Thursday, June 12, 2008

More Math for the Masses

Part of economics (and life) 101. If you want more of something, then you encourage the source to produce more. If you want less of something, then you discourage the source to continue it's current activity. This approach works with young children, teenagers, employees, business competitors, business suppliers, foreign countries, family members, corporations, and just about anybody else.

Therefore the following equations can be offered:

Activity + Positive Reinforcement = More Activity
Activity + Negative Reinforcement = Less Activity

Most people should be able to follow that logic - even Senators and Congressmen. So, just by replacing the generic with the specific we arrive at:

Gasoline Production + Windfall Profit Tax = Less Gasoline

For proof of this theory please reference the Carter administration and the summer of 1979. Delivered July 15, 1979 by President Jimmy Carter:

Congress must enact the windfall profits tax without delay.

Beginning this moment, this nation will never use more foreign oil than we did in 1977 -- never. From now on, every new addition to our demand for energy will be met from our own production and our own conservation.

You know we can do it. We have the natural resources. We have more oil in our shale alone than several Saudi Arabias. We have more coal than any nation on Earth. We have the world's highest level of technology. We have the most skilled work force, with innovative genius, and I firmly believe that we have the national will to win this war.

Carter got the alternative fuel part right. He also knew that we could not continue to use more oil products than we produced. Too bad we didn't learn from those painful moments.

However, on the point of a windfall profits tax on the oil companies he really got it wrong. We really can not allow for a mistake like the one we made in 1979 to be repeated. We really can not afford to have our investments, many of which contain oil stocks, to be deflated due to falling oil company securities. We really can not afford a return to Carter's fiscal policy.

##That's my opinion##


Beth said...

Those who do not learn from history are doomed to repeat it.

BB-Idaho said...

Carter was a nuclear engineer. As such, he approached problems like
finite source oil head on. To his
discredit, he was not a leader.
It is possible to do well in the market..just do the opposite of what Larry Kudlow recommends. :)