Hines Ketchup

As usual, whenever something bad happens, everyone blames the evils of capitalism and say we need more regulations to prevent this from every happening again.  The truth is that disasters like these are more likely to occur because of the very regulations that interfere with capitalism.

The main regulation I am talking about is the liability cap.  The liability cap basically means that if an oil spill happens, the oil company only has to pay up to 75 million dollars in damages even if the cost of the clean up is tens of billions of dollars.

BP would have acted differently had there not been a liability cap.  This is a clear moral hazard and causes a market distortion.  If you think about the cost-benefit analysis that BP would have performed, they would see themselves as taking less of risk than if there was no liability cap.  When the downside is limited, the overall upside looks better than it otherwise would have and they see it as far more profitable.  Since there is less of downside, they have less risk to worry about (meaning they have less of a reason to be careful).

Sure without the liability cap the price of oil would be greater for consumers.  But once a spill happens, the consumers are going to have to pay that extra cost anyway.  We can either pay the correct price initially or we’re just going to have to pay it later.

There are other regulations as well that prevent oil companies from drilling on land or in more shallow water.

Conclusion:  If these government regulations didn’t exist, BP would have spent more money on minimizing risks and would have been more careful…or maybe they wouldn’t have even engaged in deep sea drilling at all.

This is my final paper for Warren Writing (Global Warming).  I took an entirely different position the entire quarter than everybody else in the class and the teacher.  The conventional view of most everyone in the class (including the teacher) was that we need our wise overlords in the government to save us.  I think I surprised everyone when I explained how moral hazards created by government regulations cause the problems….anyway I’ll stop rambling here it is:

The Capitalist Approach to Climate Change

              For many, the environment and climate change is an important issue.  It is commonly understood that capitalism left to it’s own devices does not favor the environment.  The more free a market, the less friendly to the environment it is.  While under the system we live today it may be easy to make this correlation based purely on intuition, this view is based upon a misunderstanding of ethics and how government policies affect the market.  With logical ethical and economic thinking, it is not hard to see that the best way for California to go about fixing the potential problem of climate change is not to look to the government to take away more of our economic freedom, but instead to repeal the government restrictions on our economic freedom and privatize certain industries that are currently run by the government.

              So what is the economic freedom that I am referring to?  The main part of economic freedom that relates to the environment and climate change is private property rights.  The basic theory of property rights holds that you have an absolute right to your property and no one else’s.  For the most part, private property rights today are upheld.  For instance, if you break into someone else’s house without their consent you are committing the crime of trespass (Rothbard 127).  The problem occurs in that the law is not consistently applied to pollution.  Walter Block, an accomplished economics professor and senior scholar at the Ludwig von Mises Institute, uses the example that if you disposed of a bag of garbage by putting it on your neighbors lawn, we all know that your neighbor could call the police and the police would insist you dispose of your garbage without violating anybody else’s property rights.  What if instead, you took the same bag of garbage and burned it in your backyard, letting the sooty ash drift over into your neighbor’s property.  It is still clear that there is a violation of your neighbor’s property rights (Block 1891).  The problem is that tort law in California does not favor property rights in this case.  What we need is to reform the tort law so that pollution of another’s property whether it be through air, water, or earth is enforced with strict consequences.

              Now that I have explained what I mean by respect for property rights, let us see how enforcement of these rights would reduce pollution.  Before the 1840s, the very idea of property rights I am proposing was in use in America and Great Britain (Block 1890).  Typically under this system situations would arise where a property owner could accuse someone, like the owner of a nearby factory, of pollution of his property through airborne pollutants.  In this time, the courts almost always would take the side of the plaintiff and uphold his/her property rights.  Upholding property rights in this manner created huge incentives for the factory owner.  There was an incentive to use cleaner (but more expensive) types of energy in order to lessen the risk of lawsuits as a result of the property pollution (Block 1890).  Also an incentive to invest in research to develop cleaner energy.   This would stimulate scientific progress and raise public awareness for Climate Change (Dawson 11).  Unfortunately, in the 1840s and 50s, a new legal philosophy came about which was based on a flawed collectivist approach (Block 1890).  This is the system we still have today.  In our current system, even a factory that wishes to pursue clean energy just because it wishes to promote a clean environment cannot exist, since it can not compete.  A business that does not use clean energy has all the advantages.  It gets cheaper energy and it does not have to face any consequences for pollution (Block 1890).  The cost of the pollution gets socialized throughout society.  Notice that the reason this happens is not due to a failure of the market as some may lead you to believe, but instead it is due to a failure of the government to protect fundamental human rights.

              Some might say that my proposal of property rights is extreme and not pragmatic.  I do not see how this is the case considering that the strict adherence to property rights has been tried before and is part of American history up until the 1840s and 50s.  Even though the country was a lot smaller during that time in history, any economist of the Austrian school will tell you that an economy works in the same way, no matter how large or small it is.  And it is not only me supporting this idea, it is hundreds of free-market environmentalists around the world.  It could even be said that the opposite view of using more government regulations is the extreme approach considering it has not been tried before and it raises many ethical questions in regards to it’s compatibility with a free society (which I will explain later).  Another common objection that arises to my view is that this would be a chaotic mess with everybody suing everybody else.  But you have to remember, it is still not a cheap task to go about suing somebody and you must be able to prove be able to prove the property rights violation beyond a reasonable doubt, so our industry would not suddenly come to a halt because of these lawsuits (Block 1892).  At present time, it may be challenging to prove beyond a reasonable doubt (Block 1892-1893).  There would likely be a transition period during which time a lot of research would be done in environmental forensics in order to make it easier to prove the property rights violations (Block 1892).  During this time, factories could prepare for the new system of property rights (Block 1892).

              In order to make this a real free-market in energy, there is one more thing that needs to be done.  Eliminate all subsides and regulations on different types of energy.  In this true free-market in energy, different types of energy would compete in many different areas including the cost to produce the energy, the cost of the pollution that the energy produces (the risk of the lawsuits) and the safety of the type of energy (Block 1890).  For example, if a company believed nuclear power to be unsafe, it would not choose to use nuclear energy, because if something catastrophic happened, they would be held liable.  I don’t claim to know what type of energy is best.  I don’t think any single individual knows for sure.  The only way to determine what energy is best is to let the free market work.  The advantages and disadvantages of many different types of energy would be weighed by hundreds of experts and different types of energy would be tried and new types of energy would be developed (Block 1890).  A free market in energy would produce solutions that a politician or bureaucrat could never even dream of.

              There is also an environmental advantage to privatization of some things that are commonly thought of as “public goods”.  To start, I will give the example of how the privatization of the garbage collection and disposal would help the environment.  Today, we have a system in which garbage collection is socialized.  You either pay a single fee to the government each year for them to collect your garbage or the government provides it to you through your taxes.  Imagine a free market in garbage collection and disposal.  Under this system, the garbage company would charge you directly to take away your garbage.  After collection, the garbage company would need to dispose of the garbage.  They could either place it on their own property or pay somebody else to take it.  In any case, the cost to the company to dispose of the garbage would be directly related to the damages made by the garbage to the land upon which it was disposed.   If a specific piece of garbage makes X amount of damage to the value of the land then the garbage company would be able to charge no less than X to dispose of it, because if they did they would lose money and go out of business.  They would also not be able to charge significantly more than X, because competing garbage companies with lower costs would take their customers.  This would keep prices relatively stable at an amount slightly more than X, so that the company can make a profit and it is affordable.  Now imagine yourself as a consumer.  You now have an economic incentive to use products that are less costly to dispose of, that is, products that are less harmful to the environment.  And further than that, the producers of the products have an incentive to make products that are less costly to dispose of because you are more likely to buy them.  Walter Block uses the example, imagine a plastic bag costs $5.00 to dispose of (because it is more harmful to the environment) and a paper bag costs $0.01 to dispose of.  Now when you are at the grocery store and you are asked “paper or plastic?”, you have a large incentive to choose paper, because you can dispose of it for so much cheaper (Block 1894-1895).  Or imagine both paper and plastic have a high disposal cost, you might bring your own bag that you can reuse each time you visit the grocery story and now you have eliminated the disposal cost all together and in the process reduced pollution.

              Some might say it would be impossible for the garbage company to determine what garbage a particular household has.  In order to do this, the garbage company might tell you to put all your plastic in a certain trash can, all your paper in a certain trash can, etc..  Then they could weigh your garbage on their truck to calculate your bill.  This one possibility that might occur but there would be tons of other ways to go about this that the free-market would develop so that it is even more efficient and cost effective.  Also, the question is raised “couldn’t I just cheat and put my garbage in my neighbors trash can?”  This of course would be illegal as it would be a property rights violation.  If it became a serious issue, the garbage company would probably do something like provide lockable garbage cans that only you and the garbage company could open.

              Another common objection to this idea is that poor people would be alienated and unable to afford this, but this thinking is fallacious.  The economics of why there are less poor people under a free market system are explained well by Henry Hazlitt in his book Economics in One Lesson (Hazlitt 23.6).  The remaining poor people would not suffer either.  Things like food, clothing and a place to live, are not socialized but the poor people survive. The poor turn to private charities and they are taken care of.  There is no reason that garbage collection (something far less important than food) can’t be taken care of by private charities as well.

              The privatization of highways is another way in which to drastically decrease pollution.  In the public system we have now, everyday at certain times there are ridiculous amounts of traffic.  Cars are on the road for far longer than they would be if there was no traffic.  This means extra pollution than there should be.  By privatizing highways, California would be able to cut taxes and instead you would pay the private companies in order to manage the highways.  Based on simple supply and demand economics you can determine how the pricing system for highways would work.  There is more demand to use highways at certain times of the day but there is the same supply (the same size and number of highways).  Because of this, the highway owner would be able to increase prices at the times of day with high demand.  People would have an economic incentive to drive at the cheaper times or to carpool.  What these incentives would do is decrease the amount of cars that want to use the highway during the rush hour and increase the amount of cars that want to use it at other times, thus drastically lessening the amount of traffic and the amount of pollution (Block 47-95).  More incentives would be created as well.  If a highway was causing too much pollution that it was causing a property rights violation of a nearby property owner, the property owner could take legal action against the highway owner.  Because of this, the owner of the highway would need to have a higher cost to use the highway for a gas burning vehicle than to an electric car.  This creates the same principle as with garbage companies.  Now consumers, when purchasing cars, not only have to weigh the original price of the car and the amount it costs to fuel, but also the amount the car costs to use on the highways.  And additionally, car manufacturers have an incentive to make cars that cost less to use on highways, because you are more likely to buy them.

              The objections to freeway privatization are many.  Again, the argument is raised that this is an injustice to the poor people, but as I have already explained, this is a fallacy.  Another objection that is raised is that there would not be sufficient competition in such a market.  For example if there is only one road from point A to point B, the road could charge as much as it wants and there is no competition.  The fallacy here is that the road would still be competing with other forms of transportation like trains or planes.  If there was insufficient competition, more options would arise through the power of the free market (Block 260-264).  For a more in depth look at each objection to highway privatization see Walter Block’s book The Privatization of Roads and Highways and Murray Rothbard’s book For a New Liberty.  I have highlighted only the environmental benefits of highway privatization, but indeed there are other advantages as well, that I will quickly point out.  40,000 people die in America every year on public roads and highways.  Based on the work of several economists, we can extrapolate that privatization would cut that number down to somewhere in the ballpark of 10,000 deaths (Block 335).  If the unnecessary death of 30,000 people is not injustice and enough reason alone to support this system, I don’t know what is.

              Empirical research by Gene Grossman and Alan Krueger found that a relationship exists between the quality of the environment and a country’s level of wealth.  Somewhere around $8000 per capita income is a point at which any further increases in per capita income, also result in a better quality environment (Grossman and Krueger 16).  Based on this study, what we should favor are ways to increase per capita income in order to increase environmental quality.  So the question is how do we increase per capita income?  The Economic Freedom of the World Report publishes an annual study testing the correlation between poverty and economic freedom (as measured by business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, and freedom from corruption) and poverty (Wynn 5).  Gwartney et al. concludes that in general an increase in economic freedom results in a decrease in poverty (Wynn 2).  Free-market environmentalist Todd Wynn concludes from his research at the Cascade Policy Institute, that “the level of a country’s economic freedom is a statistically significant and negative determinant of both energy intensity and greenhouse gas intensity” (Wynn 6).  This cleary contradicts the percieved idea that top-down government regulation is the only way to bring about energy efficient and lower carbon intensity (Wynn 6).  “Countries with higher levels of economic freedom not only have more energy efficient and less carbon intensive economies, but over time these countries continue to decrease the amount of energy used and the amount of carbon dioxide per unit of productions.”  Further, Wynn says that “the merits of free markets and economic prospersity should not be overlooked as a potential method for reducing carbon emissions” (Wynn 6).

              Now to the ethical questions.  America was founded on a philosophy of liberty that dictates that you have an absolute and natural right to yourself, your liberty and your property.  This ethical stance of course can not be proven, but it can be said that it is derived from human nature and the fact that many philosophers agree with it give it more credibility.  This philosophy takes the stance that initiation of force against someone else’s person or property is not legitimate and that force is only justified in defense of somebody else’s unjustified use of force (Capella 26).   So if we follow this philosophy any system that does not support property rights is not ethical.  For example, if the government coerces you into using a certain type of energy on your own property, this would be considered illegitimate.  Similarly, if the government taxes you because of a decision you made to use a certain type of energy on your own property, this is unjustified.  And finally, if a government steals money from taxpayers and uses it to subsidize a certain type of energy, this is also unjustified.  The beauty of the free-market approach that I have proposed here is that it creates very strong incentives to reduce pollution and the negative affects climate change, but it does not violate any fundamental rights of human beings.

              While it is easy for people to say that the free-market is no friend of the environment and climate change, their assertion is unfounded.  Hundreds of economists have written in support of the very free-market environmentalism that I am suggesting.  If Californians really want to solve these problems in the most efficient, ethically sound, and economically sound way possible, they will join me and hundreds of other free-market environmentalists in supporting a clean environment through free-markets, property rights, and individual liberty.

Works Cited

Block, Walter. “Environmentalism and Economic Freedom: The Case for Private Property

            Rights.” Journal of Business Ethics 17 (1998): 1887-1899. Print.

Block, Walter. The Privatization of Roads and Highways. Alabama: Ludwig von Mises Institute,

            2009. Print.

Capella, Francisco.  “The Ethics of Freedom and Climate Change.” Ludwig von Mises Institute.

            Mises Daily., 24 Nov 2009. Web.

Dawson, Graham. “Privatizing Climate Policy.” Ludwig von Mises Institute. Mises Daily., 24

            Dec 2009. Web.

Grossman, Gene M. and Alan B. Krueger. “Economic growth and the environment.” Quarterly

            Journal of Economics, 100, 35377. 1991.

Hazlitt, Henry. Economics in One Lesson. New York: Laissez Faire Books. 2008. Web.

Rothbard, Murray N. “Law, Property Rights, and Air Pollution.” Alabama: Ludwig von Mises

            Institute, 2002. Print.

Rothbard, Murray N. For a New Liberty. Alabama: Ludwig con Mises Institute, 2002. Web.

Wynn, Todd.  “Economic Freedom: A No-Regrets Strategy for Reducing Global Energy

            Consumption.” Cascade Policy Institute. April 2010. Print.

Years ago on a website I ran we had a forum and we had one of those games where each person adds on three words to a story.  I just read through it again.  I LOL’d very hard.  It is really random and amazing:

There once was a very large dark blue Cornish who didn’t like very hairy men in his room because they smell. A smell so bad, that only an ostrich was able to resist the horrible odor. “What is this…? horrible smell” said the dark blue cornish as he confronted the hairy man in his delicate hairless spinal water bed covers. Cornish looked up and pondered why he was even conscious after smelling and after looking at the hairy, very hairy, man. After the Cornish’s encounter with this smell he decided to go postal. First he sliced a dinky piece of bread with lots of green fungus on it. Then forced it into the hairy mans bellybutton as if the Cornish was made of steel, but he somehow still managed to kill the hairy mans left elbow. But oh no! the hairy man apparently isn’t as weak as the cute little Cornish had assumed. Then the big hairy sliced the Cornish into two pieces. Then the hairy man was outnumbered. “WTF!” said hairy man, “Where did your mother go! Wasn’t she here?” “Hell no!” said both Cornish halves. “Then where did she go” said the hairy man. “I don’t care I’m going to watch my favorite action movie, and enjoy the hairy mans hard, slimy, Kit Kat bar.” The Cornish transformed into a cow. Actually he didn’t. That was a poor decision on Brian Houston’s part because William doesn’t not follow the stupid speeding laws. Because he doesn’t want to be an idiot like Brian Houston who tries to kill innocent Americans who are just trying to drive peacefully.

The End

— Written by Jackson Hines, William La Plant, Andre Peralta, Erin Unson, Briana Houston, and Carly Hines.

No idea who wrote this, but my friend posted it on facebook and I thought it was hilarious:

Here’s an easy thing to say
Here’s an easy game to play

If a packet hits a pocket on a socket on a port,
And the bus is interrupted as a very last resort,
And the address of the memory makes your floppy disk abort,
Then the socket packet pocket has an error to report.

If the cursor finds a menu item followed by a dash,
And the doubleclicking icon puts your window in the trash,
And your data is corrupted ‘cause the index doesn’t hash,
Then the situation’s hopeless and your system’s gonna crash.

You can’t say this?
What a shame, sir!
We’ll find you
Another game, sir!

If the label on the cable on the table at your house
Says the network is connected to the button on the mouse,
But your packets want to tunnel on another protocol,
That’s repeatedly rejected by the printer down the hall,
And your screen is all distorted by the side effects of Gauss,
So your icons in the windows are so wavy as a souse,
Then you might as well reboot and go out with a bang,
Cause as sure as I’m a poet, this sucker’s gonna hang.

When the copy of your floppy’s getting sloppy on the disk,
And the microcode instructions cause unnecessary risk,
Then you’ll have to flash your memory and you’ll have to RAM your ROM.
Quick turn off the computer and be sure to tell your mom!

At the end of last quarter, when I was picking what warren writing class I should take, I decided to pick the topic of Global Warming.  I thought we would be able to have a healthy debate about global warming…if it is caused by humans or not….and if any action should be taken to prevent it.  I was wrong.

On the first day of class, the TA asked the class if global warming “is a fact for you” and if it is for sure caused by humans.  Everybody seemed to be nodding their heads and then she asked, is it not a fact for anybody here?  I was the only one who raised my hand.  I told her that there are still many credible scientists who believe global warming is not caused by humans.  She went on to explain that this class takes the position that global warming exists and is caused by humans.  To be fair, she said this is not to dismiss any of the other arguments that I was referring to but that is just the position this class takes.  Wait…. what?!?!  This is supposed to be a class about how to make good arguments…but the entire half of the argument about global warming was just dismissed on the first day of class with no grounds to support it… just because “that’s the position this class takes”.  Ever since then the class has been made to seem like anybody who doesn’t believe in human-caused global warming is a crazy uninformed nut job.

It’s hard to know whether I should bring up the counter-arguments in class that are an essential part of this debate or if I should just go along with it.

Today she said that we should not be making the argument that the US should not sign the copenhagen accord, because that would be going backwards and that the political climate has changed these days.  I don’t understand this one bit.  Why should we change our political philosophy and sacrifice our principles because the political climate has changed?  I respect people who have consistent principled integrity when it comes to political issues, not people who flip-flop because of a change in the political climate.

Another thing that is thrown around in this class as if it is common sense is that developing countries have “the right to develop” so the “rich countries” (which I will explain in a second) are the only ones responsible for global warming and that the people of the rich countries should be forced to give money to the developing countries because of this right that they have.  What kind of crazed collectivist thinking is this?  There is a such thing as countries having rights now?  In actuality, there are no such thing as rights for anything besides individuals.  Individuals have the natural right to life, liberty, and property.  End of story.  Those are the only rights there are and all rights stem from these 3 basic rights.  There are no higher entities than individuals that have rights.  Forcing people to give money to other people is clearly an unconstitutional notion and a violation of your right to property.  The government cannot take property from anyone without due process.

Another problem is that when “rich countries” are discussed in that class, she often refers to the United States as a rich country.  Maybe she just doesn’t know or just forgot that we are in the largest financial crisis since the great depression and the cause of this crisis was too much borrowing and spending and that now the entire country is broke and has $12 trillion dollars of debt that we need to pay back with interest.  The crisis is only getting worse and more spending might not be a good solution.  She said she doesn’t buy the argument that we don’t have enough money to spend on global warming since we seem to have enough money to spend on war and on welfare.  I pointed out to her that we don’t have enough money for those things either.  Her response was that the government can print the money.  WHAT?!?!  Printing money is a horrific tax on the poor and middle class of this country.  When money is printed, purchasing power of every dollar is stolen, and the American people become poorer.  If we really care about poor people we cannot be casually saying we are just going to print money to save the world from global warming.  Printing money results in a redistribution of wealth from the poor to the politically-well connected.

In one of my assignments for this class, I wrote that the only legitimate role of the government is to protect the rights of the people, never to enforce morals.  She commented on my paper that the government enforces morals all the time, therefore it is okay.  Again I don’t get it.  If that kind of logic made sense, we could never argue against anything the government does, because they already do it so it’s okay.

I wish we could stop having silly side debates about how we should give up our freedom for the cause of global warming and instead have the argument about if we should be giving up our freedom at all.  People fought and died so we could live and be free in this country and it is sad that people are willing to give up this freedom so carelessly, but it is even more sad that this class forbids us from even talking about it.