, general public discontent with recent American foreign policy was a significant factor...
...l~e media obviously had an enormous impact as well...
...Politicians control the price of steel pipe, so there isn't any available for drilling oil wells...
...In a letter to the Wall Street Journal (April 23, 1973), even John Kenneth Galbraith reminded the politicians, in a scolding tone, that "controls should not be used where price increases are caused by an excess in aggregate demand or a shortage in the specific supply...
...Beyond such underlying factors, several additional circumstances helped create a climate of opinion favorable to the President's initiative...
...These are hard times for economists, who have to read the most inane fulminations about shortages and suffer the label of "ideologue" if they dare to mention price...
...It is the type of question we avoid, for as Wilson suggests, '~we are an increasingly secular and positivist society that has confidence in its ethical premises...
...969 10.1 1,860 1970 9.3 1,444 1971 8.3 1,858 1972 6.6 448 1973 N.A...
...That is the key question of capital punishment...
...Each side attempts, with fairly sophisticated arguments, to place the so-called '~burden of proof" on the other...
...Petroiemm Pmfineries Distillat...
...Respected reporters such as Alsop and W.H...
...I don't care," he said, '~r capital punishment is a deterrent or not...
...That is, the salesman's time is valued at a little more than a penny a minute, or about $.84 12 The Alternative February 1974 an hour...
...But the economists---who naturally supply what is demanded--have created a bogus rationale for turning economic decisions over te the politicians...
...So this is the year for ad lmc gut reactions, for matter over nfind...
...That is the issue--the only issue-and it will not go away...
...The twenty-eight major oit companies were short on capital, Chase Manhattan showed, and for several years had been forced to borrow money...
...One of the Boston patrolmen who marched up Beacon Hill to lobby for capital punishment summarized this very well...
...fewer still have so promiscuoLxsly stimulated the imagination of the American populace...
...see "A Reader's Guide to the Visitors' Reports," National Review, March 3, 1972...
...26, 1973) by the former head of the Council of Economic Advisers, Paul McCracken, shows why rationing or a higher gasoline tax will delay a solution to the shortage...
...The arguments are by now a familiar refrain...
...Everyone has big plans for the oil indnstry, all of which require money that ultimately must come out of prices...
...Wilson says, quite simply, that 1) No serious study shows definitively that capital punishment deters murder...
...But here again, the most serious flaw in the deterrence argument is that it says nothing about the most important question...
...It simply will not do, for example, to talk about fuel "savings" from various schemes without consideration of the costs involved...
...The energy shortage is only one of many shortages, and if we are to turn to rationing every time demand exceeds supply by 10-20 percent at the controlled price, we will soon be rationing nearly everything...
...At this point, Marshall is giving his views on the ethics of execution...
...The Department of the Interior has a plan for getting oil from shale which, even in the pretot}3)e stage, '%'ould require an investme, nt of nearly I. billion dollars in the next ten years...
...The striking decline in oil company profits is due to many factors, not the least of which are OPEC's (Organization of Petroleurn Exporting Countries) cartel pricing of crude oil, and the reduced depletion allowance since 1.969: The role of price controls is clearly indicated by the fact that wholesale costs of crude fuels have risen by more than 50 percentage points since 1967 (the wholesale petroleum index for October 1973 is 133.3, but extra supplies for expansion are fare more costly than the average), while the consumer price index for gasoline was 121.8 as of October--even lower than the average index of June 1971...
...Indeed, at its most philosophical level, it is not even a question of whether a murderer should be executed...
...If the slowdown improves gas mileage from, say, thirteen to fifteen miles-per-gallon, it will save seventenths of one gallon on the sixty-five mile trip (4.3 v. 5 gals...
...it is instead a question of whether or not we, as a society, say that a murderer deserves to be executed...
...In other words, the demand curve of an affluent family supposedly goes straight up, as in the first graph...
...Resolving the issue of whether our society should or should not have capital punishment does not depend on either the subtleties of constitutional debate nor on a proliferation of statistical studies of deterrence...
...his house isn't air conditioned, but the wine cellar is--first things first...
...Alan Reynolds has written an excellent critique of these and similar analyses of the "New China...
...See Alsop, "In China, Everything is Changing" and "Conclusions After...
...The 1973 Economic Report of the President points out that "the underlying rationale of the controls . . . is that the price and wage increases to be restrained were not increases necessary to avert shortages...
...Milton Friedman and Henry Wallich have devoted Newsweek columns to explaining why prices of gasoline and heating oil must rise (ten to twenty cents a gallon would probably suffice...
...and 3) There is no way to find out one way or the other because the methodological problems are insurmountable...
...If someone kills me or one of my brother police officers, there is simply no place for that person in society...
...must be kept below market-clearing equilibrium levels, because poor people buy only what they "need" now and could not afford any at a higher price...
...2) No serious study shows that it does not...
...In recognizing the humanity of our fellow beings, we pay ourselves the highest tribute...
...but it is equally clear, I trust, that he is no longer in any way "interpreting" a constitution...
...Now, even in an age of impulsive pragmatism, there are still rigorous and sloppy ways of analyzing problems...
...The sheer vastness of the Orient, with its countless millions of people, its unfathomably nonwestern values, its ancient and proud yet curiously primitive civilizations, has fascinated westerners for centuries...
...The sudden turnabout of relations with a nation toward which the United States had been unremittingly antagonistic for more than two decades was striking in itself...
...if it comes out of productive time, it is also a loss to the economy...
...and like most such discussions, neither side says much that impresses the other...
...The quality of life has changed, vastly for the worse for the ancient ruling class but for the better for everyone else . . . . The right way to see the New China, in truth, is to forget the Commtmist label and to consider the revolution as a specifically Chinese event...
...In a recent article for the New York Times Magazine, Harvard's James Q. Wilson summarizes the arguments on either side, and points out that the debate on the utilitarian issue of deterrence is irresolvable...
...Opponents of capital punishment say that there is no evidence that the death penalty deters the comission of murder, and point to studies showing no increase in murder rates after the abolition of the death penalty in a given jurisdiction...
...We achieve 'a major milestone on the long road up from barbarism,' and join the approximately seventy other jurisdictions in the world which celebrate their regard for civilization and humanity by shunning capital punishment...
...It is not a question of whether the death penalty deters people in general from committing murder, nor whether it protects society from a particular murderer, nor any other possible utilitarian argument...
...1.968 10.7 N.A...
...Whether that patrolman's answer is right or wrong, his question at least is correct...
...19(;6 i!.2('4 N.A...
...And if they invested twice as much during the 1970s as they did in the 1960s, the report concluded, it would not be enough...
...If it comes out of his leisure time, the difference between the salesman's usual pay and the $.84 is an implicit tax...
...The deepening war-weariness of the American population, a reaction both against Vietnam and against the seemingly endless Cold War, had molded a ready constituency for policies of conciliation with our postwar adversaries...
...To be sure, what has often been called %he mystique of the East" has long had a singular impact upon the American--not to say the western--political mind...
...But a healthy public policy, it seems to me, deals with precisely such ethical premises...
...1,275 (e...
...In the first place, no state is willing to use the death penalty in a way that would yield good experimental data on the issue of deterrence...
...e.g., William Buckley no longer drives a Honda 50 to work, but squanders gas in a Renault 16 instead...
...Yet a Chase Mm~hattan Bank study in September 1972 reported that oil industry sales were up 258 percent over the last ten years, while profits had increased by only 89 I~rcent r is, profi*~s per unit had fallen sharply...
...That the average American found the China trip of compelling interest, and in The Alternative February 1974 13...
Vol. 7 • February 1974 • No. 5
