I can’t repost the tweet on Substack due to the continuing war between the platforms but here is a link to it.
https://twitter.com/EzraDrissman/status/1650486886698287106?ref_src=twsrc%5Etfw">April
Ever notice that the government never offers bigger? They want you to switch to smaller cars, smaller houses; use less gas, less air conditioning, eat less meat. Yet, government workers live lavishly and tax you more! Big Government=Small citizens
This is so true.
If you are of a certain age like me, you experienced the 1970s. Remember President Jimmy Carter’s solution to the energy crisis in the 1970s? Wear a sweater. Turn the heat down. Drive less. He set up a Department of Energy.
What happened? The Department of Energy is one of the bureaucratic arms of the government that ought to be just axed. It does NOTHING. Would we miss it? No. It’s a bunch of paper-pushing bureaucrats. Did the US invest in domestic energy due to DOE policy? NO. It took the private market to do that. Recall, in 2020, we had so much crude oil the futures went negative. We had abundance and prices went down because of it AND in spite of all the government regulations designed to limit abundance.
What is funny to me is the critique of abundance. They are misguided and have no belief in innovation or free markets. It always goes back to the bet Julian Simon made. Simon was a free-market capitalistic economist who understood what would happen. His detractor wasn’t and lost the bet.
I probably didn’t “need” an MBA. I am glad I went and earned one, especially from the Chicago GSB. What my MBA did for me was to codify and prove mathematically in a Socratic way things I knew in my gut. Instead of just a supply and demand curve and fighting about “trickle-down economics”, I learned how to view the world as an allocation of scarce resources and how to allocate them to create the best return along with how to organize to execute on that goal.
Big difference. That’s why abundance matters.
Turns out, for many kinds of goods and services organizing as a corporate entity is the most cost-efficient way to deliver them to people at the lowest price. Ask yourself a question. If there is a better way to organize and deliver goods at efficient prices to the marketplace, wouldn’t we have created it already?
When we look at actual physical resources, it’s hard to scale abundance. There is only so much gold, and so much skilled labor. But, innovators developed machines and processes that can amplify those resources.
With software, it’s different. The marginal cost to do one more is so small that abundance is easy. It’s getting adoption and scale that is hard which is why in the startup world customer acquisition costs matter a great deal.
Here is a concrete example and if you are a regular reader of this blog, you read it before.
Problem: Climate Change
Current solution: Electric cars, solar panels, and wind farms.
What do those solutions actually do? They make electricity scarcer, and more expensive. People who are poor won’t be able to afford it and the government will have to subsidize them further raising the costs. Not only that, but it is clearly environmentally dangerous to pursue that strategy. Ever seen a lithium mine? Plus, if you want to mine copper where the copper is environmentalists will fight you tooth and nail while meanwhile advancing the solar panel, and wind farm agenda because they think there is no cost to it.
This analysis ignores the fact that climate change is more probably an underground totalitarian movement that is going to inject even more scarcity into society. See Venezuela. Dining at the zoo isn’t patronizing a fast food restaurant licensed by the zoo.
What’s the only real solution? Abundance. The question on energy and climate change should be asked this way with these constraints.
How do we supply abundant energy to the world for an on-demand manufacturing/knowledge economy at the cheapest price while minimizing the impact to the environment?
Solution: Nuclear. It solves virtually all the problems and we know how to deploy it effectively right now. No need to wait for fusion.
If you want to put solar panels on your house, fine, but no subsidies for it. Force that segment of the industry to adhere to market forces.
It’s the same with food. Interesting that we have people talking about how we need to eat bugs to solve climate change. We can container farm. We can plow more land. Farm companies are innovating all the time to grow more crops on less land using fewer chemicals. How much of the US land mass is in the government's hands and not utilized? Let the private sector have those lands and you’d see more efficiency out of them.
One stat I love when I go to the donut shop at my cabin in Minnesota is 88% of all the land in Cook County MN is owned by the government. It’s the poorest county in Minnesota. Duh. When I see dialogue about new businesses opening up, it has to be a “non-profit” or somehow heavily owned/regulated by the government. Bull.
We have an educational crisis in American schools. Basically, our public school system nationwide sucks. What’s the solution? Abundance. Competition. Innovation. Those three things happen outside the government-run schools because government solutions are always limiting. They are anti-abundant.
Another problem is our health care system. It’s one of the most highly regulated and bureaucratic segments of our economy. Some in the Republican Party, and virtually all of the Democratic Party advocate for government-run healthcare. What’s gonna happen? Less abundance, higher costs. Get rid of many of the regulations and what will happen? Abundance. More people will have access to healthcare at lower costs.
People are scared of abundance. They only see the downsides of abundance. They feel like the government is staffed with angels that make rules in the manner of King Solomon. They know how to split babies and do it ethically for the common good.
Except, they don’t. US government bureaucrats have the same incentives as commissars in the old Soviet states. They aren’t angels.
The best thing that limits a corporation from dominating a market is more competition, not regulation.
I saw where the new hard left-wing government in Chile is going to nationalize the lithium mining industry. See the Milton Friedman quote at the beginning of this piece and extrapolate what will happen.
We're seeing this at work right now at the global level. Our media presents it as about the dollar, but it's really about prosperity. Some countries, mostly anglophile and Europe have made a conscious decision to move away from petroleum (and nukes) in favor of renewables. It is obvious that life will get worse for almost everyone, especially the working class. Energy will become more expensive and occasionally unavailable. Food will become more expensive as farms are retired and fertilizer limited. That's what the West is offering today. The other side is rejecting global warming as a policy determinate and are choosing to pursue prosperity -- for both the corrupt political class many nations have and the general population. The road to prosperity right now is petro. In Nigeria only 62% have access to electricity. In Chad it is 9%, Kenya 85%, prosperous SA 94%. When the USA shows up, its about renewables and transgender rights. When the Chinese Communist Party shows up its about how many engineers they can send, the roads that can be built and the loans they will provide. What's more appealing? Food on the table for your kids, passable roads to market or a solar farm that doesn't work at night? It's especially interesting to me that the guys rejecting the global warming policy paradigm and trying for abundance are also staking claim to traditional values (whatever they are, wherever they are). They call the West decadent. And point to all the obvious trends that prove them right. What does transgender rights look like to a governor of a majority Islamic state in Indonesia? Yes, many of the leaders in these places are horrible human beings, but the sale has been made. This will continue. More and more of the world will choose abundance, and wonder why in the world we choose to impoverish ourselves.
I am of your mindset. But I am troubled by abundance causing waste. When things are too cheap, people do not put care into them, and waste of the resource happens much more frequently.
I am a student of economics, and I see things the way you do (I majored in it). But I wonder about something like plastic. We see tons of it in the oceans, landfills, etc. Then we learn that it breaks down and becomes microplastic, which is ingested into our food stream by animals that we eat. This is toxic for us and other animals. It also seems unnecessary.
To me, the climate change stuff is mostly agenda-driven, but stuff like plastic deserves serious economic attention. How do we deploy the tools of economics to solve this problem? Where does it fit in your theory of abundance? Don't get me wrong, I like your thinking, because it builds on human nature, instead of opposing it (something many don't seem to understand). So how do we--or the market--fix this problem?