I am, I admit, a paleocapitalist and (mostly a) paleoconservative. That said, I do not think oil company executives – or any other corporate executives – should have to defend their company’s profits, unless illegally gained. For that reason, this meddling strikes me as ridiculous. Lest we forget, oil is among the most volatile and fragile commodities markets, and one in which extremely large players necessarily dominate (at least on the transportation and distribution sides, if not necessarily in exploration). Large companies + large demand = large profits + large risks. There is always the risk, if not the certainty, that much of the profits major oil companies set aside today will disappear tomorrow due to actions by OPEC or Chavez, diminishing supply, or some other forces beyond any executive’s control.
Part of living in a capitalist society means accepting this state of affairs as generally good. We allow – even embrace and reward – those who are willing to take risks and build socially productive enterprises, because they reduce inefficiencies in a given market in ways that governments, time and time again, have been proven incapable of doing.
Meeting a demand with a legally obtained supply at a legally determined price the consumer is willing to pay is called being a good business person. That never should require defending one’s rational actions to the government.
I’ve been rather silent on here in the last couple weeks – finals and Spring Break will do that. Throw in an early birthday present (a Wii!), and posting has been a low priority.
Anyway, the New York Times has an interesting post on McCain and Obama on subprime bailouts
Hat tip Greg Mankiw.
During the Republican debate at the Reagan Library, John McCain was asked:
[Do] you have a plan to help people with bad credit get lower interest rates so they can keep those homes and avoid foreclosure[?]
Any answer to that other than “No,” “What?”, or “Why?” demonstrates a misunderstanding of how we got to where we are economically and how we’re going to get back out. The private sector – the free market – actually goofed. Big time. It made lots of loans to people who couldn’t pay them back, then loaned out those loans and made still more loans on the backing of those meta-loans. It’s precisely the availability of unreasonably low interest rates to high-risk borrowers that created the housing bubble and that is currently bursting it. Worse still, in order to get out, we are going to have to deal with that fact and let private industry take the hit, at least to some extent. The last thing we can do is force banks to take on more bad debts – debts which are already in or near default – and take them for longer term. Even if there’s no forcing, but only incentivizing through government aid, we are doing nothing but encouraging more risky behavior and trying to put duct tape on the bubble.
McCain’s answer started out:
Yes, and it’s tough and it’s tough here in California, it’s tough in Arizona, it’s tough particularly all over, but it’s very tough particularly in the high growth states.
McCain is a good man, but he is not a conservative, and he has no idea how to lead this country back to financially solid ground.