Thursday, March 10, 2011

The Broken Van Fallacy

The transmission went kaput on my 2003 Odyssey van last week.  We decided to repair it rather than going through all the necessary evil in getting a different vehicle.  My repair notwithstanding, I still place a lot of faith in Honda vehicles.

Together with some other work (timing belt, engine mounts, etc) I’m now $6,500 poorer, and I’m left with the same van I had before the breakdown.  There are some that might say this unfortunate event stimulated our economy.  Let’s examine this thought.

Yes, it’s true that Benson Honda is now $6,500 the richer (using simplified accounting for the sake of brevity), and for the job Benson hired a worker to perform the labor.  I’m certain many others were involved in the repair, such as the delivery truck driver who transported my new tranny in from Dallas and the service man who kept me informed of the progress.  Certainly many others were involved; in fact, too many to name here.  This is what is seen, but what about the unseen.

At the end of the day, I’m left with a functioning van, and nothing for the better.  I’m simply made whole again, and my bank account is $6,500 lighter.  Here’s the unseen.  The trip I was planning this summer to San Francisco is now on hold.  The new landscaping for my home – also on hold.  Braces for my kid – now on hold (sorry, KED!).  I had planned many things with this money, some for leisure and some for improvements, but now all is vanished.

Destruction does not create wealth, and for those who see economic prosperity in such, well then ~ as Frederic Bastiat would say, they fail to consider the unseen.  In some ways, I believe the current Administration is applying this same thinking to so-called Green Energy.  They are attempting to destroy the fossil fuel industry and replace it with “Green Energy”.  Many believe millions of jobs are waiting to be created and this is certainly possible.  But it will come at the expense of great destruction.


  1. Exploring ways to reduce dependence on foreign oil seems like a good thing to me. Our current fossil fuels are far from clean. Each time I Skype with my buddy in Hong Kong he shows me outside his window. The air pollution there is absolutely horrendous. Apparently is much worse during the winter months. No wonder such a large percentage of their population wear dust masks! I couldn't believe how many I personally saw wearing them indoors.

  2. What are your thoughts about taking away oil subsidies altogether? I feel like I have read that oil subsidies total someting like 4 billion a year. Maybe taking away all government subsidies would be a start to level the competitive playing field.

    I assume fossil fuels would likely have the competitive edge but I suppose you could insert your "property" rights argument into the equation at that point. For example, if you were a citizen of a city in the U.S. polluted like Hong Kong maybe you could sue the fossil fuel producing company that was causing/creating health problems. Maybe that type of pressure would make clean energy alternatives the most affordable and appropriate.

    Getting off foreign oil may even benefit what we spend on national defense. I'm a supporter of putting all ideas on the table for evaluation. That's why you've often heard me say we should study all health care systems in the world so that we can learn what works and doesn't work. I'll never agree with those that prefer sticking their heads in the sand and repeating affirmations like "The U.S. is the very best at everything" without facts to back it up. That behavior seems immature and irresponsible to me.

  3. Hooksta,

    I don’t know enough about the oil industry subsidies to comment. Some folks may suggest that the method we allow oil companies to depreciate/expense oil well exploration are subsidies. I’ll have to do more research, but you know my stance on gov’t subsidies. One subsidy we should definitely end is ethanol. Terrible policy.

    We will probably never get to a true zero emission vehicle, so this should not be the goal. The left’s dream that one day we’ll all be driving around in cars running on air is pure fantasy. Oil may be dirty, but it's cleaner than coal. I’d say the total overall benefits (of oil) far outweigh the costs.

    That a gallon of gasoline can propel a 3,500 lb. vehicle down the road at 60 mph for about 20-30 miles is amazing, and difficult to compete with. Unless gas rises and remains above $5 gallon, it’s difficult for any “green” energy to catch hold with consumers. Europeans still use gas and look at their costs.

    Nearly every single car on the road in the U.S. runs on gas that was derived from oil. Half that oil was imported. 20 Years from now, the overwhelming majority of cars will still run on gas derived from oil. We can choose to enact policies to utilize our own stocks of oil or we can import. Why hasn’t the administration chosen natural gas as an alternative to gasoline? The US has probably a 100-year supply of natural gas. It’s clean burning, plentiful, and (relatively) transportable. With a modification, current gasoline engines can run on natural gas.

    I’m all for alternatives, but only if they can compete fairly (without subsidy) with gasoline. The beauty of the market (which is to say you, me, and many other consumers) is consumers will choose the best alternative fuel. The problem is, we can’t force that choice on them, and we can’t know in advance what it will be. It will just happen, and it will be a beautiful thing so long as government stays on the sideline.

  4. I'll weigh in on just a couple things.

    1) There should be no corporate subsidies. Nor should there by tariffs, quotes, or other price controls. All of these simply distort markets and/or increase the cost burden on consumers.

    2) Interesting discussion about Hong Kong. I have read once, and not been able to track it down again, that in the U.S. prior to tort reform in the 1860s, citizens could sue businesses for violating property rights via pollution.

    The Hong Kong example has complications though. Who is ultimately responsible for the pollution? It sounds like there'd be a lot of things contributing to daily pollution. That's quite a matzo ball.

  5. As I mentioned I would prefer all ideas on the table over digging in to support oil exclusively. Like you I am far from an expert on energy, but I've read hydrogen burns up to eight times more efficiently than petroleum. (I did stay in a Holiday Express the other day) When it comes to destruction (physical or environmental), polluting the air (or another's property/space), and/or risking national security I think free market principles should be open to challenge and question. On the surface, water as emission sounds better than what we have currently.

  6. Here's a Mises Daily post (from today!) that addresses the gas price issue.

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  8. For the most part I approve of state and federal gasoline taxes....assuming they are using the money to maintain the local highway and interstate system. I say that because it seems like an appropriate way to collect a "usage" tax.

    For example, Wal-Mart has an enormous fleet of semi's running constantly on the highway system at 75,000+ gross lbs per truck and trailer. I'd like to assume they are putting more wear and tear on the highway than I am in my passenger BMW 5 series. Now I am a traveling salesman and I probably get more use and put more wear and tear on the highway than most. Because I drive more I fill up more and thus pay more in taxes. If I had a lighter car I would largely assume that I would put even less wear and tear on the highway and get better gas mileage....thus paying less taxes for fuel.

    Republican, President Eisenhower's socialist policies of building a government funded interstate system is one of the most significant reasons commerce boomed in the U.S. Not only did this help distribution of products but even boosted the economy through personal trips/vacations and also provided an effective means for moving our military from point A to point B. I have a hard time believing private corporations would have done this...even if they could make profits from charging tolls.

    Side point: I think we had some of the largest marginal tax rates in our history under Eisenhower. I believe I have read it being as high as 91%. Wouldn't that make Glenn Beck's head explode!?

  9. Eddie,

    Is there any evidence that the interstate system has, on net, increased economic activity?

    The alternative may have been more railroad and air freight, and increased usage of local roads for short trips. In other words, the interstate system may have benefited trucking companies at the expense of rail and air freight.

    I did a quick Google Scholar search, and couldn't find any comprehensive studies on this issue, but there must be some. Would be interesting to look at more carefully.

    Note the side benefit of less trucks and more rails - less crowded roads & pollution (yay!).