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I don't want to download shockwave to see how this site explains economics. Can you tell me if it explains what finite resources have to do with economics. I am under the impression that economist live in a complete fantasy world, as though all we need for our industrial economies is infinitely available to us. How tied to reality is this site you are offering?

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I don't want to download shockwave to see how this site explains economics. Can you tell me if it explains what finite resources have to do with economics. I am under the impression that economist live in a complete fantasy world, as though all we need for our industrial economies is infinitely available to us. How tied to reality is this site you are offering?

Well first you have to assume that economists are grounded in reality and have good predictive models.

After that it is a cinch.

A bit like having faith in God really.

 

You should not need shockwave to view the site; my firefox browser was fine.

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Can you tell me if it explains what finite resources have to do with economics.
There is very little in Economics that is unrelated to finite resources! :)
I am under the impression that economist live in a complete fantasy world, as though all we need for our industrial economies is infinitely available to us.
If this was so, gasoline/petrol would be free!

 

Unfortunately, high gas prices have everything to do with Economics and Hard Reality. The current administration's response to it might however be most appropriate to a fantasy world, but that is not a reflection on the science of Economics... :)

 

In economics, the majority is always wrong, :phones:

Buffy

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In economics, the majority is always wrong, :)

Buffy

Naughty

In economics the majority is always right. (?)

 

if you reduce prices I buy more.

If you increase prices I buy less.

Unless you are called Gucci et al

 

I am amazed that at the moment we have a "sub-prime" crisis" in both Australia and USA with diametrically opposed causes and solutions.

 

Are the economic models broken?

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Hum, I would be very glad to see an economist article that deals with resources, especially oil. I microfilmed 1920 papers for the U of O, and read a tiny article saying, "Given our known oil supplies and rate of consumption, we are headed for economic crisis and possibly war". These newspapers had funny cartoons about skyrocketing gasoline prices. However, in a very short time all industrial economies fell and the world went to war. I have not seen one explanation of the Great Depression and second world war, being the result of not being able to meet the demand for oil.

 

If economist were working with this reality, perhaps we might have made a few different decisions, such as not encouraging a life style as dependent on oil as we have, not tearing up trolley lines, not building suburban housing miles from where people work, not letting the railroad and bus services fall in decline, not encouraging the manufacturing and marketing of SUV's and those buses people for traveling in. Maintaining Carter's alternative research efforts, and efforts to get us to conserve. Our government artificially kept the price of oil down to encourage this growth. We believed Reagan who told us, it was not necessary to conserve, and we didn't object when he began granting arms to mid east and in 10 years we consumed as much oil as in the previous 100. Until recently when I said we have an oil problem, everyone argued we have plenty of oil, so we had mass ignorance. When I tried to get a college interested the book "Mineral Resources and the Destiny of Nations", I was told it wasn't important to economic theory. In some forums I am still arguing with those well schooled in economic theory about the importance of oil to the economy. So please, if you know of any economist talking about the US once being an exporting nation and now being an importing nation, or explaining state revenues based on finite resources, and how the decline is shifting the tax burden to individual citizens, I will be glad to read them. Like if this is information is being developed by economist, why does the US seem in denial?

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Naughty

In economics the majority is always right. (?)

You didn't look it up did you?

 

This is John Kenneth Galbraith's (arguably one of the most famous Economists of all time) cynical commentary that the majority of Economic predictions are usually wrong. He was being facetious, but the fact is that Economics--just like many other soft sciences--has better backward vision than forward vision.

Are the economic models broken?

Dr. Galbraith would tell you that the basic rules of Economics still do indeed work.

I am amazed that at the moment we have a "sub-prime" crisis" in both Australia and USA with diametrically opposed causes and solutions.
I think both the Bush and Howard Administrations pushed deregulation of banking rather fiercely, leading to wacky ideas (no-equity loans, interest-only payments) becoming popular, and the resulting equity instruments being sliced and diced and packaged up as "safe investments" (a few years ago here in the US you couldn't watch TV for 5 minutes without hearing a pitch about the wonders of high-return REITs).

 

Do you see differences between the US and Australia on this topic? What's Kevin doing to clean up the mess?

 

Asset-price bubbles *are* evidence of imperfect information, an issue that economists have only recently begun to address, and is a nasty hole in the science.

 

That doesn't make it irrelevant though.

 

Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable, :graduate:

Buffy

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Politics is telling the people what they want to hear, and counting on the public being too ignorant to know any better.

 

Reagan opposed Carter. The recession was caused by OPEC discovering it could could control the price of oil and use this as a weapon against the US when the US did something in their region they didn't like, such as back Israel. Carter told us we had to conserve and he invested pretty heavily in researching for alternative energy, and helped pay for solar water heaters for individual families.

 

Reagan lied to us and said this was not necessary. He slashed domestic budgets and poured our money into military spending which was used to increase our military force in the mid east. In ten years we consumed as much energy as in the previous 100. This brings us to a very expensive war and skyrocketing oil prices. I think you are avoiding this little piece of economic reality.

 

Reagan scapegoated the poor and slashed domestic budgets, and we come to a housing crisis. Imagine that. I remember when it was not mothers and with children who were homeless. I remember the first of urban sprawl, with the growing freeways these urban communities needed, and I remember trolly cars. Can we talk reality here, or is this thread just for theory?

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Economics IS theory;)

Nutronjon, I think you are trying to pick a fight with people that agree with your statement that economics is heavily reliant on resources which are finite in nature.

I certainly agree with you that Reagan stopped and then reversed any gains Carter made in conservation and alternative energy.

You seem to put all the blame of the US using as much oil in 10 years as we did in the previous 100 years at Reagan's feet. That I would disagree with as we didn't suddenly start using lots of oil, it has been ramping up pretty steadily for many decades.

Oil was very cheap and very plentiful, I don't think the great depression was about oil being finite.

I do agree that oil is getting scarce, rapidly, and that it is critical we get off oil for both the good of our society, to avoid resource wars and for the good of the environment (and thus us;)).

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I microfilmed 1920 papers for the U of O, and read a tiny article saying, "Given our known oil supply and rate of consumption, we are headed for economic crisis and possibly war". These newspapers had funny cartoons about skyrocketing gasoline prices. However, in a very short time all industrial economies fell and the world went to war. I have not seen one explanation of the Great Depression and second world war, being the result of not being able to meet the demand for oil.

 

Here's one:

The Imperial Navy eventually began to feel that it did not have enough fuel reserves....To remedy this deficiency and ensure a safe supply of oil and other critical resources, Japan would have to challenge the European colonial powers over the control of oil rich areas such as the Dutch East Indies. Such a move against the colonial powers was however expected to lead to open conflict also with the United States. On August 1941, the crisis came to a head as the United States, which at the time supplied 80% of Japanese oil imports, initiated a complete oil embargo.

 

Hum, I would be very glad to see an economist article that deals with resources, especially oil.
Actually, I'd love to see a story about oil that did not quote an economist or a politician/CEO quoting an economist.

 

I think you may be using a definition of "limited resources" than I am. Maybe you want to expound a bit on that.

 

If economist were working with this reality, perhaps we might have made a few different decisions, such as not encouraging a life style as dependent on oil as we have, not tearing up trolley lines...
Well, if economists ruled the world, maybe you'd be right! Unfortunately to politicians and the public they are annoying Cassandras who always want to stop the party.

 

No one likes to hear that what is cheap today is going to be expensive tomorrow. That's why everyone is always "surprised" when that's what happens.

 

A friend of mine actually wrote a doctoral thesis on Standard Oil and General Motors colluding to rip up the trolley lines in Los Angeles after WWII, and the part of the story that makes perfect sense is their motivation that was based on pure economics: they were eliminating competition from a substitute resource.

 

Might not make sense for the long term economy, but it does improve their short-term profits, and it most certainly is an example of economic principles!

 

So the lesson here is if you hear some one who owns a business claiming there are no limits to resources, you'd better check as to *why*:

We believed Reagan who told us, it was not necessary to conserve, and we didn't object when he began granting arms to mid east and in 10 years we consumed as much oil as in the previous 100. Until recently when I said we have an oil problem, everyone argued we have plenty of oil, so we had mass ignorance.
The Republican party has worked hard to go from being Eisenhower's questioning of the wisdom of building a "military industrial complex" to being unquestioning cheerleaders of business, as if what GM's CEO actually did *not* say, that "what's good for General Motors is good for the country" was the absolute truth, in spite of what all the economists have always said (even Uncle Miltie didn't go as far as Reagan).

 

I'd love to know who the "everybody" is in your quote. I can imagine that that would be true in some very conservative colleges, but given that conservatives rail against academia in general as being all traitorous liberals, I think you'd find it hard to get this kind of reaction in most schools going back at least 30 years. I know that the mid70's gas crisis was a staple of Economics and Business school when I went to school as an example of not only artificial limitation of supply, but of the impact of *supply chain* inefficiencies (we had oil here, but not enough transportation or refinery capacity to deal with a shift that could have lessened the shock).

 

The oil can is mightier than the sword, :graduate:

Buffy

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I just stumbled across this good web site

It would be handy for economics students, teachers or those just interested to learn more.

EconSources!

 

The best way to have a prosperous economy is to

 

SHARE THE WEALTH.

 

By spreading the wealth around evenly, the MASS purchasing power enables the people to buy the merchantise that they create in the first place.

 

Mike C

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I want to acknowledge the intelligent post here. They are why I am posting in these forums and not other ones.

 

Can we stay with economics, please.

 

Buffy I googled government subsidized oil and found 85 Pages. The oldest one is dated in the 80 tys, the oldest book I have on the subject is a 1990 book. So how long do you think people have been talking and thinking about the fact that oil is finite? Just weeks ago, with shock, Bush asked, who would think using corn for ethanol would send the price of food up. We need a president who understands such matters and Carter is the only politician I know of who understood. (Not even Obama has a grip on this reality.) Carter was President in 1977-1981, following the 1973 OPEC oil embargo. He was a farmer. Guess who knew what using corn for fuel would do to food prices? Notice it is during his administration that this vitally important information about conservation and oil, started coming out. Note that Reagan told us conservation was not necessary, and everyone believed him, and the country worships Reagan for what he did to our economy, AND PLEASE NOTE, REAGAN SLASHED DOMESTIC BUDGETS AND POURED OUR MONEY INTO MILITARY SPENDING, and destabilize the mid east by giving this country weapons and not that one, escalating the likelihood of war and the destructive potential of war. This includes allowing Israel to become a nuclear power, and greatly favoring Israel with our military gifts and technology, and annual foreign aid payments. This is about more than energy policy, and I think we should stay with this discussion.

 

I perhaps get over excited about these things, but you know how proud we are of being the richest nation in the world. You know how that makes us think we are superior, and therefore have the right, and perhaps God's directive, to dictate to the rest of the world what needs to be done.

 

Before WWII we barely had a standing army. We were very unprepared for war. We sure didn't see ourselves as the world's police. However, we were the world's supply of oil, and new oil fields were being discovered, with a whole new importance of having control of the mid east. However, this was not totally unknown before WWI. The Rothschild's were aware of oil in the mid east, because they had developed a trade in oil for kerosene. This competition for control of regions, should included knowledge of the first and second world wars, as well as knowledge of the Cold War, and our present occupation of the region. When the USSR fell, I am sure the Neocons had a moment of panic. Without communist, how could the US justify its activity in the mid east? Thank goodness for terrorist, who give the US an excuse to maintain a strong military strength in the mid east. To bad their lies were discovered.

 

I am kind of loosing the point- our wealth and abundance, and position in the world is, because of what oil did for our country. While we turn up our noses at those undeveloped third world countries, and justify using their soil to feed our nation while the poor people in those countries starve, let us give some thought to what makes one country poor and another rich. LET US TALK ECONOMICS, OKAY? The whole picture, not just energy policy, but water and food too.

 

Green Scissors: An Overview of Senate Energy Bill Subsidies to the Fossil Fuel Industry

 

Subsidies for oil and natural gas began in 1916 with the federal government creating its first tax breaks for oil and gas production. After 90 years of taxpayer-funded subsidies, the oil and gas industries are flourishing. Yet, taxpayers continue to contribute between $4 billion and $30 billion annually to the energy sector.

 

The Quaker Economist #142 - Oil Addiction

 

Many countries of the world subsidize their energy industries, but the USA and several third world countries (Venezuela, Indonesia, Malaysia, and Bolivia, for example) stand out in this regard. These are the countries that subsidize gasoline, on the theory that lower gasoline prices will help domestic business and cause more rapid growth.

 

I moved on to bio-diesel, which doesn't require as much fuel to produce as ethanol, but still has the problem of turning food into fuel. As America became SUV obsessed, I wrote editorial pieces and tried to get people to realize that the low fuel prices were temporary. We needed to find other ways to fuel our lifestyles than imported oil, for our security, self-sufficiency, our economy, and for the environment.

 

Peak Oil News: Debate: Is the ethanol boom about to bust?

 

Now, with the support of the current administration, we are subsidizing ethanol as an alternative to imported oil. Our net gain in energy is almost negligible. It raises the price of grain, corn, and anything that requires grain: cattle, breakfast cereal, chicken, even other foods that would be grown but are converted to grain production to fuel the ethanol industry.

 

Were ethanol production not subsidized, it would fail for economic reasons. I support the concept of subsidizing an emerging industry if there is a viable future, but ethanol will eventually become the "Great Boondoggle" of this period in America's history of fuel consumption.

 

As electric cars, not hybrids but all electric, become viable, which we are close to achieving, the ethanol industry will become extinct. How long will that be? I'm guessing it will be less than ten years from now. By the time enough plants are built and the government realizes that we are subsidizing a doomed industry and withdraws its support, most will not be paid for and there will be a bankruptcy crisis in the ethanol industry, which we'll have to bail out or continue to support with subsidies. Farmers, who are investing in ethanol co-ops will lose their farms to corporations ready to consume the farm land, as more farms are turned into cash cows for corporations who will use imported laborers at low wages, deplete the land's nutrients and then build residential sprawl across former farm land.

 

Folks, we are facing a soil and water crisis and using corn for fuel is perhaps the worst thing we can do. Corn crops are hard on the soil, depleting it faster than other crops. We have been consuming underground water faster than it is replaced, and some areas, like in Azizona, have sunk 15 feet. These aquifers are being destroyed and can never again be refilled with water when the land collapses. Please, this is about more than energy policy, it is about who lives and who dies.

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Can we stay with economics, please.
Nutro, if you want to say on economics, please refrain from inserting a litany of political jabs/conjecture in the starting post.
So how long do you think people have been talking and thinking about the fact that oil is finite?
Oil is indeed finite, but it is a different "finite" depending on price. At $120/barrel, there is more oil in the tar sands in the western US that there is recoverable in Saudi Arabia.
We need a president who understands such matters and Carter is the only politician I know of who understood.
Sounds like economics to me
Note that Reagan told us conservation was not necessary, and everyone believed him, and the country worships Reagan for what he did to our economy..
More economics?
REAGAN SLASHED DOMESTIC BUDGETS AND POURED OUR MONEY INTO MILITARY SPENDING
Ah, economics. Domestic spending rose under Reagan. Military spending rose faster
destabilize the mid east by giving this country weapons and not that one, escalating the likelihood of war and the destructive potential of war. This includes allowing Israel to become a nuclear power, and greatly favoring Israel with our military gifts and technology, and annual foreign aid payments. This is about more than energy policy, and I think we should stay with this discussion.
It would be really great if you could do that. I am pretty sure that some intelligent folks believe that our support for Israel is a little broader than energy policy.
...you know how proud we are of being the richest nation in the world. You know how that makes us think we are superior, and therefore have the right, and perhaps God's directive, to dictate to the rest of the world what needs to be done.
...and the economics??
Without communist, how could the US justify its activity in the mid east?
Is this a serious question?
Thank goodness for terrorist, who give the US an excuse to maintain a strong military strength in the mid east. To bad their lies were discovered.
..and the economics?
I am kind of loosing the point- our wealth and abundance, and position in the world is, because of what oil did for our country.
I think it could be fairly argued that the US economic position is based at least several of the following (unprioritized):

 

1) Abundant natural resources (of which oil is only a part, and only important since about 1900)

2) Liberal immigration policies, which fostered acceptance of a large number of hard-working entrants into the job market

3) Open markets

4) Low taxation (although less true now than in 1900)

5) Significant cultural orientation toward success based on hard work, versus success based on class or entitlement

6) Orderly markets, orchestrated under orderly rule of law

7) an educated workforce

 

Putting "oil" as the primary engine seems a little narrow. Remember that Japan trounced the US (in terms of growth and competition) for most of the last half of the 1900s, and they have NO oil at all.

While we turn up our noses at those undeveloped third world countries, and justify using their soil to feed our nation while the poor people in those countries starve,
I am not sure about this, but I think the US is a net food exporter. Could someone else editorialize on this?
let us give some thought to what makes one country poor and another rich. LET US TALK ECONOMICS, OKAY?
In that case, lets talk about things that make all countries rich (not trading off one for the other). NAFTA (for example) benefited all three participants. Even though polls show that over half of all respondents say in each country think the the other two countries benefited more (a conclusion that is arithmetically impossible), the benefits of NAFTA (for all participants) were pretty clear. Is this an example of what you mean?
..we are facing a soil and water crisis and using corn for fuel is perhaps the worst thing we can do.
Agreed.
Please, this is about more than energy policy, it is about who lives and who dies.
Maybe. But US support for corn-based ethanol is a LOT more about farm policy (that is, pandering to farmer votes in the midwest) than about energy policy
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I think it could be fairly argued that the US economic position is based at least several of the following (unprioritized):

 

1) Abundant natural resources (of which oil is only a part, and only important since about 1900)

2) Liberal immigration policies, which fostered acceptance of a large number of hard-working entrants into the job market

3) Open markets

4) Low taxation (although less true now than in 1900)

5) Significant cultural orientation toward success based on hard work, versus success based on class or entitlement

6) Orderly markets, orchestrated under orderly rule of law

7) an educated workforce

 

Putting "oil" as the primary engine seems a little narrow. Remember that Japan trounced the US (in terms of growth and competition) for most of the last half of the 1900s, and they have NO oil at all.

 

Okay, let us take oil out of the economy and return to 1899, and see how our economy grows. What are we using for light? What are we using for transportation? Do we have roads? Why? What are they made of? What is in the local grocery stores and how did it get there? Here is some information for determining what is in a grocrery store.

 

World Without Oil

Agribusiness is totally dependent upon large machines and artificial fertilizers and pesticides in order to raise, harvest, and transport the vast quantities of grain, fruit, and vegetables we enjoy today. Fertilizers and pesticides require oil and natural gas, not only in their distribution, but in their manufacture as well. Also, feed for beef cattle, chickens, and turkeys depends very heavily on these same fertilizers and pesticides. When cheap sources of oil and gas are not readily available, the chemical industry passes the increased costs on to agriculture. The increasing prices for fertilizers and pesticides then results in increased food prices for the rest of us.

 

Here is a great site for those curious about a world without oil

 

Learn About :: World Without Oil

“As for me, I’m a different person

thanks to WWO.”

PLAYER MTALON

WWO’s greatest success may be: it was engrossingly, breathtakingly fun. More than immersive, it was meaningful and satisfying: “Usually games take away from real life,” player Ironmonkey wrote, “but WWO taught me a lot, lowered my electric bill, and focused me on doing things that matter to me.” WWO’s success on a small budget has opened the door for similar games that can engage mainstream Internet users with climate change, education reform, governmental policy and other timely, vital issues.

 

And just for fun, what does the second world war look like without oil, and what is the position of the US at the end of this war, without oil?

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Nutronjon, I appreciate your desire to have a discussion without emotional arguments, name calling, etc.

However, as Biochemist asked, why would you post such a desire for a discussion about the facts and then through in a bunch of inflamitory comments about politics and politicians?

 

Okay, let us take oil out of the economy and return to 1899, and see how our economy grows. What are we using for light? What are we using for transportation? Do we have roads? Why? What are they made of? What is in the local grocery stores and how did it get there? Here is some information for determining what is in a grocrery store.

 

I am not sure what your goal is here. You can basically look at history to see what we would do without oil, expecially since you took us back to 1899.

This has very little in common with what would happen without oil today. The genie is out of the bottle and you can't go back:)

If oil supplies started decreasing rapidly (10% a year) we would quickly come up with other alternatives.

Oil would stop being burned for electricity.

Autos would rapidly start using more efficient engines or alternative fuels (not ethanol).

More freight would shift to trains, less to trucks.

More nuclear plants would be built for future energy production (10-15years).

More wind, solar, geothermal and hydro generators would be built.

 

Don't get me wrong, this would be a major economic upheaval. And I think a supply decrease of 10% a year is actually a best case scenario as the end result is painfully obvious.

I think if we get into a 1-2% decrease each year people will continue to think: 'oh, we can make that up, it isn't really a problem'.

 

Now, if you want to talk politics, I am all for it, but I would suggest it in another thread so we don't cloud the economics side of things;)

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You didn't look it up did you?

Suckered again.:(

I wonder if Galbraith could make millions again today. He seems to be one of the few economists who have.

 

 

 

 

Do you see differences between the US and Australia on this topic? What's Kevin doing to clean up the mess?

No the picture here is very different, yet the results are the same.

With a little help from the sub-prime-crisis (My local council -always crying poor -just blew 25mil on sub prime ivestments.)

The banking regulations here are good, few cowboys survived the 80's.

Some banks are even rediscovering customer service.

Home loans are lent to people who can afford them in a very tight housing market. In Sydney it is almost impossible to rent a house let alone buy one.

For the last 18 months the Oz 'Fedral Resevre' equivalent has been putting up interest rates to over 7%. (?)I think we are up to about twelve increases now.(They are independent of government)

This has not slowed the economy or spending.

Our dollar is rising against US$ and some others.

Unemployment is at a 12 year low.

 

But the high house costs ($500,000 -2mil = in Sydney) has made the housing interest rates (well over 10%) begin to bite. So foreclosures seem imminent.

 

The banks have also added 1% for the "difficulty in getting funds" caused by the US sub prime woes.

 

As I understand it USA loans were made to people who couldn't afford it in a poorly regulated market and with a 20% housing oversupply.

You Reserve has been putting down rates (to 1.5% now?) and you dollar has been falling, unemployment is up.

 

So you see, two diametrically opposite scenarios with the same effect -people are finding it hard put a roof over their heads.

While I guess the next step is to bail out the rich and stupid.

 

So are traditional economic "predictors/models" working?

You put the price of money up people slow spending - no the opposite is happening in Oz.

You put the price of money down people start spending -no the opposite is happening in the USA.

 

 

Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable, :confused:

Buffy

I want better than that from my politicians.

 

Sorry for my slow reply. I have been a bit ill lately.

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