Econ 110: Why Gas is $4 a Gallon

My favorite class in college was Dr. Kearl's Econ 110 class. Hands down. Cliche as it may sound, this was the one class that really changed the way I view the world. The first lesson of the class was that economics is not the study of money, but of choices. (Money is just a handy way of evaluating options on a standard scale.) Soon after that came the supply-demand curve, which looks something like this:

This is really a brilliant piece of work. The x- and y-axes represent quantity and price, respectively. The blue line represents supply, and shows that as the price people will pay for something increases, so does the quantity produced. The red lines represent two different levels of demand for a product (oil for example), which gradually decrease as the price increases. The supply and demand curves intersect at the exact price and quantity which maximize benefit for both parties.

Now I chose this particular graph because it exactly demonstrates why gasoline costs so much right now. Demand for oil is increasing, as represented by the demand curve shifting to the right. You'll notice that the point of intersection between supply and demand is at a higher price and quantity. Voila, there are your gas price increases.

With India and China fast becoming industrial giants, the demand for oil has risen dramatically. I read a statistic last week that the number of drivers in China is set to explode over the next decade, something like 8 times as many as they have currently. Oil being a scarce resource, and barring any practical replacement for the combustion engine (and anyone who invents this is going to be richer than Gates, Buffet, and the Waltons put together), the demand for oil is not going to drop anytime soon.

So we have two options for lowering oil prices: decrease demand through "eco-friendly" technologies that use less oil-- shifting the demand curve back to the left, or increase supply of oil or alternate sources of energy such as coal, wind, solar, or NUCLEAR power (we already have the technology; let's use it for heaven's sake!)-- shifting the supply curve to the right and effectively dropping the price of oil.

Coincidentally, the U.S. went through this same deal back in the 70's, when people could only buy gas on certain days based on the last digit of their license plate, and still waited in line for hours. Double-pane windows were invented then. Just a side note.

Both candidates spoke out on their energy policy Thursday. Obama's main thrust is on lowering demand, with increasing supply as a secondary strategy. McCain's plan primarily calls for increased supply. Here are the links. Inform yourself on what is quickly becoming one of the main planks of this year's election:

McCain's Energy Plan

Obama's Energy Plan

On Liberty: Part 4- Liberty and Government, Revisited

"I'm starting with the man in the mirror. " MJ

Up to this point I have been fairly one-sided on the subject of liberty, but I would like to note that there are definitely certain disadvantages to living in a culture dedicated to freedom. Such a culture cannot be all things to all people. For example, elevating liberty as the highest ideal in our country does, by necessity, preclude any other principle from taking precedence over it. There are well-made arguments in support of taking equality as our paramount value, or of sacrificing liberty at the altar of virtue. I don't happen to agree with these points (because I too highly regard my liberty to disagree with them, and them with me), but I can usually appreciate where they are rooted. Equality and virtue are worthy principles which any free society ought to pursue, just not at the expense of the freedom which allows them that pursuit.

These, however, are not the most brutal arguments against liberty, nor they loudest voices calling for its restriction, limitation, or abolition. That dishonor is reserved for... well, we'll get to that shortly.

You see, the hardest part about liberty is that when things aren't going how we'd like them to, there is nowhere else to point the finger. Oh sure, we try to do it all the time, masking our own accountability by couching it in fuzzy terms like "the government" or my personal favorite, "society." These expressions are so familiar they have become cliche: "The government is so crooked," or "Society is really going down the tubes." The fallacy lurking behind these seemingly innocuous terms is that they set up imaginary, shadowy, faceless groups on which to comfortably hang blame. The only problem is, when you are finally able to clear the smoke away, all you really find is a mirror. There is no government other than the one we decided on; there is no society other than you, me, and the neighbors.

Now here is the truth of the matter, the REAL "problem" with liberty: we don't always agree with the neighbors. We don't want them to have their liberty... if they disagree with us. And so, in a tragedy that is repeated every day, thus enters government. You see, government intervention and regulation is the last, best resort for those who want to restrict liberty, to deprive opponents of their freedom to disagree. Government, in this form, is exploited by both the strong and the weak, the majority and the minority--but its purpose is always the same. It is that some of us want to deprive others of us of their liberty. And the coercive force of government intervention is a particularly appealing means to that end.

One important note: as I've stated previously, government SHOULD intervene when a person's liberty is threatened or limited. Again, this is the primary function of government. Sadly, all too often the government becomes the vehicle by which liberty is restricted. And just to reiterate: "the government" is nothing more or less than what we decide it to be. If your liberty, or your neighbor's liberty, our your favorite support group's liberty is restricted, no enemy hath done this. We have. And we can fix it.

On Liberty: Part 3- Liberty and America

Having examined liberty as it relates to governments in general, I delve now into particulars.

I believe that liberty can be secured in many different forms of government (including monarchy, oligarchy, theocracy, and democracy) and economic systems (capitalism, socialism, and yes, even communism). However, long experience--and wise Founders-- have demonstrated that democratic, capitalistic governments best foster the principles of liberty in our modern world. (More about capitalism later.) This is not to say that other forms of government or economics cannot function in liberty, just that they have not in recent memory. Nor should this be taken as a chest-thumping declaration that our own current brand of democratic capitalism is beyond reproach; there are certainly improvements to be made in both form and practice.

That being said, I firmly believe that, think what you will about our country, the American experiment has resulted in more liberty for the whole of mankind than any other political development in all of history. Since that bold declaration of individual empowerment-- the idea that government derives its power from the consent of the governed-- freedom has been on the march; the world as a whole enjoys more liberty now than at any point in all of history.

I love America, with its beautiful diversity of land and people. But even more, I love what America stands for, what it represents-- an idea. From a the tall, copper woman in New York harbor to the last line of the our national anthem, America is a symbol of liberty. I love the image of a rag-tag group of upstarts standing up to an empire (Star Wars, anyone?) covering two-thirds of the globe and declaring, "Don't tread on me!" and "Give me liberty or give me death!" America, maybe more as an idea than an actual landmass, is truly "the last best hope of earth." (Lincoln said that prior to the Emancipation Proclamation. "In giving freedom to the slave, we assure freedom to the free -- honorable alike in what we give, and what we preserve.")

To quell any accusations of blind nationalism, I fully recognize that we all too often fail to live up to our great heritage. I also would like to say that too much is made of America being "the greatest country in the world." For me, this is reminiscent of C.S. Lewis' admonition, "Pride gets no pleasure out of having something, only out of having more of it than the next man." America has no monopoly on greatness. That which makes America great-- its dedication to liberty-- can, has, and hopefully will continue to make other nations great. We should strive towards that end, rather than revel in comparative liberty.

Furthermore, if America is to remain great, we must cling to liberty as our life blood. Without liberty, we are lost, as a nation, and as individuals.

On Liberty: Part 2- Liberty and Government

"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men..."

On Liberty (a continuation; for the first part of this series, click here)

In my first post on this subject, I tried to evidence a few self-evident truths. Today, I proceed with the topic of liberty and government. While I will do my best to spare you the latin and history lessons I am entirely unqualified to teach, suffice it to say that people, of necessity, must interact with each other-- since the dawn of civilization people have lived together, communicated, loved, fought, traded, and helped one another. In these societal interactions, the question of liberty first emerges as, well, a question. If man were indeed an island, there would be no doubt that he could do just as he pleased (although the scope of his action in such a setting would be inherently limited). As civilized man is neither rock nor island, his liberty will quite naturally collide-- and often conflict--with the liberty of those around him. Thus enters government.

Jefferson tells us that governments are instituted among men as a means of securing god-given individual rights, the foremost among them being life, liberty, and the pursuit of happiness (and as property is often tacked on to that trio, I'll include it here as well). Indeed, the protection of liberty is the primary, if not the sole, function of government. That bears repeating.

The preservation of liberty is the primary, if not the sole, function of government.

In form, this means that governments should allow people the full exercise of their liberty, provided that it does not infringe on the liberty of others. This is easier said than done. I once received the sage advice that the most difficult decisions to make are ones where a good principle is in conflict with another good principle. In matters of government, liberty MUST be the supreme ideal, no matter if it is pitted against prosperity, equality, virtue, or any other good principle. Liberty must stand supreme.

In practice, this means that except in matters involving infringement on the liberty of others, matters of personal ethics and morality should not be dictated by extrinsic rewards or punishments. This includes monetary and criminal consequences. In essence, governments should follow the pattern established by God's interaction with man in regards to their liberty-- as He will not force us, neither should governments; as He spurns arbitrary punishment in favor of eternal natural law, so should governments.

On Liberty: Part 1

On Liberty

I believe that as human beings, one of the few things we possess that is innately, independently our own is our liberty. (In my faith, we often refer to this as agency-- I will use the terms interchangeably.) Lest I be accused of ingratitude, I fully believe that our Creator has provided us with the means and the environment in which to exercise that liberty in a constant pursuit of becoming more like Him. In this pursuit, He guides us, instructs us, but does not force us-- indeed, it would not be liberty if force dictated our actions. Compliance to His instructions (often called commandments) is not forcefully mandated, nor are the instructions arbitrary-- commandments are in accordance with eternal natural laws. Obedience fosters more liberty, while disobedience (often labeled sin) results in the loss of liberty.