Right on que, from the Dec 29 WSJ:
The global oil industry—far from chastened by the catastrophic U.S. Gulf of Mexico spill—is planning record spending next year, including a large amount for deep-water development.
High prices attract and encourage producers to, well, produce. So much for Krugman’s finite worlds.
It’s not true that vigorous economic growth necessarily makes resources more scarce. In fact, history shows that, because of human ingenuity, the opposite is not only possible but prevalent.
Ingenuity, that human trait central planners ignore. I would also point out that politicians of all stripes around the world are causing shortages of commodities such as oil. OPEC still exists, governments control more than 90% of the petroleum in the world and their restrictive policies cause inefficient processing of the stuff.
An economic recession is a response to high prices, which reduces quantity demanded for various commodities.
Mark Perry has comments also.
Paul Krugman is not only not impressed with the Republican’s “Pledge”, he thinks there is a hidden agenda. And that is “dismantling Medicare and Social Security.”
Many programs need to be changed to put government spending on a more sustainable path to solvency. Those changes include eliminating disincentives to work and produce.
He also thinks the “Pledge” puts the U.S. on a road to banana republic. Yes, I, too am disappointed “national security” programs were excluded. But Krugman wants the government to continue spending on programs that have caused more problems, i.e. stimulus. Stimulus doesn’t work. It simply registers in the government’s accounting as increases in GDP while the programs are in effect. They don’t “kick start” anything, the spending is a blip in sales to firms, much as a snow storm temporarily increases the demand for snow shovels at the local hardware store.
They don’t encourage commerce, unless they allow people to connect with each other when they were not able to connect in some way before. So, for example, a river prevented people on both side from shopping in each other’s malls. A bridge enables people on both side to visit the other. Similarly, import tariffs inhibit people from buying and selling across national borders. Eliminating the tariffs lowers the cost of something and brings it into the orbit of potential customers.
To borrow a phrase: “Prosperity is right around the corner.”
The now-infamous line from Herbert Hoover should be ringing in the ears of the president—and voters as well. Hoover may not have caused the stock market crash of 1929, but many of his policies turned the economic downturn that followed into what we now know as the Great Depression: restrictive trade policies and tax increases (in part to pay for government-sponsored work projects) to name just a few.
“Thus, Milton Friedman’s preferred remedy for corporate negligence, tort law, continues to operate and there is no doubt that BPs potential liability under common law alone would be in the billions of dollars.” ~ Alex Tabarrok responding to Paul Krugman’s Nth reason why libertarianism doesn’t work.