Barack Obama signals that he may not know that much about economics,
Are oil companies, I ask, more morally culpable than other industries that would not be subject to Obama’s proposed tax?
“Not in the view of most economists,” Obama replies. “I’m well aware of the argument (about) singling out oil companies rather than soda pop manufacturers,” he says.
Yes, but what does Obama himself believe? “I think oil companies are amoral. They want to make as much money as they can for their shareholders, which is what corporations do,” he says. “The difference is the nature of the kind of outsized profits they make that may have no relationship to their investments or their production. The fact, for example, the shortage of refinery capacity could actually increase their profits so the less they invest the more they make indicates that you are not dealing with someone making widgets out there.”
Unfortunately for Senator Obama it is true for any industry that when there is reduced investment in capacity prices go up as do profits. The idea that the oil market is somehow special is a specious argument. For example, a policy that gave an incentive to farmers to leave land fallow instead of planting crops is designed to increase the price of said crops and increase the profits for the farmers/firms involved. And lets be clear one reason we aren’t seeing new refineries being built is, at least in part, due to government regulations.
Of course I expect this kind of pandering nonsense form politicians.
Via Greg Mankiw
