There's hope for the world

Nickelback may have been the top selling band of the Bush era, but the world isn't quite over yet. The Arcade Fire's transcendent third album, The Suburbs, just hit #1:

They did it, folks-- more people bought Arcade Fire's third album, The Suburbs, than any other album in the United States last week. The news comes courtesy of their label, Merge, and label mates Spoon, who Tweeted, "Let the record reflect that Merge Records is the NUMBER ONE LABEL IN THE USA! Here's to Arcade Fire and Merge: #1 -- 156k copies sold." This comes after news of the group triumphing over the UK album charts this week as well, according to Billboard.

This is the band's first chart-topping album in the U.S. Their last LP, Neon Bible, debuted at number two. Independent rock music is pretty popular now, apparently!

For a little while at least, everything is just in the music world.

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A shocking moment of honesty from Big Oil: ConocoPhillips CEO says offshore oil isn’t economical without big government support, demands bailout

One of the complaints free marketeers frequently level against renewable energy is that it can’t survive without government support, whereas dirty fuels are economical in their own right. So when a major oil company CEO admits that offshore oil is only economical because of government support, that should cause any so-called libertarian to reconsider his beliefs.

We already knew that fossil fuels hardly compete solely on their own merits. Far from it: subsidies for dirty fuels dwarf those for clean energy. From 2002-08, the US spent about seven times as much subsidizing dirty energy than it did renewables. And an analysis by Bloomberg found that worldwide, governments spend twelve times more subsidizing dirty energy: $557 billion per year for fossil fuels vs. only $43-$46 billion for renewables. Government-dependent indeed.

But those are just the explicit subsidies: cash directly given to companies, or requirements to use specific fuels. The true shocker here is how heavily offshore oil development depends on anti-market protection from liability in order to be profitable. At least, that’s what ConocoPhillips CEO Jim Mulva unwittingly declared the other day. In an article entitled, “Unlimited liability for Gulf oil spills would kill development,” the Financial Times reports:

Jim Mulva, ConocoPhillips’ chief executive, says that the unlimited liability some are proposing in Congress to punish operators for further spills in the Gulf of Mexico is inappropriate. That would raise the question of how many of the smaller companies operating in the Gulf could afford to get back out there to work following the lifting of the moratorium and even whether the risk reward equation would favor going out into the waters again for the biggest of companies. He said to analysts:

We will not develop the resources if we have that situation.

It may have sounded like a threat, but it is also a realistic assessment of the situation.It is true that an increasing number of companies have been looking to the Gulf for prospects, given that it has been a good source of oil and natural gas over the years and new technology has made it even more so. But they will not risk their entire futures to get at the resources.

Mulva’s intent, of course, was to argue against imposing unlimited liability for oil spills. But assuming his statement was more than bluster, his implicit admission is that the risks of oil spills are so great that in a free market, the costs of paying for spill damages would outweigh the benefits of developing the resources.

Of course, the situation in the Gulf is hardly a free market, and neither oil companies nor Congressional Republicans have any interest in creating one (corporate welfare is good for the shareholders). Liability for damages from oil spills is capped at $75 million, which means that oil companies do not have to account for the full costs of oil production in their resource planning. It’s an implicit subsidy (or more accurately, a bailout): no matter how bad the damages to the tourism industry, the fishing industry, and the intrinsic value of the coastal ecology, oil companies will only ever have to pay $75 million to compensate them. Either the taxpayer picks up the tab, or the non-oil industries are just left with losses, while Big Oil gets bailed out.

In other words, when Jim Mulva or coastal congressmen say, “lifting the liability cap will hurt production and kill jobs,” what they’re actually saying is, “offshore production only occurs because of market-distorting protections that insulate companies from the consequences of their decisions and lead to overproduction of a resource.” Would making oil companies responsible for damages they cause reduce oil production and oil jobs? Probably. But jobs and money are not reasons to subsidize irresponsibility. There’s no constitutional right to drill for oil: if paying for the full cost of oil spills would make offshore drilling unprofitable, then offshore drilling probably shouldn’t be happening, and it’s not the government’s job to make it profitable.

And let’s not forget that for every offshore driller who’s hard at work, there’s also a fisherman whose fishing grounds are ruined by oil, and a hotel worker whose rooms are empty of tourists. If oil companies are insulated from liability, it means that drilling is necessarily happening in an economically inefficient manner, which likely means that the jobs destroyed by oil are greater than the jobs created by it.

If companies have rights just like people, then they also have responsibilities. Personal responsibility is not just for individuals.

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Could Paul Ryan’s plan to abolish Medicare actually make sense?

Rep. Paul Ryan wants to get rid of Medicare and Medicaid, and replace them with vouchers to buy health insurance. In conservative circles, the idea is quietly ignored because it could be unpopular. In media circles, the idea has christened him as the intellectual leader of the Right (not because it’s a good idea, but because it’s an idea—a rare sight amount today’s Right). And in liberal circles, the idea has been lambasted as one which would gradually result in poor people unable to afford health care.

People poo poo the Ryan plan because his vouchers would increase more slowly than health care expenses currently are. So it stands to reason that over time, the voucher would buy less and less health care.

Of course, the key assumption here is that health care costs would continue rising at the same rate after Ryan’s plan were passed. But that’s not necessarily a safe assumption, because our willingness to pay a lot for health care isn’t just a result of high health care costs—it is also a cause.

Part of the problem with Medicare is that because it pays for unlimited health care, providers and medical technology manufacturers have little incentive to control costs. If the trough of health care dollars is ever expanding, just line right up and drink.

But if instead of unlimited insurance dollars, people were given a fixed voucher, health care providers would have to compete for a limited pool of health care dollars. Patients would be more hesitant to consume health care, and when they did consume it, they would be more likely to shop around for lower costs (assuming information on quality and costs were available to them). This would give providers a strong incentive to keep costs down. In this sense, it’s possible that the Ryan plan could bring down the rate of increase in health care spending so it’s more in line with the money available to pay for it.

Moreover, experience in developing countries suggests that lack of money to pay for health care doesn’t discourage innovation—it simply shifts innovation And in poor countries where people DON’T have unlimited Medicare money to spend on health care, companies like GE are innovating low-cost medical technologies that deliver 50% of the benefit for 10% of the cost of similar technologies in the West. From a previous post:

Check out what GE Healthcare is doing in India. Conventional wisdom holds that with a per capital GDP only 5% that of the United States', India would be a poor market for a company that makes million-dollar imaging machines, but that's exactly where GE Healthcare decided to invest. And the risk paid off. The need to serve people without much money to spend on health care has produced a $1,000 electrocardiogram device and a $15,000 PC-based ultrasound machine - roughly 15% the price of the top-end devices sold in the US. And costs keep falling. In fact, today GE is finding markets in the United States for these "50% solutions at 15% prices":

Consider GE’s health-care business in the United States. It used to make most of its money on premium computed tomography (CT) and magnetic resonance (MR) imaging machines. But to succeed in the era of broader access and reduced reimbursement that President Obama hopes to bring about, the business will probably need to increase by 50% the number of products it offers at lower price points. And that doesn’t mean just cheaper versions of high-tech products like imaging machines. The company also must create more offerings like the heated bassinet it developed for India, which has great potential in US inner cities, where infant deaths related to the cold remain high. And let’s not forget that technology often can be improved until it satisfies more demanding customers. The compact ultrasound, which can now handle imaging applications that previously required a conventional machine, is one example.

Anticipating the effects of health care reform, GE recently announced a plan to invest $3 billion to invent 100 more low-cost medical solutions in the US. Reading the article, I can scarcely contain my optimism over companies' abilities to innovate if given the right carrots (or sticks).

In other words, we don’t have to accept the current rate of health care cost increase as a given. If it is true that the availability of health care dollars is a cause of the increase in health care costs, reducing those dollars would bring down the costs as well, making health care more affordable than many liberals anticipate.

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I actually agree with Rand Paul... sort of

Extremist Senate candidate Rand Paul is back in the headlines again, asserting that just because a mine explosion killed 29 miners the other month—a mine run by anti-government fanatic Don Blankenship—nonetheless doesn’t mean that government has any business regulating the mining business. According to The Hill:

Reform-minded lawmakers in both the House and Senate are pushing legislation to bolster the work-safety protections for miners working underground. But don't try to convince Rand Paul.

The Republican running to replace outgoing Sen. Jim Bunning (R-Ky.) in the coal-mining hub of Kentucky said recently that Washington has no business formulating mine safety rules.

"The bottom line is: I'm not an expert, so don't give me the power in Washington to be making rules," Paul said at a recent campaign stop in response to questions about April's deadly mining explosion in West Virginia, according to a profile in Details magazine. "You live here, and you have to work in the mines. You'd try to make good rules to protect your people here. If you don't, I'm thinking that no one will apply for those jobs."

"I know that doesn't sound ... I want to be compassionate, and I'm sorry for what happened, but I wonder: Was it just an accident?"

And you know what? Contrary to blogger Steve Benen, I agree with Paul… to a point. Elected officials AREN'T qualified to decide which technologies a business should implement. But that doesn't mean that government shouldn't be involved at all. The solution is simply to impose enormous liability for accidents on the mining companies, giving them an incentive to invest in better safety equipment to reduce the risk of massive lawsuits. That is, rather than require that specific accident-preventing methods be used, government should simply raise the cost of accidents and let business figure out the best methods to prevent them.

Incidentally, this is also why cap-and-trade should really be called capitalism-and-trade. In contrast to a regulatory approach that mandates specific carbon-reducing technologies, cap-and-trade is a market-based approach that gives businesses a target for carbon reductions and then allows them to figure out how to get there. A regulatory approach is uniform, costly, and sometimes hampers innovation, while a market-based approach is flexible, cheap, and spurs innovation.

The broader point speaks to the proper role of government: while government shouldn’t prescribe specific methods which business must adopt to achieve goals, it certainly has a role in determining which goals are necessary to achieve—whether a safer workplace, healthier communities, or reduced carbon emissions.