Two neat, funny, and interesting videos on gas prices.
This first video goes through some common explanations and reasons why these aren’t true. The speaker talks about tension in the Middle East, speculation,1 greed, and rising demand in developing countries. He blames money expansion. I can see the merits of his criticisms of the other positions, but the money explanation has really never persuaded me — very few people can explain the causal mechanism, which is usually a sign that their conceptualization of their explanation is incomplete. Here is the first video,
This second video goes in a different direction. Here the speaker discusses gas prices, taxes, and the actual amount that petrol-industry firms actually earn per gallon. I’m sure there are some methodological issues, but the point he makes is probably more-or-less true. (An example of issues people might have — and are probably justified in having — is that these firms also enjoy tax loopholes, which may reduce the burden of taxes on their revenue. But, I don’t know the tax structure well, or how it impacts oil companies.)
1. “Speculators” do form part of the causal mechanism of price changes. The problem with blaming speculators is that by overemphasizing their role we can forget about other factors which, more often than not, provide speculators with a sense of direction. Speculators should be seen as people seeking to reveal the “true” price; changes in the “true” price aren’t caused by speculators, but they do tend to follow it. I realize that this might be an inadequate way of explaining the role of speculators, but I think it holds as a general principle.
This summer, Bob Murphy gave a talk on the “market for security” at Mises University. The video:
I want to comment in response to something Murphy says early on, “I think, in general, using violence should be shunned.” I think he talks about it a little more later on, but he essentially suggests that there are alternative means of dealing with criminals other than violence. He gives a brief example of the power company shutting off a criminal’s electricity.
In developed countries, with extensive division of labor, most people live in large communities — cities — where large companies have tens of thousands, or even hundreds of thousands, of clients. The theory of being able to “shun” or ostracize criminals from the market is a bit unrealistic given these conditions. Indeed, utility companies, and any business, could deny service to a suspected criminal even in our world of a State-run justice system. But, they don’t, and there’s no reason to suspect that they would if the justice system were privatized.
Neither is peaceful arbitration an option for all kinds of crime. It might work for someone who is a known criminal — and I use the term extremely loosely, for anybody who has broken the law, contract, et cetera — and can’t move, or whose business depends on public relations. For instance, a big company has an incentive to arbitrate with clients or others who feel that an injustice has been committed by part of the firm. Murders, and other violent criminals, don’t share the incentive.
So, in a world where the criminal actively evades the justice system and where the division of labor is too large to exclude the agent from the market, what options does private law and security have? I see two obvious choices: (i) prevention (the threat of force) and (ii) forceful detainment. Both involve the willingness to respond to violence with violence. What’s more, I think there is the possibility that there could be a free market variant of the death penalty (and, to be clear, I oppose the death penalty): deadly retribution — and this can be a form of prevention.
To put it all into perspective, I do think there is (and would be) a huge market for arbitration, just like there is today. But, arbitration and other forms of peaceful methods of justice don’t work for those who are able and willing to evade these mechanisms. What does work is the armed arm of the law.
Here is the video of the lectures given by Paul Krugman, Pedro Schwartz, and Manuel Conthe. Although it begins in Spanish, much of the video is actually in English.
Edit: Krugman complains that Schwartz tries to pull credentials. That’s not entirely correct (and Schwartz is right to be offended). Schwartz claimed that oftentimes people put too much weight on opinions only because these opinions were given by Nobel laureates.
Here is the video footage of the testimony of Joseph Salerno, John Cochran, and Lawrence White.
This video, sponsored by the Instituto Juan de Mariana, talks about the recession from a predominately Austrian angle. Some of it is a bit too exaggerated for my tastes (like the idea that “there are no free markets anymore”), but it is nice to see that Austrian theory is circulating more and more around a Spanish-speaking audience.