AEIdeas

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Discussion: (9 comments)

  1. By coincidence, I read this quote from Dow CEO Andrew Liveris this a.m.:

    “When natural gas is not exported or burned for energy but instead used as an ingredient in manufacturing processes, it creates eight times more value across the economy and five times the number of jobs in the supply chain,” Liveris said. He called for a national energy policy that provides manufacturers, who consume one-third of the energy in the U.S., with more clarity and predictability concerning energy availability and cost.

    Can anybody confirm the validity of his assertion (8x more value?) if nat gas is not exported?

    1. morganovich

      moe-

      1. that sounds like some pretty shady accounting to me. it sounds to me like he is trying to claim that X grams of a chemical or a plastic are worth more than Y KWH of power made from the same gas. wanna bet he left some inputs out of the “value” side for ingredient use?

      2. this is a self defeating argument, no? if it provides so much more value, then he certainly ought to have no trouble bidding for the gas and buying it. i mean, if he can get $8 of value from the gas and i can only get $1, he ought to be able to buy all he wants without fear of me overbidding him. what a fraud.

      3. what he’s really doing is trying to mask theft as “public good”. what if i could generate 8X more public good and tax revenue by taking liveris’s house and turning it into a museum of rent seeking and corporate cronyism? i mean, surely if we all used it, we could get a great deal more out of the house. thus, he ought to be required to sell it to us way below market price. after all, its for the common good, right? don’t we all want 8X the value from an existing resource?

      somehow i doubt dear andrew is going to support this same argument when he’s the one who has to give up property.

    2. Actually its a repeat of a very old argument that in one sense lead to the American revolution. Mercantilism holds that it is best to export items with the highest value, not raw materials. The idea is partly to maximize employment by increasing the labor content of exports.
      There is another interest that wants low gas prices everyone that pays an electric bill. Low gas prices have resulted in lower electric bills, as well as lower gas bills for home heating, is being a consumer a special interest? For the consumer not exporting is in their interest unless they own stock in a gas producing company. (Assuming lower utility bills are in their interest) This also applies to businesses. (Another industry that might benefit is aluminum, whose plants in Tx use power from natural gas)

      1. morganovich

        lyle-

        “For the consumer not exporting is in their interest unless they own stock in a gas producing company.”

        unless, of course, the consumer values things like freedom or buys imports that would be cheaper due to a better trade balance if exports rose etc.

        further, it presumes that the consumer does not work for a gas company or for a company that sells anyhting to a gas company or to a company that sells anything to a company that sells to a gas company or, of course, that they work for a company that sells anyhting that a gas company employee buys.

        suppressing profits at a gas company offsets increasing them at an aluminum company. it’s (at best, and then only in theory) a zero sum game and in reality always a negative sum one as it prevents gas output from increasing as much as it would if it could be exported.

        this is why mercantilst ideas will ALWAYS result in less wealth than free trade, not more. the imposition of tariffs or export restrictions ALWAYS results in a deadweight loss for the imposing state.

        stop and think about it for a moment and the reason why becomes perfectly obvious.

        if you produce natural gas and i use it to make steel, then if i can prevent you from exporting and keep your cost low, then all i can do is shift costs.

        if i buy from you for $100 what would have cost $200, it’s a zero sum shift from you to me. i can then pocket that profit or pass it on to customers etc, but NOTHING of actual value has been created.

        but value HAS been destroyed.

        that value is the value of my exports. that would lead to higher prices, more incentive for me to invest, greater gas production etc and therefore greater profits for me which leads to more dividends, wages, etc which spreads out into the rest of the economy.

        blocking exports can only increase your profit at the expense of mine and lead to no net gains. you export too, then you can keep the profits from before AND make more from overseas which makes the overall domestic economy larger and more profitable.

        1. morganovich

          sorry, that should read “the value of your exports”. in that whole second to last p-graph i was thinking as if i were the gas producer, when i had stated that you were.

          flip all the “my” to “your” there. i was speaking of the gas producer. i made the same error in sentence 1 of the last paragraph before getting it right again.

          1. sorry, that should read:

            “that value is the value of my your exports. that would lead to higher prices, more incentive for me youto invest, greater gas production etc and therefore greater profits for me you which leads to more dividends, wages, etc which spreads out into the rest of the economy.

            blocking exports can only increase your my profit at the expense of mine yours and lead to no net gains. you export too, then you can keep the profits from before AND make more from overseas which makes the overall domestic economy larger and more profitable.”

            there.

        2. Note that the issue is some benefit from the exports, while all benefit from the lower electric rates. This is of course the flip side of the offshoring argument were all benefit from free trade but some loose their jobs because of it. The companies are only doing what everyone always does and is the primary rule look out for #1 because no one else will. They see blocking of exports being in their interest. The third order effects you cite occur but are to small to measure. I might add that owners of gas rights to the group that want the exports, and possibly the local governments where the gas is located, as the value of the mineral go up and thus the property taxes.
          So some loose and some win no matter how you go, the question is of course what is the greatest good for the greatest number.

          Note that if gas production finally extends to Europe then investing in LNG liquification plants may be as bad a deal as investing in LNG import plants in the US was. (The only place for LNG exports IMHO is from Alaska, build the pipeline south, and export to Japan)

          1. morganovich

            no lyle, that’s an incomplete assessment.

            there is NO net benefit from lower electric rates, just a shift in profit from one place to another at the expense of freedom and, therefore, the misallocation of resources and the long term underproduction of gas.

            you are applauding a net loss of economic activity because it allows some people to steal profit from other by taking away their liberty.

            if the standard is, as you claim “what is the greatest good for the greatest number” then banning exports is a clear loser.

            but, that’s an asinine standard. that is the philosophy of a totalitarian arranging matters among slaves and subjects.

            you have earned X money in you life. shall we ban you from ever buying a non US made good or selling your labor to anyone outside the us because it would “do the most good for the most people”?

            after all we could all hire you for less. we could all sell you items for more. it would benefit all of us but you.

            does that sound like a program you want to get behind?

            i doubt it.

            hell, if it works so well overseas, let’s go even more whole hog. how about you cannot work for or sell to anyone not in your town or buy anything made outside it?

            you guys will be rich in no time!

            liberty stems from rights. if you have a right to sell your labor or the products of it to whomever you choose, you are better off. you seem to take the view that it’s OK to take the right away from others if it would benefit you, yet i doubt you are willing to give up such rights yourself.

            your line about “some win and some lose no matter how you go” is pure obfuscation of the real issue.

            if i produce gas and can sell to whom i please, you do not lose. you pay a market price, just like everyone else. to call that losing is to make the bad assumption that you are somehow a “winner” if you can steal from me and take away my rights and that such practices are ethical or economically sensible, neither of which are true.

            to claim that being prevented from taking away the rights of others is somehow a “loss” for you is pure nonsense. that’s the rationale of a tyrant.

            further, you keep forgetting the other losers you create by getting your cheap electricity.

            what about the car dealer near me that i would have bought a car from? what about the grocer or the clothing retailer or the contractor that would have put in my new kitchen?

            their loss will ALWAYS be greater then the gain you all get form cheaper electricity.

            this is because i am forced to sell gas at a lower price. every dollar that you save comes right out of my profit. that is zero sum. but, of course, because i could have exported gas at higher prices i would have produced more, invested more in greater production etc (as one does in response to price)

            you seem mired in the broken economic ideas from 200 years ago. mercantilism is just populist crap and political grandstanding that takes advantage of the credulous and economically illiterate by promising to make them the beneficiaries of theft when, in fact, they wind up being the victims.

            looking out for #1 is one thing and all well and good. but when you cross the line into taking away the rights of others to do it, you are just a common thief.

            demanding cheaper power by taking away my rights is, in the end, no different that mugging me in an alley.

            i don’t think you have thought this through very well lyle.

  2. morganovich

    mark-

    as deserving as the companies you nominate are for such an award, i really must nominate general electric who runs entire business segments (like wind power) based on subsidy, gets financial subsidies and liquidity guarantees like a bank, consistently pushes horrendous legislation around climate change for personal gain and tax breaks.

    if you want the rent seeker of the century, i think it’s really got to be GE.

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