Exxon and Squatter Economics
BROCKWAY, GEORGE P.
The Dismal Science EXXON AND SQUATTER ECONOMICS BY GEORGE P. BROCKWAY Dean Acheson once remarked wearily that if anyone, at any time, found him agreeing with any Indian on any subject...
...And Los Angeles knows that breatheable air would be impossibly expensive...
...It would appear that the price of a commodity depends, at least in part, on resources, and that resources are commodities—a Hne of argument that looks suspiciously circular to me...
...If you had asked Adam Smith about it, he would have shrugged his Scotch shoulders...
...Is economics really about the allocation of resources at all...
...Their willingness shows that is the efficient thing to do...
...It is not separately discoverable, for resources are resources because the market says so, and their allocation is efficient only because the market says so...
...The more beguiling advocates of freemarket theory admit that sooner or later oil will run out...
...of the economy...
...It is this balanced price system that allocates resources...
...Let's examine the proposition, not from the point of view of ecology or even of national security (where it's a clear loser), but from the point of view of logic...
...So far as I know or Professor Taussig said, he never bought or sold anything, or used money...
...Natural resources are things untouched by human hands, lying around ready to be picked up or dug up or fished up, and used...
...He would never have heard of it, for one thing...
...Economic resources are also scarce...
...I know that George Bush is a kind and gentle man who does not always mean exactly what he says...
...It disappears...
...If you're in the hospital and they decide to pep you up with oxygen, you'll find $100 a day added to your bill...
...It does not really advance us very far, either...
...The market does not so much allocate resources as tell us what resources are...
...True believers in the market apparently do not understand this, for they are very liberal (if you know what I mean) with advice about thesortsof issues we mentioned earlier—finding a way to make Exxon pay, restricting further exploitation of Alaskan oil, and so on...
...In the 1850s, Stephen A. Douglas proposed squatter sovereignty (allowing the territories to vote on slavery), which appeared to be impartial but actually favored the South...
...Yet these matters, as they now stand, are part of the present system...
...If you really want to learn about resources and their allocation, you should go, not to Wallstreet, butto someplace like World Watch Institute, which publishes an annual report called State of the World that explains the consequences of what we are doing and tells how we could do better...
...How about this: A resource is something that is useful or necessary to make something else, a component of an economic commodity...
...But if we are to read his lips, he should watch his tongue...
...Taussig (if my memory serves after all these years) gave air as an example of a noneconomic resource, the reasons being that there was a lot of it, and that no one could figure out how to bottle it and sell it...
...Thatiscrucial...
...What, then, becomes of efficiency...
...Trade is for human beings...
...It also destroys economics itself, reducing the whole exercise to a defense of the status quo...
...It would be lovely if we could come to understand the vacuity of squatter economics...
...Everything is properly allocated again...
...it is the only way...
...that does not mean a use will never be discovered or invented...
...If tomorrow morning some bright fellow comes up with a use for bluebird nests, the supply of and demand for them (the story goes) will set the price for them...
...There is no point in talking about them if they are not scarce...
...I've even droppedahint or twoconcerning the Law of Supply and Demand, and might supply a column about it, if I detected any demand...
...From these random samples we can infer that the usefulness of objects is not something inherent in them...
...David Ricardo's Law of Comparative Advantage was an early loser, and I wrote three columns about it six or so years ago...
...In the meantime, they argue, as oil gets scarcer and the price rises higher, those willing to give up coarser pleasures are entitled to enjoy the daintier pleasure of burning gasoline in fast cars, fast boats and fast snowmobiles...
...They are useful, yes, but neither petroleum nor uranium nor abluebird nest is, in and of itself, useful...
...A half century earlier Jean-Baptiste Say had characteristically introduced an intermediate and indeterminable abstraction: "Price is the measure of the value of things, and their value is the measure of their utility...
...But other resources (including, sad to say, human resources) are shifted into the bluebird nest industry, restoring the equilibrium...
...So they are resources for us...
...But our economy does know ho w to use them, up to a point...
...Having said this much, it has uttered nonsense...
...Think of petroleum...
...On the other hand, ancient man mined and traded obsidian, which, apart from the art and tools the ancients made of it, is now of no interest to a Harvard Business School graduate...
...One by one the classic laws have lost their savor for me...
...Like Oscar Wilde's cynic, we economists knowthe price of everything and the value of nothing...
...That won Douglas the Senate seat, but cost him the Presidency two years later...
...My feelings about standard economics are similar, perhaps because one summer, in a youthful fit of self-improvement, I spent many hours reading Frank Taussig's introductory textbook when I could have been sleeping in the sun...
...Nonsense is always dangerous...
...As Abraham Lincoln replied when requested to apologize for saying that Simon Cameron would not steal a red-hot stove, I now take that back...
...The Education President tells us that a trained labor force is an essential resource in our struggle with Japan and Germany for the hearts and moneys of the world...
...The organization of our economy is, as the marginal analysts say, a price system...
...W. Stanley Jevons, who shares with Walras the distinction of having invented marginal utility, put it this way: "The price of a commodity is the only test we have of the utility of the commodity to the purchaser...
...Noting the word "resources" before Debreu's ellipses, I confess myself puzzled, since in a subsequent passage he says, "Thetotalresourcesofaneconomy are the a priori given quantities of commodities that are made available to (or by) its agents...
...The Dismal Science EXXON AND SQUATTER ECONOMICS BY GEORGE P. BROCKWAY Dean Acheson once remarked wearily that if anyone, at any time, found him agreeing with any Indian on any subject whatever, that person should have him certified immediately...
...But of course not all scarce natural objects, even those that could be readily packaged, such as bluebird nests, are natural resources...
...At this point there is a side issue we ought to deal with...
...Red-blooded Americans, if given their druthers, would prefer very big cars that can go very fast...
...My recollection is that Taussig, who was a big man in his day, startedoff by talking about Robinson Crusoe...
...They are resources for us because of the way our economy is organized...
...Krishna Menon, who wanted all North Korean POWs shipped home whether they wished to go or not...
...therefore they should be allowed to put their money where their preference is, and the speed laws should be lifted while we're at it...
...One way or another, then, we come to the conclusion that it is not so easy to say what economic resources are...
...They urge, too, a relaxation of the already relaxed standards of gasoline efficiency (that word again) for new automobiles...
...Indeed, if you don't know how to use them petroleum is nasty and uranium is dangerous...
...The fact that the price of a commodity is positive, null, ornegative," he writes, "is no/anintrinsic property of that commodity...
...The notion that producers are profit maximizers and consumers are utility maximizers attracted my attention last year, and the Law of Diminishing Returns a couple of months ago...
...Bluebird nests are now a resource, not simply because they are rare and a use has been found for them, but because they fit into the price system...
...What kind of resource is something you never heard of...
...G m ashamed to say that in one of my early columns I made a slip and endorsed the proposition that free competition in a free market makes for the most efficient allocation of scarce resources...
...This is what the theory says...
...Please forgive another side issue...
...it is human beings, and human beings are ends in themselves...
...It was a sticky, stinky substance where it appeared, as in the notorious fields near Cumae, rendering useless the land that harbored it...
...In their renowned debates, Lincoln forced Douglas to admit that slavery could be voted down as well as up...
...But a labor force is not a thing...
...This does not seem a remarkably difficult advance in thought...
...Encouraged by the sound of their own voices, the naysayers add that it would be inefficient to impose further restrictions on the exploitation of Alaskan oil, and also that an increase in the gasoline tax would distort the allocation of resources...
...To answer that question, we have to be able to say what a resource is...
...The market is not a better way of allocating resources...
...His judgment was no doubt colored by his experiences with V.K...
...Léon Walras, the patron saint of marginal utility analysis, credits his father Auguste with the notion that an economic good has to be useful as well as scarce...
...Maybe you are not clever enough to think up uses for bluebird nests, and maybe no one is...
...Some excitable people want to punish Exxon, but they have been patiently told it would be inefficient to do so...
...As it happens, there is no dispute on this point...
...Once any sort of change is admissible, every sort can be argued up or down...
...Or you might have asked Karl Marx about uranium...
...Every price is dependent on every other price in a delicately beautiful equilibrium...
...I have since come to doubt that Robinson had anything to do with economics at all...
...They are confident, however, that the spur of possible profits will drive some mad scientist to invent a way of using crab grass or zucchini for fuel (as some tried to use dandelions for rubber in World War II), thus rehabilitating suburban agriculture and saving the automobile...
...Changes in favor of the oil industry are no less an interference with the market than are changes in favor of the world and them that dwell therein...
...We've made progress, however...
...Not only that, but as the demand for bluebird nests develops, the demand for some other things must decline...
...In our day, Gerard Debreu, a Nobelist and probably the world's foremost mathematical economist, is in agreement with Jevons and Say...
...The horror story that The Market Knows damages the ecosystem...
...it depends on the technology, the tastes, the resources...
...To treat human beings as means is the ultimate sin...
...They are not a resource or a means to anything else...
...The issue is in the news because of the great Valdez oil spill...
...human beings are not for trade...
...So resources are things, objects...
Vol. 72 • August 1989 • No. 12
