Just Shoot Yourself in the Head

Charles Krauthammer thinks he has the solution to high gas prices: increase gas taxes. If $4 a gallon gasoline gets a few more people to ride transit and buy more fuel-efficient cars, just think what $8 a gallon gasoline would do!

That’s a little bit like saying, “Oh, you got shot in the gut? Well, here is the solution for you: just shoot yourself in the head.”

Or think of it this way: suppose food prices were so high that some people were starving. I know! Let’s increase taxes to double the cost of food. That’ll teach ’em.

Just what will it teach them? That nothing is so bad that the government can’t make it worse? Or that people like Krauthammer are totally out of touch with ordinary Americans?

To the Krauthammers, Kunstlers, and Holtz Kays of the world, automobiles are by definition evil, and anything that reduces use of them is a good thing. In fact, mobility is the good thing, and automobiles provide far more mobility than their precious transit systems.

I have to admit I am biased. If I hadn’t had the mobility to visit more than half the national forests in every region of the country in the 1980s, I never would have gained the insights I did on what makes the Forest Service tick. If I hadn’t had the mobility to visit urban areas all over the country in the 1990s and 2000s, I never would have gained the insights that help me understand how cities work. Somehow, I doubt that Charlie Krauthammer, James Kunstler, or Jane Holtz Kay would be satisfied never traveling beyond the borders of their towns. But they all imagine that their mobility is more important than other peoples’, and so we can sacrifice general mobility without giving up our own.

(To be fair, Kunstler and Holtz Kay also imagine that transit and trains can provide equal mobility to autos at no higher financial cost and a lower energy cost — all three of which points are doubtful. But ultimately, their ideas will require a drastic reduction in mobility for many people.)

Experts are divided on why oil prices are high and whether they will stay high or may soon fall. According to Goldman Sachs, growing demand combined with limits on supply mean that oil prices will go nowhere but up. Others point out that Goldman Sachs has a vested interest in creating an oil bubble and that it is speculators, not actual shortages, that have driven prices up.

It doesn’t matter a whole lot either way. If prices stay high, Americans (and others) will adapt by buying more fuel-efficient cars and conserving in other ways. If prices go down again, we will have more time to find new sources of energy. But, for the most part, we won’t want to give up our mobility. Raising taxes to suddenly double gas prices will only make the transition more costly and painful.

One blogger tells a possibly fictitious story of a friend who panicked and traded in his SUV for a Prius — without consulting his spouse. Whatever this says about marital relations, the blogger concludes with sage advice: “It’s actually pretty simple when it comes right down to it. Make smarter choices on your next vehicle purchase, and for now just sit tight, grit your teeth and exhale.”

Though I prefer to bicycle, I have a 1986, 33-mpg Mazda with 250,000 miles on it. I’ve thought about getting a Prius, but it seems a shame to waste a car that still has a lot of miles left. It takes energy to build cars (and the energy required to build hybrids is a more than ordinary cars, which is why McKinsey says hybrids cost $100 per ton of greenhouse gases abated), so wholesale junking of our existing fleet is not going to save much.

Encouraging everyone to buy new cars now may actually be a mistake, like asking everyone to buy the first IBM PCs when many preferred to see what improvements the future would bring. Diesels get better mileage than gasoline vehicles. Plug-in hybrids will be available in a year or so. Electrics might actually become affordable. There are always Geos. We don’t know yet what technology will best deal with rising oil prices, and there is no point in locking us into the wrong one.

So don’t panic and don’t encourage panicky government policies. Let everyone deal with oil prices in the way that best suits them.

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35 thoughts on “Just Shoot Yourself in the Head

  1. D4P

    You want more fuel-efficient cars? Don’t regulate. Don’t mandate. Don’t scold. Don’t appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

    Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us — and pocket the money that the tax would have recycled back to the American worker.

    I would have liked you to comment on this part, and I’m surprised that you didn’t.

  2. Kevyn Miller

    For once I agree with D4P.

    But I disagree with Krauthammer’s claim that American’s need to pay British fuelprices. British drivers and EU drivers haven’t reponded to the fuel price rises to anything like the same extent as Americans, Canadians, Australians or New Zealanders. The reason they haven’t is because with tax accounting for such a large proportion of fuel prices the increase at the pump has been 33% rather than the 100% in all those former British colonies. One could also posit that the EU’s policy of steadily increasing fuel taxes throughout the 1990s desensitised British and Eu to fuel price increases. Possibly these drivers have downsized to the next lowest number in the range of BMWs, Volvos, Mercs and Peugeots but they definitely haven’t suddenly rediscovered transit.

    Where Krauthammer might be most wrong is his assumption that $4 a gallon was all it took to initiate this radical change in America. It seems to me there is a good case to include the mortgage interest rate impact from the sub-prime crisis as a co-contributor to the abruptness of this behaviour change.

  3. Neal Meyer

    D4P said:

    You want more fuel-efficient cars? Don’t regulate. Don’t mandate. Don’t scold. Don’t appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

    Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us — and pocket the money that the tax would have recycled back to the American worker.

    I would have liked you to comment on this part, and I’m surprised that you didn’t.

    I’ll comment on that part:

    1) Raising the gasoline tax by $2 per gallon would not necessarily have meant that the Federal Government would then turn around and refund that tax money back to American workers via a lower payroll tax. More likely, the feds would have simply kept the money and burned it all away on something else – such as helping to keep American forces in the Persian Gulf for years on end, which is what the Krauthammer’s of the world want to do anyway.

    2) Krauthammer should run for Congress. He can then tell his would be constituents that he intends to raise their gasoline taxes by $2 per gallon. I’m sure he’ll get elected.

    3) Raising fuel prices via a tax will encourage conservation. Unfortunately, raising the price of fuel by means of a tax does not encourage production of energy, which in the long run is what we really need. In the very long run, renewable liquid transportation fuels from sources like sorghum, which could produce several times as much fuel from an acre of land than corn, will become economically viable via a rise in the real price (but not the taxed price) of energy or by an improvement in cost effectiveness on current methods of production.

    Rising gasoline prices haven’t bothered me a bit. I also drive a 19 year old car, long paid for, that gets 24 mpg in the city and 33 on the freeway. That and the fact that I drive only 6,000 miles per year and do quite a bit of walking for in my home town of… drum roll please – Houston.

  4. D4P

    That and the fact that I drive only 6,000 miles per year and do quite a bit of walking for in my home town of… drum roll please – Houston

    How’s your asthma…?

    Just kidding. Rising gasoline prices haven’t bothered me either. I walk or bus most places, and we drive (only) 6,000 miles a year as well.

    From his Wikipedia site:

    Krauthammer appears regularly as a commentator on Fox News

    Nine words that say a lot.

  5. prk166

    “Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us — and pocket the money that the tax would have recycled back to the American worker.”

    — Actually, if Krauthammer took any time to research his claims he’d see the that a large chunk of that is going to refiners and oil companies. Then what they’re paying to get the raw oil is going to the Canadians, Saudis and Mexicans. And in the case of the Canadians that actually means all sorts of companies, not some uber huge nationalized (ie govt owned) Canadian oil extraction company. Whether he realizes it or not, Krauthammer is also arguing against trade in general. After all, why let the Angolans, the Sudanese, the Congans, the Chileans, the Chinese, the Japanense and all those other non-Americans “get our money” when we can just come up with some half-baked scheme to “keep it at home”?

    I’m not sure why Krauthammer is proposing this as a replacement for the payroll tax. If it does what he claims it will do, force Americans to conserve more energy, than by it’s nature the revenues from the tax will be shrinking. Now I don’t want to bitch and moan about less taxes, that’s fine with me, but somehow I don’t think that is Krauthammer’s intention. Otherhwise why would he be so openly advocating for government to get involved?

  6. Francis King

    Krauthammer is half way there.

    “You want to get people out of their cars? Don’t regulate. Don’t mandate. Don’t scold. Don’t appeal to the better angels of our nature. Do one thing: make the alternatives better”.

    ?

    Antiplanner wrote:

    “Though I prefer to bicycle…”

    Hail fellow cyclist!

    Antiplanner also wrote:

    “Diesels get better mileage than gasoline vehicles. Plug-in hybrids will be available in a year or so. Electrics might actually become affordable. There are always Geos. ”

    Of those, a high-pressure diesel is the only one that makes sense. Small petrol cars are underwhelming, particularly on fast road, and electrical cars need expensive batteries. A modern small diesel car can do 70 mpg ex-urban – much better than a Prius.

  7. Kevyn Miller

    Only 6,000 miles. Only? You make it sound like a tiny fraction of what normal people do. It’s three-quarters of the Europen average mileage. Only an American would give themselves a pat on the back for “only” driving 6,000 miles a year.

  8. Kevyn Miller

    What am I allowed to include in my opportunity cost estimate? I presume I am not allowed to use the land occupied by roads for any activity that requires the movement of people or freight by road. Am I allowed to also estimate the opportunity costs of the land not being used for roads and thus calculate the nett opportunity cost/benefit?

    Perhaps I’ll ask a property developer if they have done this type of calculation and what the results were.

    Rationalitate, you are challenging a concept enshrined in common law for a thousand years. I can only assume that the Right of the Kings Highway has been accepted for that long because there is a long-standing and widespread belief that the opportunity cost of restricting travel is greater than the opportunity cost of setting aside land for that purpose. Whether that perception stands up to objective assessment is propbably the greatest test that economic rationalism can be subjected to. If something as fundamental as the right to travel from A to B imposes costs greater than the benefits it produces yet we still insist that the opposite is true, or that the economics are irrelevant then the very basis of rational economic decision making must be rethought.

  9. Dan

    We have Rights-of-Way as legal entities for a reason.

    Long ago in the colonies, the opportunity cost of building in the ROW was calculated by some individuals. Their individual costs were low, the costs for society were high, hence the colonies forbidding building in places where people travel.

    DS

  10. rationalitate

    Perhaps I’ll ask a property developer if they have done this type of calculation and what the results were.

    It was sort of a trick question. Obviously nobody knows the opportunity cost of the roads. Yet another part of the socialist calculation dilemma – i.e., you can’t. I’m just trying to show that using the user fees model cannot ever hope to go anywhere near the allocative power of the free market.

    And regarding centuries of English common law, who gives a shit? Somalis have a different idea of taxation and government, which definitely doesn’t include the power of the government to build rights of way (actually, it doesn’t include any involuntary government or taxation whatsoever) – are we to believe that speaking a different language and having a different skin tone makes different things more efficient? Obviously not. There are plenty of things that I’m sure have been transmitted through English common law that are woefully inefficient and pretty unfair. Like, you know, the institution of monarchy, for example??

    Long ago in the colonies, the opportunity cost of building in the ROW was calculated by some individuals. Their individual costs were low, the costs for society were high, hence the colonies forbidding building in places where people travel.

    As a though experiment, try to imagine the foregone opportunity cost of a sidestreet on Manhattan. Do you think that the utility derived from that road (calculated by figuring out the user fees paid by those who travel on it) can even touch the value of the land if it were left unzoned and auctioned off to the highest bidder?

  11. lgrattan

    Somewhere it should be mentioned that oil supplies are controlled by a monopoly. Reducing the US demand by 5 to 25 % will have no effect on the suppliers who can again reduce supply at will. They are not now at full supply but at an amount to maximize their income. We may see oil at 200 a barrow soon, what is to stop them?

    The solution to a monopoly is to obtain another source of supply and not do business with them. Just threatening to obtain other sources can have a substantial impact.

    Lowell Grattan

  12. Dan

    The solution to a monopoly is to obtain another source of supply and not do business with them.

    Seeing as how most of the world’s supply of crude is controlled by state monopolies*, how does on propose, here in reality, to obtain another source of supply to replace monopolistic control? Invade some countries? Invent a new chemistry and burn, say, air?

    DS

    * Mexico’s supply is dwindling, Russia’s is being cut back, we beg the Saudis to increase supply, Venezuela…you get the picture.

  13. Dan

    Do you think that the utility derived from that road (calculated by figuring out the user fees paid by those who travel on it)

    Whose utility? The people’s who have to drive a more tortuous route?

    DS

  14. Dan

    Round numbers,

    Current use is ~21 million barrels a day (mbd). Current domestic production is ~ 5mbd, and the fields are largely declining. Total recoverable reserves in ANWR at full daily production and best estimates are ~.8mbd – less than 5% 2008 daily consumption. Combine with all North Slope production and all Gulf-Atlantic-Pacific (declining) production, that makes maybe ~ 35% of consumption.

    DS

  15. Kevyn Miller

    rationalitate said “And regarding centuries of English common law, who gives a shit?”

    Anybody who values freedom, liberty and the American way of life and anybody who hasescaped from feudalism, like the Somali refugees I work alongside of.

  16. Kevyn Miller

    rationalitate asked “Do you think that the utility derived from that road (calculated by figuring out the user fees paid by those who travel on it) can even touch the value of the land if it were left unzoned and auctioned off to the highest bidder?”

    The utlility derived from that road can’t be calculated solely by figuring out the user fees paid by those who travel on it. You also need to calculate the difference in earning power of the buildings accessed from that road compared with the earning power of those same buildings without road access or if they were required to fund there own alternative access – subway, heliport, etc. Are you starting to understand why local roads have traditionally been funded from property taxes?

    If it only applied to one Manhattan sidestreet the highest bidder would probably be either the mafia or a corporate raider. Neither would think twice about charging an arm and a leg to allow office workers to cross their land to get to work. Then once the the owners of the neighbouring buildings had all gone bankrupt through having untenantable buildings the mafia or corporate raider would buy all those buildings dirt cheap then reopen the road as a free road and make a killing from the jump in property values.

    Roads reserves became mandatory in all land surveys in New Zealand in 1855 to preclude precisely this practice, known as “spotting”. The practice was to buy land that included the only spots where a river could be safely forded or straddled the only pass or saddle through a range of hills. The owner could then refuse to allow a road across his land thus driving down the value of the land to which access was denied. The owner then was able to buy that land cheaply, build the road, then sell the land at it’s new accessable value. Very profitable..fot the spotter, bad news for the government which was selling the blocks of land.

  17. Dan

    Huh:

    However, since the financial crisis, housing prices on the primary and secondary housing markets of most cities have recovered both in roubles and in the dollar equivalent. Especially high market prices were registered in major cities,
    regional capitals with good potential for economic growth, financial and cultural centres,
    in towns that attract a large number of migrants, in resorts and regional oil and gas centres in Siberia and the far east. Housing is the cheapest in small towns (except in the region of Moscow and St Petersburg), as well as in the former industrial cities, especially those located in areas with an unfavourable climate. [emphases added]

    Market forces or Urban Growth Boundaries? You decide!

    But where is this crazy market that expresses human desires for high rents? Moscow. The paper describes the efforts at privatization of property in Russia.

    This also includes having clear rules for land development, to wit:

    There is also a lack of clear land policy, in particular in the municipalities. Land policy refers here to the entire complex of socio-economic and legal prescriptions that dictate how the land and the benefits from it are to be allocated. A balance must be struck between the exploitation, use and conservation of the land as a resource in order to obtain the necessary level of sustainable development for sensible and orderly city development. [emphasis added]

    Kinda like Kevyn was saying.

    DS

  18. lgrattan

    Monopoly — reducing oil use 5% to 25% does not reduce OIL price.

    Saudi oil executive Sadad Al-Husseini said last June: “There has been a paradigm shift in the energy world whereby oil producers are no longer inclined to rapidly exhaust their resource for the sake of accelerating the misuse of a precious and finite commodity. This sentiment prevails inside and outside of OPEC countries, but has yet to be appreciated among the major energy-consuming countries of the world.”

    DRILL – DRILL – DRILL

  19. Dan

    DRILL – DRILL – DRILL

    As I explained above, despite your wish that won’t help you.

    Unless the help you want is in depleting US fields more quickly, making your kids more dependent on the Saudis.

    DS

  20. Ettinger

    Ebenezer Scrooge travels to 100 Christmases in the future and returns back to 2008. He reports…

    “Our descendants, those bastards, they not only get to live 200 years looking as we look in our 30s, still have sex at 150, with no diseases like cancer and heart attacks, private flying vehicles and ….(use your imagination). And we were thinking of adopting the passive defeatist mentality of scaling down our current limited freedom out of fear for their [ha!] futures? It’s as if I went back to my ancestor in the mid 19th century and told him: ”Grandpa, I know your fireplace only gets your house to 55degrees in the winter but can you also please stop burning wood altogether? Your descendants are going to run out of telegraph poles.””

  21. Dan

    Telling stories about what we wish for not only puts yummy oil in the ground, but it also crushes the fear-based defeatist freedom-killas. Oh, and telling stories brings us ponies.

    Sure.

    DS

  22. Ettinger

    I guess the defeatist version is more convincing. This will be the first time in human history that standard of living actually retreats. “Serously, this time, things are going to get worse. This time its for real!”

  23. Dan

    If you wish to project your fantasy that I said something about living standards because I passed on well-known oil reserve numbers, that’s your gig.*

    Don’t go bragging that your conclusion came from the evidence presented if you don’t like being embarrassed.

    DS

    * On top of that, AFAICT and IIRC, I’ve given exactly zero opinions on future living standards on this site.

  24. Kevyn Miller

    “Or think of it this way: suppose food prices were so high that some people were starving. I know! Let’s increase taxes to double the cost of food. That’ll teach ‘em.”

    Poor example. Try this and, yes, public health planners have actually proposed it:

    Or think of it this way: suppose food prices were so low that some people were obese. I know! Let’s increase taxes to double the cost of food. That’ll teach ‘em.

  25. Pingback: Piedmont Publius » Blog Archive » Mobility is a good thing

  26. Kevyn Miller

    Ettinger, Why would high energy prices or a carbon emissions reduction commitment lead to lower standards of living? Are you assuming that we already use energy 100% efficiently and therefore the only way to use less is to do less?.

    Admittedly the technologies and techniques needed to improve efficiency by more than 25% are in their infancy and their prices reflect their position on relevant economic curves. But look at the price electricity in 1895, autos in 1905, air travel in 1965, personal computers in 1985. In a decade or two LED lighting and distributed renewable energy systems will be so cheap and common place that we’ll be wondering what all the fuss was about back in 2008.

  27. the highwayman

    Well raising gas taxes makes economic sense in the short term, but in the long term what really needs to be done is people being charged for their VMT. Even if only starting at $1 a mile.

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