Energy executive chides Obama administration

[De Selby]

You forget FM was a government-sponsored enterprise.

So were huge components of the energy sector as well.  The decisions on the writing and later purchases of these loans were made privately, not by the public or the government's bureaucracy.

[makattak]

So were huge components of the energy sector as well.  The decisions on the writing and later purchases of these loans were made privately, not by the public or the government's bureaucracy.

Huh... so they weren't backed by Fannie or Freddie?

[Headless Thompson Gunner]

Why would you treat energy production any differently than another free market bargain?  In other words, why wouldn't you automatically critique and be highly skeptical of the salesman(executive)'s claims, and assume that he's maximizing his personal gain without regard for your own? 

Strawman.  Just because we believe the energy industry doesn't mean we're trusting them blindly.  I won't speak for everyone, but it's been my observation that the energy industrialists usually speak sensibly (compared to say, politicians, enviro weenies, etc).

[Headless Thompson Gunner]

So were huge components of the energy sector as well.  The decisions on the writing and later purchases of these loans were made privately, not by the public or the government's bureaucracy.

You fail at finance.

[De Selby]

You fail at finance.

No - the private sector types who bought billions of dollars in funny paper (freely, and with little government interference) failed at finance.  That's why they were reduced to welfare queen status to avoid ending up in rags.

What is it that makes the oil executives sensible and trustworthy on their claims about energy?  It'd be odd to have a whole sector of the economy that isn't motivated primarily by profit...not that it's bad, but when you're on the other end of a bargain, the bigger the other guy's profit, the higher your price to pay.  That's why people bargain and take a hard, critical look at the other party's claims in a free market system. 

It is decidedly un-capitalist behavior to assume that every legislative proposal put forward by a massive corporation is good business for the rest of us.

[makattak]

No - the private sector types who bought billions of dollars in funny paper (freely, and with little government interference) failed at finance.  That's why they were reduced to welfare queen status to avoid ending up in rags.

What is it that makes the oil executives sensible and trustworthy on their claims about energy?  It'd be odd to have a whole sector of the economy that isn't motivated primarily by profit...not that it's bad, but when you're on the other end of a bargain, the bigger the other guy's profit, the higher your price to pay.  That's why people bargain and take a hard, critical look at the other party's claims in a free market system. 

It is decidedly un-capitalist behavior to assume that every legislative proposal put forward by a massive corporation is good business for the rest of us.

I said it before: the speculators obviously didn't fail at finance. They assumed that since fannie and freddie were backing these securities, they could take the massive risk associated with them knowing the government would bail them out. We call that moral hazard.

And, it looks like they were right.

[richyoung]

As an ex-USN Nuclear Reactor Operator (ET) I agree completely. But we'll have the same problem with fission reactors we have with oil. Fissile material is finite, eventually it will run out. In addition as far as I know there are only small amounts available in the US so we become as dependent of foreign sources of uranium as we are on oil.

They not teachin you squiddies about "breeder reactors"?

[Werewolf]

They not teachin you squiddies about "breeder reactors"?

Yeah... We learned about breeder reactors. Not a lot but they taught us how they worked and made a point that what they breed is fissile material usable only in fast fission reactors which are wholly unsuitable for electric power production.

Nuclear reactors used for electric power production are slow fission/thermal reactors. Water is used to slow down the neutrons that get the fission reaction going and control it with control rods that absorb excess neutrons (usually made of hafnium IIRC). Thermalized neutrons absorbed by the fissile material cause the fission reaction in various Uranium and Plutonium isotopes that only fission if hit by a thermal neutron. The rate that the fission reaction occurs and thus power output is highly controllable.

Fast fission reactors, on the other hand, use non-thermalized high energy neutrons to cause fission. The isotopes created are not suitable for use in a thermal reactor. Breeder reactors are used to produce fissile material to be used in weapons not as a source of fissile material for use in reactors designed for electricity production (at least not back in the '70s when I learned this stuff).

[roo_ster]

FBRs have been used in many countries to produce electricity, despite not being as suitable as other nuke methods.

If you are, say, Japan, France or another country with zero uranium to be found within your borders, it might behoove you to keep at least one FBR around...which both Japan & France did and plan to do in the future.

Personally, I like the concept and especially the lesser amount of waste.

[Headless Thompson Gunner]

I said it before: the speculators obviously didn't fail at finance. They assumed that since fannie and freddie were backing these securities, they could take the massive risk associated with them knowing the government would bail them out. We call that moral hazard.

And, it looks like they were right.

Yep.  Bad loans backed by the full faith and credit of the United States of America.  What could possibly go wrong?

[De Selby]

Yep.  Bad loans backed by the full faith and credit of the United States of America.  What could possibly go wrong?

We all agree that this was bad policy - but where were all those lenders out there demanding that Government stop assuming their risk?  This is the point.  Policy that is bad for the economy and bad for the public and bad for the "free market" gets pushed by corporations and executives of corporations all the time because, unsurprisingly, it's good for that corporation or executive's narrow interests at the time.

[makattak]

We all agree that this was bad policy - but where were all those lenders out there demanding that Government stop assuming their risk?  This is the point.  Policy that is bad for the economy and bad for the public and bad for the "free market" gets pushed by corporations and executives of corporations all the time because, unsurprisingly, it's good for that corporation or executive's narrow interests at the time.

THAT MEANS THERE IS A GOVERNMENT FAILURE.

I don't want my companies looking out for the good of the "economy". That's stupid. They are not in business to make "the economy" money. If you want companies to act in the best interest of the economy, STOP USING THE GOVERNMENT TO AFFECT THEIR INCENTIVES.

If the government hadn't backed these bad loans (and "encouraged" the banks to make them), they would not have happened because it would not have been in the best interest of the company.

Yet, you seem to think that people should ignore economic incentives and act against their best interest. There's a political philosophy that completely misunderstands human nature and the market and thinks people should not act in their own best interest: communism.

But of course, you already knew that, shootin.

[MicroBalrog]

...I think I have to agree with shootin here. When a company lobbies to receive government subsidies, it's just as much to blame for the present situation as is, for example, the NEA or similar groups.

[makattak]

...I think I have to agree with shootin here. When a company lobbies to receive government subsidies, it's just as much to blame for the present situation as is, for example, the NEA or similar groups.

That's true. From the beginning of economics, Adam Smith warned that businesses would collude, use government force, anything they could to work to their own benefit.

However, I classify this as government failure. If the government acted as it should, businesses wouldn't spend so much time and money lobbying for their own benefits.

When the government tells everybody "no", people will stop wasting so much money on wooing politicians.

Once they tell somebody "Yes" the expected return on government "investments" gets higher.

You want to avoid a situation like this? Less government is the answer.

[richyoung]

You want to avoid a situation like this? Less government is the answer.

You mean, like a constitutionally limited republic, maybe?

[Headless Thompson Gunner]

We all agree that this was bad policy - but where were all those lenders out there demanding that Government stop assuming their risk?  This is the point.  Policy that is bad for the economy and bad for the public and bad for the "free market" gets pushed by corporations and executives of corporations all the time because, unsurprisingly, it's good for that corporation or executive's narrow interests at the time.

Don't forget that the banks were cajoled by the government into making these bad loans. 

Stop and think about it.  What would you expect the banks to do in this sort of environment? 

On the one hand the government and pseudo-government political entities like Acorn were threatening banks with redlining charges and told to "make the American dream accessible for everyone".  On the other hand, the government was buying up or backing any bad loan the banks wanted to issue.  It was a classic carrot-and-stick arrangement.

Do you think the banks would refuse to issue the loans, and thereby risk the wrath of regulators and lawsuits and activists? 

Or instead do you think they'd simply make the loans, pocket the transaction fees, and pass the risk off onto someone else (such as the government)?

Bad government policy has consequences.  Government has been running the home loan business since the Great Depression.  The mortgage mess we have now has been inevitable since FDR created Fannie back in the 1930's.  This sort of mess is what happens when government manipulates the market.

And if you think this mess is a disaster, just wait until the government runs the manufacturing industry, and health care, and the oil industry, and...

[De Selby]

That's true. From the beginning of economics, Adam Smith warned that businesses would collude, use government force, anything they could to work to their own benefit.

However, I classify this as government failure. If the government acted as it should, businesses wouldn't spend so much time and money lobbying for their own benefits.

When the government tells everybody "no", people will stop wasting so much money on wooing politicians.

Once they tell somebody "Yes" the expected return on government "investments" gets higher.

You want to avoid a situation like this? Less government is the answer.

Okay, you see the problem.  Now to take it back to the origin of this thread:  How does reflexively supporting corporations that oppose some particular Government action actually deliver any results?

The best way to get Government out of the market is to treat government like a market - let competing interests worry about their own problems, and lobby for yours.  That's how bargaining works, and it is an essential practice in terms of having a functioning free market.

[makattak]

I will support any company that opposes almost any action by the federal government. (That deals with regulation).

I will oppose any company that supports almost any action by the federal government. (That deals with regulation).


So, you think instead of trying to get the government's noses out of business, we should encourage more waste and unproductive activities in order to play a ZERO-SUM GAME?

Wonderful.

[Rudy Kohn]

Isn't the whole point of modern free-market economics that voluntary exchange can never be zero-sum, since both parties generally benefit in such exchanges, else they wouldn't make them?

The addition of government coercion wastes resources in (at least) two ways:
1.  By forcing people to make decisions they wouldn't otherwise make (i.e. decisions that don't benefit them)
2.  By generating a massive bureaucratic apparatus (both in government, and, for compliance, in private business as well) which generates nothing but must contain and support people, who, by definition, consume already scarce resources.

I'm honestly not worried that "the oil man" will force me to buy his oil.  I want his oil, as its use (at current prices and my usage levels) makes my life better.  I am, however, worried that the government will put a gun to the oil man's head, and make him either:
(a) not sell me the oil I want, or
(b) extract a "We don't want oil to be viable" tax from him, making the price he must charge me to profit too high for me to afford, forcing me to grudgingly curtail my use of oil (and funneling the tax money he does get to create larger bureaucracy, more regulation, and thus further negatively impacting my life).

[makattak]

Isn't the whole point of modern free-market economics that voluntary exchange can never be zero-sum, since both parties generally benefit in such exchanges, else they wouldn't make them?

Yes. However, lobbying the government to create regulations, tariffs, or subsidies that benefit you necessarily cost someone else.

In government, someone wins and someone loses.

In the market, everyone can win.

But hey, let's play the government game instead.

[De Selby]

Yeah, well at least we all know that the oil industry has never pushed programs that use taxpayer dollars to benefit the oil industry.  They handle all of their supply and security issues privately, and are unknown to say, gain billions as a result of incredible taxpayer expenditures in "security" aid to oil rich regions.

So when I see an oil industry guy challenging Obama's policy, I know he must be doing the right thing, because big oil wouldn't try to use my tax money for its own purposes.  They're too nice to do something like that.

[Balog]

You quote mak saying business will do bad things, then claim people are saying business doesn't do bad things.

You're gonna be a great lawyer.

[makattak]

Yeah, well at least we all know that the oil industry has never pushed programs that use taxpayer dollars to benefit the oil industry.  They handle all of their supply and security issues privately, and are unknown to say, gain billions as a result of incredible taxpayer expenditures in "security" aid to oil rich regions.

So when I see an oil industry guy challenging Obama's policy, I know he must be doing the right thing, because big oil wouldn't try to use my tax money for its own purposes.  They're too nice to do something like that.

You've convinced me.

Because any given business has used, will use, or wants to use the government to benefit themselves at a cost to me, I'm going to support the government in every instance because they will punish these companies that will end up as a cost to me.

Wait, I think their's a saying about this... "Cutting off your nose to spite your face."

Honestly, I don't trust businesses to do anything but act in their own best interest. However, in the market, their best interest is to serve me because there cannot be any force in the market. In the government they can FORCE me to pay to subsidize them. But I should instead play the government game, huh?

[MicroBalrog]

That's not what he said.

All that he said was that we should not automatically believe that a businessperson has the interest of the free market in mind, just because they're a businessperson. Anybody who read Ayn Rand would know that's true.

[makattak]

That's not what he said.

All that he said was that we should not automatically believe that a businessperson has the interest of the free market in mind, just because they're a businessperson. Anybody who read Ayn Rand would know that's true.

Really? I italicized the portion most applicable:

Okay, you see the problem.  Now to take it back to the origin of this thread:  How does reflexively supporting corporations that oppose some particular Government action actually deliver any results?

The best way to get Government out of the market is to treat government like a market - let competing interests worry about their own problems, and lobby for yours.  That's how bargaining works, and it is an essential practice in terms of having a functioning free market.

And if you will note he has mischaracterized our position as "reflexively supporting Corporations that oppose some government action."

When we point out that we want to government out of everything and anytime a corporation wants that, we support them, he continues with pointing out companies want subsidies.

I have turned his arguments back on him: "Reflexively supporting the government that proposes some action."