And so continues an economic guest rant. Points 1-3 can be found here.
4. "Oil is running out"
Resources are an economic concept. The definition of oil reserves and resources depends on price assumptions of what is economical to extract. At higher prices, all of a sudden there are more resources. After the high 70s prices, oil prices plummeted through the 80s because of over capacity that was motivated by those high prices. The market worked, supply and demand adjusted to suit each other. Humanity will never run out of oil. Obviously, there is a physical upper limit on the amount of oil that can exist on a structure of finite size, such as planet Earth. But as we use more of it up, prices will eventually stay high enough, long enough, that the market will spur sustainable long term substitutes to oil. At some point, we just won’t care as much about oil because we’ll be using something else. There will always be some left in the ground, that at a high enough price will be economical to extract. Will these changes cause pain?
5. Comparisons across several years using nominal dollars
See intro to this list above. It’s just wrong and meaningless to compare a price or total sales revenue stat from one decade to another without correcting for inflation.
6. The concept that industries that need to be "saved" or "protected"
The latest, biggest source of this gripe is about China “stealing” manufacturing jobs. There was a time when improving efficiency in agriculture was “stealing” work from peasant farmers. Humanity adjusted. Most of us in the western world aren’t farmers any more. We found other things to do. There is no reason why this same phenomenon won’t keep repeating self through history. Besides, you can’t fight the market. When governments step in to save steel mills or whatever, those uneconomic businesses are still uneconomic and eventually go under. Protectionism and subsidies to keep industries and factories alive are nothing other than vote buying, direct subsidies of the livelihoods of the workers. Of course I sympathize (although by saying “the market works” and similar things, many would think I’m intrinsically and irredeemably heartless). If I were a maritime fisherman, and enjoyed the job that my ancestors did, of course I’d be sad if there were no longer a market for my work at the salary I want. But that doesn’t justify a government taking money from other provinces so some people can stay in their home provinces. My ancestors left Europe because the market said it wasn’t willing to pay very much for farm labour in the backwaters of Germany and Poland. My ancestors did not have a perpetual right to ply the same trade in same region, and neither does anyone else in Canada or elsewhere. If the jobs move and your town closes down, I’m sorry but that’s tough. Taxes shouldn’t support your sentimental attachment to the land you know. Canada is particularly egregious in this regard, with so-called “regional economic amelioration”. It is disgusting and undemocratic that this goes on, but it’s only because our electoral system means that a riding is a riding, and by stealing from more populous and prosperous ridings, you can buy votes in other regions that no longer have economic reasons to support current levels of population.
7. "The private sector doesn't think long term"
I agree that the quarterly earnings culture among publicly traded companies has some problems and can lead to sacrificing the future for short term gains. But it is wrong to say that private business doesn’t think long term. Actually, they think much longer term than governments, whose world stops at the next election. The price of assets in business is based on the assets’ long term potential to make money. Whether a business wants to keep or eventually sell an asset, it wants to maximize its value. When governments are under financial pressure, they are motivated to go cheap on things like infrastructure maintenance because the effect won’t become apparent before the next election. Businesses, however, are run more by economics, which motivates them to make decisions such as, “let’s spend a little for the next four years, so we don’t have to spend a lot more ten years from now”. Sure, there are examples of businesses that have made the short term, uneconomic
decisions, but these eventually get weeded out by competition.
