I was thinking about doing an economic analysis of reductions in oil consumption today and happened to receive the latest issue of Resources, a magazine put out by the US-based Resources For the Future institute, probably the leading advocate of market-based solutions to environmental problems. It included an article on the topic, Is Gasoline Undertaxed in the United States (Note: PDF file). The conclusion, not surprisingly is “Yes”, basically because of congestion, pollution and accident “externalities”. The author, Ian Parry, suggests an optimal tax of $1/gallon compared to the current tax of about 40 cents/gallon.
Assuming current demand is based on a ‘normal’ price of around $1.20/gallon, the implied price increase is 50 per cent. With a long-run elasticity of demand of 0.7, this implies that the long-run reduction in demand would be 35 per cent. The implication of Parry’s analysis is that the US, acting in its own self-interest, and regardless of foreign policy concerns, would be better off reducing gasoline consumption by 35 per cent. Broadly similar arguments apply to other transportation uses. Since transport accounts for about 60 per cent of total petroleum consumption, this implies a reduction in total oil consumption of 20 per cent, and a reduction in net imports of around 40 per cent or about 4 million barrels per day. This is more than the likely amount of additional production that would arise from overthrowing Saddam, even assuming an American occupation or an Iraqi puppet government acting in the interests of the US, as is explicit in the arguments of Steven den Beste and implicit in any oil-based scenario.
Rationing would achieve the same reduction in demand more rapidly, although less efficiently in an economic sense. If reducing reliance on Saudi oil is a strategic objective of the US of sufficient importance to justify war, then the US government is morally obliged to take whatever peaceful and unilateral action it can towards this goal before resorting to military means.

In the comments thread, Steven den Beste asserts that “Your entire idea is based on the fallacious assumption that the refining process can be adjusted to produce all outputs in whatever proportions are desired. That isn’t how it works. ”

Actually, the refining process can be adjusted, though not without limit, and, more importantly, there is trade in petroleum products as well as crude. The US uses more gasoline relative to other products than the fractionation process produces, and therefore trades other refined products for gasoline as well as importing crude. As this graph shows, transportation (mainly gasoline) is indeed the dominant use of petroleum in the US. In any case, I picked gasoline precisely because this is the petroleum product for which attempts to reduce consumption would be most politically unthinkable. If the US government could grasp this nettle, it would have no trouble in cutting back on other uses for oil.

The idea of a war based even partly on promoting a flow of Iraqi oil doesn’t stand up either economically or morally. A war with Iraq may be justified for a number of reasons, but oil isn’t one of them.

This NYT report is the clearest statement yet that the US has dropped its demand for regime change in Iraq
“All we are interested in is getting rid of those weapons of mass destruction,” Powell said. “We think the Iraqi people would be better off with a different leader, a different regime, but the principal offense here is the weapons of mass destruction, and that is what this resolution is working on.”
Obviously, the war faction is assuming and hoping that Saddam is going to obstruct the inspectors. One argument, put to me by Steven den Beste in email is that he has no choice, given that he actually has WMD programs going on. This, like much of the discussion about inspections, is refuted by the history of the first series of inspections following the Gulf War which found and destroyed Saddam’s nuclear weapons program, using calutrons to enrich the uranium. It’s clear that Saddam has the option either to destroy the weapons himself or to ‘fess up and let the UN destroy them, and unless he’s crazy, that’s what he will do. On the other hand, as another NYT report pointed out, Saddam’s fear of assassination means that he’s thoroughly isolated from the outside world, so he may well think he can get away with obstructing the inspections.

Bloggers as diverse as Ken Parish and Steven den Beste have argued that the real case for an invasion of Iraq is ‘about oil’ in the sense that it will provide a way of breaking the OPEC stranglehold on oil, and therefore allowing the US to deal with the real source of Islamist terrorism: Saudi Arabia. For those who support such a rationale, and regard the threat posed by Islamists as calling for American sacrifices comparable to those made in World War II (not to mention the thousands of Iraqi civilians and unwilling conscripts whose lives will be sacrificed as ‘collateral damage’) I have a proposal that is simple, cost-effective,unilateral, foolproof and unthinkable.

The proposal is petrol (gasoline) rationing. If the US reduced its consumption of oil (used primarily for gasoline) by half, it would reduce its import dependency to zero and Americans would still be able consume more, per person, than the rest of the OECD. OPEC would be out of business. The proposal is:

Simple:

Nothing could be simpler than this

Cost-effective:

In financial terms, the US would reduce its trade deficit. In economic terms, there would be a loss of consumer welfare, but it would be well under the 3 per cent of GDP that has been estimated as the cost of a serious war effort

Unilateral:

An invasion of Iraq requires the co-operation of at least some middle Eastern oil states and preferably Saudi Arabia itself. In addition, it requires at least passive consent from the Russians, who have apparently already secured guarantees that their oil interests won’t be affected. Rationing can be implemented without going near the UN or any foreign government.

Foolproof:

Unlike war, which is always chancy, rationing is something at which governments have always excelled. And if black marketeers managed to slip around the edges of the policy, even a 25 per cent reduction in US demand would push the Saudis into bankruptcy

Unthinkable:

Just think about it

Paul Krugman documents and analyzes the growth in inequality in the US, attributing it, rightly in my view, to changes in social attitudes and the distribution of political power rather than to underlying forces. In passing, he notes that median incomes in the US have risen by only 10 per cent in the past 20 years, and demolishes the Instapundit factoid claim that people are better off in Mississippi than in Sweden.
For those who prefer striking examples to statistics, check out the latest from Arianna Huffington

No more posting from me until Monday. I’ll be observing our national day of mourning of which the wattle above is the symbol.

In commenting on the Bali bombings, I’ve avoided linking to the writings of others, either bloggers or other commentators (with the exception of a brief response to one US-based critic of my comments). I didn’t want to have the difficult task of clarifying my own thoughts and emotions made more difficult by arguments with others.
But now that the immediate aftermath is behind us, I thought I’d record my views on the way in which bloggers and other dealt with these awful events. On the whole, I thought Australians responded pretty well – showing sympathy those injured and bereaved, grief for those lost, and anger at those who would do such a thing, but not giving way either to panic or to calls for indiscriminate revenge on Muslims or Indonesians in general.
Thus far, at least, our political leaders have responded both decently and sensibly. I was disappointed by reports that Bob Brown had said that the bombing was a result of our possible involvement in an attack on Iraq (and I said so in a comments thread somewhere) but as Don Arthur notes, these reports turned out to be false. And while I don’t suppose they are blind to the possibilities, neither Howard nor Crean has gone after political advantage as yet.
Nevertheless, some people, including deplorably, Archbishop Carnley, have tried to use the bombing to make a political point about Iraq. It will be a long time, if ever, before we know if the Australian position on Iraq played a role in the decisions of the terrorists about who should be targeted (I doubt it, but I have no more evidence than anyone else). But regardless of what we might or might not find out some time in the future, the important fact was that many Australians and others were murdered by evil criminals. Any attempt to exploit that for political purposes, especially in a way that might be seen to mitigate the guilt of the killers, is wrong and offensive.
Coming to the blogosphere, I’ll begin by agreeing with just about everybody else that Gareth Parker‘s contribution has been superb. Gareth’s conveyed all the emotions Australians have felt about this atrocity, while remaining reasonable and balanced in his determination that we should bring those responsible to justice.
The negatives are much harder to find. Fortunately, as far as I know, no Australian blogger has taken the line that ‘we are to blame for all this’. The main blogging fault has been on the other side, with people so eager to sniff out heresy that they were happy to make it up if they couldn’t find it. An example was James Morrow’s beat-up about the way the SMH rewrote the Reuters feed they got.
Tim Blair gave us a mixed bag – some great, impassioned and obviously sincere writing on the victims of the bombing mixed with a lot of petty point-scoring and heresy-hunting. His American audience loved it, but most of the Australian commentary I saw was more ambivalent and rightly so.
Between the extremes, the majority of bloggers struggled to come to terms with the bombing but managed to make valuable contributions in the end. I’d particularly mention Don Arthur, Bargarz, Tim Dunlop, Ken Parish and Scott Wickstein. I won’t say anything about my own contributions, but the comments thread on this blog has plenty of interesting ideas from among others, Jason Soon and Jack Strocchi. And there are lots of others I haven’t listed – readres could start by checking the links on the left .

From the NYT, the best comment I’ve yet seen on the Iraqi election. It’s Saddam Hussein, by a Whisker
Teaser: “Mr. Hussein won 100 percent of the vote, but Mr. Hussein’s aides claim that the real number was probably closer to 110 percent.”

As a result of the Washington shootings, there are increasing calls in the US for gun ‘fingerprinting’. The idea is guns would be test-fired and records of the bullets kept for matching with those retrieved from crime scenes. As both opponents and critics have acknowledged, this would, in effect be a registration system, something that is anathema to the National Rifle Association and other supporters of an unrestricted right to bear arms.

However, I didn’t want to comment on this debate but on an article in which it is argued that such fingerprinting won’t and can’t work. This piece, linked by Instapundit.com:, was published at a site called Junkscience.com which purports to refute “”Junk science” defined as” faulty scientific data and analysis used to used to further a special agenda. ”

The publisher of Junk Science is Steve Milloy, who is an adjunct fellow at the Cato Institute. So, one might ask whether Milloy’s definition of junk science applies to his own site. Since scientific truth is always provisional it’s hard to prove that any particular piece of scientific work is ‘faulty’ (alternatively, if you apply a sufficiently high standard of rigour, all work is faulty). So the obvious question is whether the work is being used to ‘further a special agenda’. After all, scientific facts being as awkward as they are, anyone who pursues objective research is sooner or later going to come up with results that have political implications they don’t like.

This has, however, not happened to Milloy, as far as I can see. I went through his site, and failed to find a single instance where the results he reported weren’t in line with the poltical agenda of the Cato Institute. On some issues, such as global warming, his claims are clearly inconsistent with the views of even the most sceptical scientific commentators. Milloy says
“Global warming is a silly controversy that should have faded long ago. But gullible youth, a corrupt bureaucracy and biased media may keep it alive for years to come.”
Among serious scientists, even strong Kyoto opponents like Richard Lindzen agree that the balance of evidence favors the existence of some human-induced global warming, and argue only that the uncertainty surrounding the issue is too great to justify immediate action. Milloy would be hard-pressed to find any credible scientist who would endorse his claim.

But more to the point, even when Milloy’s facts are right, what he’s doing is advocacy disguised as science. He selects the facts that support his political case, and ignores those that don’t. Does anyone seriously suppose, for example, that if a new and improved method of gun fingerprinting were developed, Milloy would publicise it? What he does is rightly described as “junk science”.

This kind of thing is done on all sides of politics, particularly in relation to environmental issues. What makes Milloy particularly dangerous, however, is that he engages in advocacy while purporting to defend scientific objectivity. Quite a few others, often claiming to be ‘sceptics’, do the same thing. The right word for someone who believes scientific evidence will always confirm their preconceived views is ‘credulous’ not sceptical’.

A good test on this relates to environmental and food safety ‘scares’. There have been a great many of these over the past thirty or forty years, relating to such diverse risks as acid rain, aluminium saucepans, Alar (a pesticide used on apples) and asbestos, to name only the first few on my list. Anyone who investigates them honestly will find some where the scientific evidence of danger is overwhelming, some where it is non-existent and some that are in-between. It follows that someone who always finds that scares are justified, or always finds that they are not justified, is not a scientist but a lobbyist.

The revelation that the North Korean government, the second member of the Axis of Evil (and it seems pretty clear that Iran was only thrown in to make up the numbers) has been trying to build nuclear weapons has forced rethinking of lots of positions. At this stage, it appears probable though not certain that no bomb has actually been built and also probable but not certain that the Pakistani government gave assistance in return for missiles. What is clear is that the North Korean government has violated a range of agreeements it made with the US under the Clinton Administration.

The big rethinking is going on as various people try to adjust their positions on Iraq or use this news to justify their earlier positions. I’m in the latter category myself, and I suppose most others will be also, human nature being what it is.

The North Korean news indicates a need for a much sharper focus on weapons of mass destruction and the abandonment of the idea of regime change for its own sake. It’s clear, despite the Axis of Evil rhetoric, that the US Administration has no real desire to launch an invasion of North Korea, even though its (the Koreans, I mean) rulers are every bit as evil as Saddam. And despite the rhetoric of hyperpower, the idea that even the US can run wars on four fronts (Iraq, Afghanistan, North Korea, Al Qaeda) stretches credulity.

What is needed now is a really serious focus on weapons of mass destruction everywhere, not just in Iraq. This means
(i) continuing the push for unfettered inspections and destruction of all weapons facilities in Iraq
(ii) demanding the same in N. Korea. Clearly agreements without verification are worthless. This should be pushed through the UN with whatever bribes are needed to prevent a Chinese veto
(iii) a really serious effort to denuclearise the fragment states of the former Soviet Union
(iv) pressure on France and the UK governments to abandon their nuclear weapons. These are pure status symbols with no remaining strategic role, and set an immensely bad example to prestige-seeking governments in the Third World
(v) more cuts in Russian and US arsenals
(vi) the US government recanting its opposition to germ warfare and other treaties (as I pointed out earlier the US objections are the same as those of Saddam
(vii) Pushing hard for a settlement of the Israel/Palestine dispute, then offering the Israelis incentives for nuclear disarmament

This is a long and dishearteningly difficult agenda. But step (i) is looking good and several of the others seem a lot more possible than they did when Reagan and Brezhnev were in office.

The biggest and most difficult issues relate to India and Pakistan. Someone in the comment thread referred to the idea that since S11, Americans focused on the ‘worst case scenario’, and that this justified an invasion of Iraq. But the most plausible worst case scenarios I can think of involve Pakistan – beginning either with a nuclear war between India and Pakistan or with Pakistan’s bombs getting into the ‘wrong’ hands (worse than those they’re already in, that is). If someone could persuade India and Pakistan to take $100 billion apiece in return for agreeing to a settlement in Kashmir and giving up their nuclear weapons (or even scaling back to half a dozen apiece), it would be money well spent.

As an aside, I try when blogging to distinguish governments from the people they rule and, in some cases, represent. For example, I talk about whether Saddam* will comply with UN resolutions and how the Bush Administration will respond. On the other hand, an invasion of Iraq, since it is the country that will be invaded and occupied. This isn’t always a simple distinction to draw, and I haven’t been entirely consistent, but it’s worth remembering, particularly when we think about countries like Indonesia.

* I have formed the impression that ‘Saddam’ is the least respectful form of his name, and therefore use it at all times.

Jack Kapica has a nice take on the music biz.