Streetwise Professor

J. D. Vance has been nominated as the Republican candidate for Vice President. I wrote about Vance, and his book Hillbilly Elegy, about 3.5 years ago. The end of the piece talks about the venom directed at Vance and those he wrote about when the movie version of the book came out:

In sum, Hillbilly Elegy is a Rorschach Test. Show it to me, and it evokes the attributes and deep flaws and great struggles of my family–struggles that made it possible for me to have an unbelievable blessed life that has been able to grab the boundless opportunities America offers. Show it to the coastal “elite” and it triggers all they hate about America, and many who live in it.

Streetwiseprofessor.com

That disdain and vituperation has been turned up to 11 since Trump announced him as his VP choice. It’s fair to say that VDS–Vance Derangement Syndrome–has spread faster than the Spanish Flu on the left.

It’s hard to choose the most insane of the criticisms, but I think this gem from some MSNBC lunatic (but I repeat myself) is a heavy favorite:

MSNBC’s Alex Wagner accused Republican vice presidential nominee JD Vance of dropping an “easter egg of white nationalism” by mentioning that he hoped to be buried in his family’s plot in Kentucky during his speech at the Republican National Convention Wednesday night:

MSN

It’s easy to understand why Trump chose Vance. Trump wants to be an impactful president. He wants to leave a lasting legacy. A MAGA legacy. Of all national political figures, Vance is most closely aligned with Trump ideologically. He is young. There is no one more fit to make MAGA a historical era, rather than a transient phase tied to a particular personality.

And perhaps it is this that is driving the left even more insane than usual about a decision (choice of a vice president) that is seldom of great and lasting importance.

Trump wisely rejected all of the traditional criteria for choosing a VP, specifically ideological, geographical, and identity balancing. Picking a say Nicky Haley as VP would have ensured that Trump’s impact would be evanescent (except on the mental health of the left). Historically such decision making has worked out badly–G. H. W. Bush being perhaps the best example.

As for Vance, he truly does tick all of the Jacksonian boxes identified by Walter Russell Mead in his famous article of decades ago. Most notable is his belief in the primacy of what Mead called the American “folk community” (something that was a big part of his acceptance speech) as opposed to newcomers and foreigners. This is precisely the thing that the progressive left considers a barbarous atavism, especially considering those whom Vance considers to be the bedrock of the folk community. Hint: they don’t live in Brooklyn, NY. (Some in Brooklyn, MI maybe).

Relatedly, no globalist he. With that comes a foreign policy vision starkly at odds with the Uniparty consensus that harkens back to Republicans of an earlier era, like Henry Cabot Lodge and (fellow Ohioan) Robert Taft, and indeed to George Washington with his aversion to foreign entanglements. He is an anti-Wilsonian–and hence an anti-Bushian and anti-neocon, which is why people likely Lindsey Graham looked so glum when Vance spoke in Milwaukee. And keep Vladamir Zelensky away from sharp objects.

This mission to protect the folk community also leads him to favor trade protectionism, also something of a throwback to historical Republican policy–the Republicans were the protectionist party, and the Democrats the free traders, through the 19th and early 20th centuries. He is also well-disposed to various forms of industrial policy and minimum wages and has said nice things about antitrust loon Lina Khan.

Another Jacksonian trait is his intense hostility to the political establishment, the economic elite (corporations now, the Bank of the US in Jackson’s day), and the federal bureaucracy.

I share many of Vance’s views, and so I heartily support his candidacy–especially when considering the alternatives. Where I part ways is on economic policy (which is true of Jacksonianism generally). Protectionism for the purpose of supporting domestic industry is highly inefficient: one could have a debate about the merits of substituting tariffs for other forms of taxation that also have distortionary effects (e.g., capital taxation) but the flaws of protecting dying industries are beyond dispute. Minimum wages are another disaster. If the current experience in California’s fast food industry isn’t convincing enough, he’s not capable of being convinced on this.

Various forms of industrial policy, which in the end come down to picking winners and losers, propping up the winners with subsidies and protection and entry barriers, are also disasters in waiting that have no chance of achieving their stated objectives and which inevitably wreak huge collateral damage.

The best way to rejuvenate American industries is to lift the appalling regulatory burden that has been heaped on them for decades–a process that has reached a frenzied level under Biden. Here Vance’s antipathy to the bureaucracy could be the spur to meaningful action.

In brief–slash away at existing policies and regulations: don’t add new ones. That would help the American folk community immensely.

Of course, all policy views are aspirational. Given that Jacksonians are hardly a major presence in Congress, the media, or the bureaucracy, the ability of Trump and Vance to realize their aspirations is doubtful, at best. But at least it will help to have the executive pushing in the right direction and against the DC consensus, rather than pushing it forward with all its might (as with the current administration).

I had been hoping that Trump would choose Vance, and did so fully aware of my areas of disagreement. On the biggest issues–the overawing power of the federal government and its abuse thereof, immigration, and a more restrained, non-globalist, non-Wilsonian foreign policy–Vance is on the right side. Where he’s not, I can live with.

But precisely because of where he stands on those big issues, he has achieved Derangement Syndrome Status faster than perhaps faster than anyone in history. Considering those he has deranged, that’s the biggest endorsement of all. He has all the right enemies. May he destroy them–he has already driven them mad.

UMass-Amherst associate professor Isabella Weber is a darling of the Eurocrats (and presumably of Davos). Per her own telling, she is a superstar:

Her first book How China Escaped Shock Therapy: The Market Reform Debate is the winner of the Joan Robinson Prize, the International Studies Association Best Interdisciplinary Book Award and the Keynes Price and has been recommended on best book of 2021 lists by the Financial Times, Foreign Policy, Project Syndicate, ProMarket and Folha de S.Paulo among others. The book has been translated into five languages. Isabella has become a leading voice on policy responses to inflation and has advised policy makers in the United States and Germany on questions of price stabilization. For her public policy work she has been profiled in the New Yorker, recognized as one of TIME100 Next, Bloomberg’s 50 Ones to Watch, Germany’s 100 women of 2022 and Capital 40 under 40 and has been awarded the Kurt Rothschild Prize and the 2024 Hans-Matthöfer Prize. For her work on China’s market reforms she has won the International Convention of Asia Scholars’ Ground-breaking Subject Matter Accolade and the Warren Samuels Prize for Interdisciplinary Research in History of Economic Thought and Methodology. Isabella is an Open Society Foundations Ideas Fellow.

www.isabellaweber.com

She is also an idiot.

The evidence for this proposition is profuse: just look at any one of her opeds or articles. Rather than bore you with her corpus, I will just focus on one of her most recent retchings, on a subject that is clearly in one of my lanes–commodity storage, commodity prices, and speculation.

Weber and her co-authors Merle Schulken, Lena Bassermann, Lena Luig, Jan Urhahn (no changing names to protect the guilty on SWP!) recently released a “policy paper” called “Buffer Stocks Against Inflation.” (NB: “policy paper” is a tell for lack of rigor. The tell is quite accurate here). The Guardian shared Weber’s deep thoughts from the paper in a long article. (NB: another accurate tell).

The gravamen of the argument:

Weber’s new paper, published on Thursday, looks at how grain prices spiked in 2022 as Covid snagged supply chains and Russia invaded Ukraine. The price hikes helped to drive record profits for corporations while pushing inflation higher and increasing global hunger. In the paper, Weber and colleagues call for the creation of buffer stocks of grain that could be released during shortages or emergencies to ease price pressures.

The Guardian.

And what is the root of this volatility? Can you say speculation? I knew you could:

Speculation causes prices to swing wildly even though the prices are often detached from the physical reality of the commodity. While Russia’s 2022 Ukraine invasion led to temporary local threats of physical grain shortages, the global supply of grain always remained well above levels to meet demand in the medium term, the paper notes.

The Guardian

The need for a government-run storage system presumes that private storage is inadequate or inefficiently small. Of course Weber et al don’t even attempt to demonstrate this. And no, volatility–including extreme price movements like those following the invasion of Ukraine in 2022 is not sufficient to demonstrate inadequate storage.

Optimal storage is the solution to a dynamic optimization problem. This solution frequently involves “stockouts” when storage is drawn down to near zero. Prices tend to be highly volatile in such circumstances. Recent events in the cocoa market are a near textbook illustration of this. This is a characteristic of an efficient market, though it is all too often taken (by people such as Weber) as prima facie evidence of inefficiency. If you say that, you are betraying your ignorance.

These episodes can be avoided only by holding excessive stocks. This is wasteful because (a) storage is costly, and (b) it means that some resources that are produced are never consumed. Paying money to hold something you never use (and which was costly to produce) is obviously dumb.

Insofar as uncertainty is concerned, inventories are a form of economic shock absorber. Efficient, competitive storage depends on the amount of underlying economic uncertainty. In chapter 5 of my book on storage I show that higher fundamental uncertainty leads to greater storage. Indeed, this model shows that the kind of price movements Weber bewails actually reflect efficient storage decisions.

Specifically, the invasion of Ukraine clearly increased economic uncertainty. The rational response to this is to increase storage of commodities (including corn and wheat) affected by this uncertainty. The only way to increase storage is to reduce consumption. Therefore, the increase of uncertainty alone caused an increase in price over and above the effect of the invasion on output or trade. This creates the outsized price movements that give Weber and her ilk the vapors.

Weber also seems to overlook the fact that government stocks are substitutes for private stocks, and that increased government stockholding will result in decreased private storage. Meaning that government stocks are bigger than the amount by which such a policy increases stocks.

Government stockholding also injects a new form of uncertainty into the market. Private stockholders have to forecast what the government stock policy decisions will be. When will they accumulate stocks? When will they release them? Will the decision be driven by economics or politics? If the latter, political uncertainty is an important consideration. And it could have particularly detrimental impacts on private stockholding. The main benefit of holding stocks is the ability to sell them at a high price under tight supply and demand conditions. Release of excessive stocks by the government during such conditions seriously undermines the incentive for private entities to hold stocks.

There is actually rigorous economic analysis of public storage by actual economists, Brian Wright and Jeffrey C. Williams. They show that public storage can be efficiency enhancing if there is some other sort of “market failure.” Ironically, the market failure that Wright and Williams focused on was . . . government policy, namely price controls. Irony alert! Weber is a BIG booster of price controls.

Wright and Williams also show that the details of government policy and uncertainty about them plague such schemes. One important point that they make is that government storage policies are subject to time inconsistency problems (a la the important work of Kynland and Prescott in the ’70s) (also referred to as subgame imperfection). That is, a government may design an efficient policy but cannot commit to it. Under some circumstances the government will find it desirable (for it!) to deviate from the policy. Thus, the abstract existence of an optimal policy does not mean that it can be implemented in practice. Moreover, trying to figure out when time inconsistency is going to kick in is a source of uncertainty that feeds back to private decisions.

Weber’s writing betrays no contaminating exposure to economic analysis like Wright and Williams’.

In Wealth of Nations Adam Smith pointed out some of the irrationality of government policies regarding storage. In the laws he discussed, English governments thought that private traders were holding excessive stocks, and punished such “hoarders” and “engrossers.” Which obviously undermined the incentive to accumulate inventories in the first place.

Yes, these policies are different from the one that Weber advocates, but they illustrate how political forces lead to highly destructive interference in storage decisions.

Insofar as speculation is concerned, all I can say is: “Really? Not this shit again.” The title of an article wrote in Regulation 14 years ago summarizes Weber to a “T”: “No Theory? No Evidence? No Problem!”

Weber has no theory of how speculation distorts prices or causes excessive volatility. She has no evidence that it does. But no problem! She blames it anyways.

I guess she is proving her green credentials by recycling discredited ideas.

Ironically, Weber does not discuss a prominent example of her preferred policy–Chinese state reserves of commodities like corn, cotton, and pork. To say that his has been like most centrally-planned schemes–that is, an unmitigated cluster-F–would be an understatement. For example, and I hope you are sitting down for this, corn goes bad when you store it too long: in the past China ended up holding vast stocks of dodgy corn. I could go on.

You’d think that a policy paper would include analysis of the recommended policy in practice. In Weber’s case, you’d be wrong.

Looking at Weber’s corpus you will see that all of the disqualifying defects described above are rife. She is a sworn enemy of markets, but her analyses betray zero careful analysis of how markets actually work, or what causes their problems. She is a huge fan girl of government intervention, but never contemplates the possibility of government failure, being instead a slave to the Nirvana Fallacy.

Her latest work on storage is arguably a minor sin compared to some of her other transgressions against good economics. Most notably, she is a major advocate of comprehensive price controls as a means of controlling inflation.

One would not be wrong to call her Gosplan Girl.*

But of course this is why she is a rock star in Brussels. EU bureaucrats run the gamut from dirigistes to full on commies, and gobble up her garbage like it is going out of style.

Which, unfortunately, it is not. Which is why the EU is a stagnant economic wreck which will only get worse if it embraces the deep thoughts of Isabella Weber.

*Izabella Kaminska at The Blind Spot pointed out the Gosplan analogy to me.

Javier Blas is in a tizzy about a new ETF that will hold physical copper. He shouldn’t be.

He says:

Might the copper market suffer a similar squeeze [to the Hunt episode of 1980]? Until now, I would have been confident in saying no. But speculators are about to get an easy and completely legal way to dominate the market for the red metal — a development that regulators seem far too relaxed about.

Bloomberg

Why not worry, let alone panic? Many reasons.

First, I don’t know where Javier has been, but this is hardly a new development. There have been physical copper ETFs around for over a decade: I addressed a similar moral panic that erupted when that was introduced. There are also physical ETFs in other metals. The scare scenario has not transpired in all that time.

As I say every time I teach about speculation (as distinct from manipulation), what is necessary for it to distort prices is that it must somehow distort the physical market, that is, distort supply or demand. The doom scenario outlined (“As more money pours into the new fund, more copper will need to be stockpiled as backing”) seems to envision a distortion in supply. Specifically, uneconomically withholding stocks from the market.

First of all, that scenario assumes really dumb money. I mean really dumb. Buying shares in an ETF that will turn around and buy physical copper and add to inventories at a time when inventories should fall (thereby causing spot prices to be too high) means buying high and selling low. Indeed, the market is likely in backwardation under those circumstances, and in that case prices tend to trend down–and everybody can see this. Not a good investment strategy! One almost guaranteed to lose money. Yes, maybe there are lemmings, greater fools, etc., but such people would be perfect short bait. (Though maybe Roaring Kitty will make copper ETFs a meme investment!)

The Hunts (mentioned in the article) are example of how irrational stock building and holding ends in tears. As I joke in class, the Hunts are the poster children for the old joke: “Want to make a small fortune in commodities? Start with a large fortune.” All because they propped up the price of silver by accumulating ever-expanding quantities of physical silver.

Another example that may be even more on point is the International Tin Council, which tried to imitate OPEC in the worst way–and succeeded. Rather than restrict output (a la OPEC) it tried to inflate prices by offering to purchase tin at supercompetitive prices. It ended up accumulating vast amounts of tin in storage, and when the money to keep buying tin ran out the price collapsed and the ITC suffered huge losses–and almost brought the LME down with it. (This is the so-called “Tin Crisis,” not to be mistaken with the LME’s “Nickel Crisis” of 2022).

In my 2012 post on physical metal ETFs, I wrote that one mechanism that would also limit the potential distortionary effects was that if such an ETF were uneconomically maintaining excessive physical stocks, someone could buy shares of the ETF, and tender them in exchange for physical metal, and then liquidate the stocks so obtained. That is, the ETF’s management could not unilaterally withhold stocks from the market.

If you look at the Sprott prospectus, you might conclude that use of that mechanism is highly restricted: there is an option to exchange shares for metal, but it can be exercised only on a semi-annual basis.

However! Elsewhere the prospectus says:

The Trust will have the ability to optimize the value of the Trust through Copper optimization transactions, including the use of futures, warrants, CME or LME warehouse receipts, and other financial
instruments [swaps? options?] to complement the Trust’s Copper procurement strategy, so long asthese transactions provide value to the Trust.

So this isn’t a pure copper piggy bank for shiny pennies or the cathodes you can make them from. If the fund is managed to maximize value, it will trade its physical copper optimally, and reduce stocks when the price signals indicate this is optimal. For example, it could sell inventories outright and replace the copper exposure with futures with deferred expiration dates. Or it could engage in spread transactions that are common on LME, e.g., selling cash and buying three month or 15 month or whatever futures.

In this respect, the ETF is really more analogous to a hedge fund. It’s managers have a lot of trading discretion within the copper space. In this respect it is very different than other commodity ETFs (e.g., the US Oil Fund) which have virtually no discretion.

Indeed, it is my sneaking suspicion that the fund’s restriction on withdrawals of metal is due precisely to the fact that it will essentially be engaged in fractional reserve banking, as it were. That is, its potential obligations to deliver will exceed its holdings of physical metal because its “optimization transactions” will involve accumulation of large paper positions, and its notional tonnage will exceed substantially its actual physical holdings. This restriction is analogous to the restrictions on withdrawals that hedge funds impose on investors–another point of tangency between this ETF and hedge funds.

Furthermore, even if the money is dumb and the managers are too (or are like Scrooge McDuck and just enjoy frolicking in their shiny stash), it can only distort supply to the extent its physical holdings are somehow pivotal, and/or there isn’t a lot of competition among those holding copper stocks. If total stocks should fall by X, as long as enough others collectively hold more than X they can supply that copper to the market even if the Sprott fund ignores the price signal and keeps a death grip on its physical holdings.

As for “cornering,” here Javier is playing fast and loose with a loaded term. The word (and squeeze, also used in the article) connotes manipulation. Manipulation is intentional conduct. Under US law in particular, it is conduct that involves a specific intent to cause “artificial prices.” (The Frankendodd revisions of the Commodity Exchange Act and CFTC regulations issued pursuant thereto have new provisions that arguably weaken the intent requirement, but it remains in Section 9).

Yes, an ETF that can take physical ownership can corner whereas a purely futures ETF that cannot own physical cannot. (I’d also note that a fund that holds ONLY physical metal cannot engage in market power manipulation either, or at least is guaranteed to lose money if it tries). But using the “optimization transactions” in futures to manipulate a market crosses a legal line, and indeed, a line that has been in place for over a century. That is something regulators (and market participants who have private right of action under the CEA) would be very unrelaxed about.

Moreover the incremental manipulation potential posed by this ETF is likely small. Manipulations have occurred in copper, and the industrial metals, from time immemorial. Remember Sumitomo? There have been other though less severe and shorter lasting cases of likely manipulation on the LME in the decades since. The proximate cause of the Panic of 1907 was a copper squeeze. Right now with all of the hedge fund money out there, as well as the big physical players, the potential for market power manipulation is omnipresent. Sprott will be a minnow in this ocean that already has a lot of big sharks.

I also chuckle at this concern about cornering. I excoriated Javier Blas severely for his failure to see that yes, a hedge fund–Armajaro–cornered the cocoa market in 2010. Indeed Javier seemed to have a man crush on the eventually disgraced head of the fund, Anthony Ward (AKA “Chocfinger”). One of my posts suggested they get a room. (Ward’s karma came a few years later when he bet wrong in the cocoa market, and Armajaro–which had taken delivery of enough beans to make billions of Hershey Bars in 2010–was sold for less than the price of one of these).

So I reprise my 2012 Alfred E. Neuman persona: What, me worry? Well, certainly not about a physical copper ETF.

Well, the FTC done gone ahead and done it, implementing a broad prohibition on “no compete” clauses in contracts. As with most recent FTC rules and court cases, it brings to mind Coase’s observation to the effect that some people see a market practice they don’t understand, their immediate conclusion is that it is some sort of nefarious exercise of market power.

The FTC’s main bugaboo is that non-competes create lopsided bargaining power in favor of firms. Such bargaining power per se should not give rise to antitrust concerns. And indeed, lopsided bargaining power may be an efficiency enhancing feature that makes both firms (the supposed beneficiaries) and employees (the alleged victims) better off.

One needs to remember that there are at least two stages here. Ex ante, when the employer and employee agree on terms to a contract, which may or may not include the non-compete clause (and the employee can reject an offer that includes one), and ex post, when the employee has found a potentially superior outside opportunity and would like to get out of the restriction. The bargaining power under non-competes is unbalanced in the ex post stage.

A threshold issue is why would the employer and employee agree ex ante to an arrangement that is inefficient, i.e. reduces their joint wealth? If the benefit of the restriction to the employer is smaller than the cost to the employee, there would be a bargain without the non-compete that would make both parties better off. Crucially, this is true regardless of the distribution of bargaining power. Thus, it is highly likely that the mutual agreement to employment contracts including non-competes indicates that they are efficiency enhancing.

This then raises the question: what is the source of efficiency at the ex ante stage that induces the parties to enter into an arrangement that ties the employee’s hands and limits his/her bargaining power ex post?

Property rights economics provides an answer. In a zero transactions cost world, who owns assets is irrelevant. (The Coase Theorem.) However, if certain things are non-contractible (because, for instance, they cannot be verified by 3rd parties like courts), transactions cost are positive and the distribution of asset ownership matters, and can impact efficiency. It matters precisely because it can affect bargaining power ex post.

The owner of assets has bargaining power over non-owners with whom he contracts: he can withhold the employee’s access to the asset, thus depriving him/her from any benefits from it.

This can affect efficiency because it affects incentives to invest ex ante. The party with the bargaining power (the asset owner) extracts most of the rents from the relationship between the two parties. That affects that party’s incentive to make (non-contractible) investments that increase the amount of ex post rents to be split between employer and employee because he gets the lion’s share of these gains.

Placing the bargaining power in the hands of the party who is best able to make rent-increasing investments therefore leads to better investment decisions, and to greater surplus to be divided between the parties.

Designing contracts that allocate ex post bargaining power unevenly can therefore improve incentives ex ante, and crucially, make both sides better off–including the putatively disadvantaged party. Disadvantaged ex post, anyways.

Non-compete clauses, by the FTC’s own admission–hell, lament–allocate bargaining power. Property rights economics suggests that is likely a feature, not a bug. Crucially, it can explain why these clauses come into existence in the first place.

Firms can make non-contractible investments in their employees’ general human capital. Moreover, apropos my recent post on learning by doing, firms can increase knowledge and information by increasing their output or scale. If employees can walk across the street and sell that knowledge and information to others the firm’s incentive to invest in employees’ human capital or engage in actions that lead to employee learning by doing is reduced. However, with non-competes firms have the bargaining power that allows them to extract those ex post rents, which preserves their incentives to make non-contractible investments in generalized employee human capital, including human capital generated as the result of experience/learning by doing..

The real conundrum with non-competes is the one common to all arrangements relating to the production and dissemination of information. There are static losses if information already in existence is sold at a price above its marginal cost–effectively zero–or not sold/transferred at all. However, if information is transferred at a zero price, but is costly to produce, too little is produced. This is effectively a dynamic effect.

The same tension/trade-off exists with patents and copyrights. The ex post trade in costless information is restricted in order provide incentives to create it in the first place. Non-compete clauses that allow firms to extract most of the rents associated with knowledge production in their employees provides similar incentives.

I would also note again (as I have in earlier posts) that non-competes don’t create bargaining power ex ante, and restricting them will therefore not affect the distribution of gains at the contract formation stage. However, the magnitude of the gains to be split will be smaller in the absence of non-competes if they have the incentive effects discussed above.

Non-competes are a form of vertical restriction. Such restrictions often–and I would say typically–have efficiency rationales. Indeed, these rationales often relate to attempting to restrict free riding on information. Think of Lester Telser’s argument about resale price maintenance, or research on things like exclusive dealing and exclusive territories. Non-competes clearly relate to property rights in information, and therefore eliminating them will have baleful consequences.

But the Lina Khan FTC only has a market power hammer in its tool box, and is therefore bashing away at what is likely an efficiency enhancing contract feature that has nothing at all to do with the exercise of market power qua market power.

The estimable Francis Menton has noted repeatedly that the “energy transition” has set loose upon the world a host of innumerates who assure us that they know best when in fact they know less than nothing. And perhaps to coin a phrase, I would add that they are ineconimate, i.e., know nothing about economics. Arrogance and ignorance is a lethal combination. Such people will make us poor, and likely shivering in the dark.

Alas, the mind eating virus has even infected many who were once sensible, or at least periodically sensate or sentient. Such as the FT’s Tim Harford. (I am guessing that the brain eating ameobae at the FT have finally gotten to him.)

Harford wrote that instead of saying “I could’ve had a V8” 40 years ago, we should have said “I could’ve subsidized solar and then all our energy and climate problems would have been already solved.”

In a nutshell, Harford invokes learning by doing, which he refers to as Wright’s Law in honor of an aeronautical engineer in the 1930s who first identified this phenomenon. It has since been documented in numerous other areas, starting probably with Liberty Ships in WWII.

Yes, LBD is a thing. It has been part of the theory of economic growth since at least the 1970s, starting most notably with Paul David’s work on the antebellum cotton spinning industry in the US, and earlier than that even with work by Kenneth Arrow. Robert Lucas taught about it in the economic growth undergraduate (!) course I took as a small child at Chicago in 1981, FFS. (What a privilege and experience it was to be in that course.) I was so taken by the subject that my paper for George Stigler’s economic policy course in 1982 (when he won the Nobel Prize) examined empirically learning by doing at the Springfield and Harpers Ferry Arsenals prior to 1860. It’s hardly a new idea, or an unexplored one.

Alas, there are numerous problems with Harford’s application of LBD/Wright’s Law to solar.

One issue is: who is to say that the highly touted reductions in the cost of solar aren’t due to LBD?

That is, since cumulative output in solar panels has indeed increased dramatically over the years, learning would presumably have taken place and that plausibly accounts for some of the cost reductions. Harford himself says “PV is now so cheap that the question is moot.” So, perhaps LBD did its work.

Empirical evidence would be nice. And at most what Harford is saying is that we could have learned earlier. But if the learning has taken place (as evidenced by it being “so cheap”), albeit belatedly, solar should be taking over the world now, without subsidies, right?

Further, if Harford really means that too little learning has taken place, or it has occurred too late, then that would require (a) externalities/spillovers in learning, (b) the large subsidies to solar (which Harford pooh-poohs) were in fact too small and/or too late to generate the right amount of learning at the right time, and (c) market participants were unaware of the spillovers and did not take obvious steps to internalize them. He provides support for none of these.

With respect to externalities, it is not obvious that LBD effects are largely external to firms. Firms may be able to keep the benefits of their experience largely to themselves. To the extent they are internalized, there is no rationale for subsidies, and competitive firms will treat current production in part as an investment in future lower costs and expand output accordingly without need for government support or protection.

(NB. Non-compete agreements may be one way firms attempt to keep the benefits of experience internalized. I will soon write a post on the idiocy of the FTC’s ban of such agreements.)

I have analyzed LBD in the US shale sector in detail. I have found extensive learning effects, but the evidence for learning spillovers is weak. A firm’s own experience contributes more to its productivity than collective industry experience. This is evidence that learning is internalized.

Further, firms respond rationally to spillovers–by trying to internalize them. Mergers, consolidation, and concentration are means of internalizing learning. I note that consolidation is coming to shale only after more than a decade after the industry dramatically increased output and drilling experience.

In shale, it is plausible that much of the learning is done by service firms who internalize the benefits. Thus, even to the extent that industry experience explains productivity improvement, to the extent that service firms who, well, service the industry are the ones who generate this learning, these industry experience effects may be internalized as well.

That is, just because there is learning by doing, doesn’t necessarily mean that there are learning spillovers of the type that justify subsidies (or tariffs) to increase output (and hence learning). And if there are, there are strong economic incentives to internalize them. And if there aren’t, there’s no justification for subsidization. (David’s work on the cotton industry addressed the question of whether tariffs to stimulate domestic cotton cloth output were justified because of learning spillovers.)

All of these factors undercut the argument that the PV industry learned too little, too late. Where is the evidence that PV is unlike shale, and characterized by large learning spillovers which industry participants did not attempt to internalize through merger or other means? (I would also like to highlight the irony that Harford’s argument would imply that shale, for which there is actual evidence of LBD, should have been subsidized decades ago.)

Harford also has a myopic focus on PV cost, and fails to consider the total cost of renewables, including solar. Like other renewables, solar has intermittency and diffusiveness problems. Moreover, it has large and predictable output fluctuations (e.g., the “duck curve” problem in which solar output plunges when the sun starts to set). Due to these inherent features, useful solar will require beyond revolutionary innovations in battery technology (something Menton has analyzed in detail) that are not anywhere on the horizon.

(I note that battery technology has been the subject of massive research. It has also experienced tremendous growth in cumulative output, which has presumably contributed to learning. Yet it is nowhere even close to being an economical way to address output variability for renewables.)

Word to the wise: we are not going to be able to learn our way out of the sun rising, and more importantly setting. Or out of rain, clouds, and hailstorms. Or out of voracious needs for land to site renewables. Or out of the difficulties of disposing defunct panels.

Solar is part of a complex energy system. The cost of solar panels is actually among the least important aspects of the cost of relying on solar as a source of energy.

And talk about hindsight. Harford laments our failure to gaze into the distant future and foresee with precision the obsession with CO2 and climate change, and supersize solar panel output in time to provide cheap solar power when those obsessions became manifest. Yeah, and I should have invested in Apple when Harford says we should have subsidized solar. Or Bitcoin in 2013.

In sum, Harford’s woulda, coulda, shoulda lament in the FT is yet another example–as if more were needed–of the intellectual vacuity of those hyping the “energy transition.” Harford invokes a respectable economic concept–learning by doing–but does so in a superficial way that betrays a complete lack of understanding of it. And in a way that also betrays a lack of understanding of the real challenges of transforming an extremely complex energy system. Cheap solar panels may be a necessary condition for a cheap transition, but it’s hardly a sufficient one, or indeed, even likely an important one.

Alas, learning by doing doesn’t appear to apply in the writing of newspaper columns.

In the Wealth of Nations, Adam Smith famously wrote:

By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland? (WN IV.ii.15)

This came to mind when reading this Bloomberg article about an “efuels” venture:

At its plant, electrolyzers break down water into hydrogen and oxygen, using electricity generated from nearby wind and solar farms. The hydrogen is then transported to a reactor, where it meets CO2 captured from local refineries, setting off a series of complex chemical reactions aided by patented catalysts. The result is a synthetic fuel with the same chemical properties as its fossil fuel-based cousins.

Yes, this process can create “equally good” fuel as traditional hydrocarbons. But at what cost? Well, they could tell you, but then they’d have to kill you:

How Infinium fits into that future remains to be seen. Schuetzle is tight-lipped about the company’s exact plans. While acknowledging that Infinium’s e-fuel is “more expensive” than conventional fuel, he didn’t disclose the cost difference. 

Probably not the 30x of Adam Smith’s Scottish wine, but evidently a large enough multiple to frighten the horses if disclosed.

Because of this cost differential, this industry will come into existence only as the result of heavy-handed government policy, in the form of subsidies, kneecapping competitors (namely traditional fuels), or more likely both. And echoing Smith, the question becomes “is it a reasonable law or policy to rig they system to favor this technology, merely to encourage the making of efuels?”

Smith did not answer his question because it answered itself. And the same is true of mine.

To repurpose an old joke, the government wants to address climate change in the worst way, and it is. Picking technologies that are feasible but exorbitantly costly in order to achieve a putatively desirable objective is a tried and false modus operandi of government. And this has been especially true of environmental and energy policies in the United States going back to the dawn of the EPA in the early 1970s, and the energy crisis of the mid-to-late 1970s.

I recall the “synfuels” boondoggles of the late-70s, e.g., making oil from shale. No, not the shale revolution you might be thinking of that actually resulted in the economical production of vast amounts of crude oil and natural gas, but taking shale rock in Wyoming with embedded hydrocarbons, subjecting it to energy intensive transformations (redolent of those described above for the efuels project) to produce oil at vastly higher cost than even the then-elevated price of conventionally produced oil. The government spent billions back when a billion actually meant something on this effort (and other synfuel efforts). And every dollar was wasted.

And reading the Bloomberg article demonstrates that the government, in its wisdom, is doing Adam Smith one better: it wants to mandate technologies that don’t really exist (unlike Smith’s “glasses, hotbeds, and hotwalls”):

Some regulators seem to agree with that thinking. The EU will phase out government subsidies for e-fuel made with fossil fuel-sourced CO2 by 2041. 

In its place, governments will mandate that efuels be made from CO2 obtained from air capture, a technology that the Bloomberg article describes as “nascent” but is more accurately described as “pie in the sky” (literally, in this case).

This generation of efuels will come into existence only as the result of government diktat, just as the first generation–ethanol and biodiesel–did. And the efuel technological greenhouse forcing is just one small part of an array of mandating of technology choices, all in the name of fighting global warming. The electrification of everything is if anything a more extreme example: the EPA’s mileage mandates (intended to make ICE vehicles uncompetitive with EVs), its emission standards for fossil fuel generation, and the lavish subsidization of inefficient (because diffuse and intermittent) renewables are if anything more egregious than growing the efuels industry like orchids.

But bureaucrats are geniuses, and will only do what’s best, right? Right? To disabuse yourself of such notions, refer back to the synfuels case discussed above. Or consider two more recent examples.

One was the European policy to force the replacement of gasoline engines with diesel ones in passenger vehicles, with the unintended–but totes foreseeable–result of increased particulate emissions (and widespread fraud by automakers to conceal that). Europe had to jettison that policy, so it has substituted another: eliminating ICE vehicles altogether. I’m sure that will work out swell.

Another that I find particularly rich is the sulfur standards for marine fuels introduced in 2020. In another unintended (but again foreseeable) consequence, the resulting reduction in particulate emissions is allegedly contributing to global warming. The irony behind this (compounded by the fact that efuels funder Bill Gates is also a fan of this technology) is demonstrated by serious proposals–recently experimented with–to inject particulates into the atmosphere to, yes, mitigate global warming.

So why do governments repeatedly adopt excessively costly policies to address putative problems? One part of the answer is hubris combined with the knowledge problem: they think they know a lot more than they do. But that’s not the entire answer.

At root, I think the more fundamental driver is public choice-related. Specifically, specific technologies have specific constituencies who would benefit from their subsidization (or other forms of policy support). They exert influence on legislators and bureaucrats to implement policies that favor them. (It is not a coincidence, comrades, that Bill Gates and the like have connections with many of these schemes.)

In contrast the effects of policies such as a carbon tax or cap and trade are much more diffuse and far less predictable because the ultimate outcome would be determined by market processes in a complex system. Adjustments would occur on myriad margins, not just by large firms but billions of individuals. The winners and losers in such a process are unknown, unknowable, and highly diffuse–these are not the concentrated interests that exert disproportionate influence on public policy.

(NB: I am not endorsing a carbon tax or cap and trade. I merely assert that they would be better ways of reducing carbon emissions than subsidizing or mandating technologies to do so. An exercise in the Theory of the Second Worst, if you will.)

In sum, political systems produce bad “solutions” to problems because of the very nature of politics, a nature that Mancur Olson and others pointed out years ago. A nature in which “public choice” means that the public gets screwed.

Not surprisingly given its avatar, the Biden administration is a picture of drooling incoherence. This is especially true when it comes to energy policy and the Russo-Ukrainian War and especially the intersection of these.

Case in point. The administration constantly asserts that it is a vital US interest for Ukraine to prevail and Russia to lose. Secretary of State Blinken went so far as to promise that Ukraine would join Nato, despite the fact that this is akin to waving a red flag in front of a bull (in the form of Putin). Ukraine must win! We must provide massive military aid! UKRAINE MUST WIN! FREEDOM AND OUR DEMOCRACY ARE AT STAKE!

But not if it raises the price of gasoline in an election year, apparently. In recent months one of Ukraine’s most successful gambits has been drone attacks on Russian oil refineries. These attacks focused on distillation units, the disabling of which sharply cuts refinery output. As a result, Russian refined product output is supposedly down around 10-15 percent, exports of gasoline have been banned for six months, and the country is desperately seeking imports of gasoline from Kazakhstan. This is a serious economic blow to Russia, and also crimps military efforts which are obviously dependent on fuel supplies.

Further, the impact is likely to be long lasting because repairs depend on foreign parts and foreign expertise that Russia cannot readily obtain due to sanctions.

These attacks are also mirror images to Russia’s relentless bombardments of Ukrainian energy facilities, especially electric power generation.

Especially given the trivial resources devoted to the campaign (which is carried out using drones), this is arguably one of the most effective measures that Ukraine has implemented in the two plus years of war.

So given the allegedly existential stakes in a Ukrainian victory, the administration is gung ho in its support for these attacks, right? Right?

Wrong! The administration, first in the form of the execrable Ichabod Crane doppelgänger Jake Sullivan, then in the form of the utterly embarrassing Secretary of Defense Lloyd “AWOL” Austin, is intensely pressuring Ukraine to cease its campaign against Russian refineries.

Why? Because it might raise gasoline prices. It’s an election year dontcha know:

Defense Secretary Lloyd Austin warned that Ukraine’s recent attacks on Russian oil refineries risk impacting global energy markets https://t.co/3LgO2UfzHg

— Bloomberg (@business) April 9, 2024

The incoherence is only compounded when you consider the administration’s antipathy for fossil fuels in its obsession over climate change. The administration thinks that fossil fuels are really, really bad, m’kay, and wants to reduce sharply their use. What better way to do that but to make them more expensive?

Now that I mention it, none, actually. Demand curves slope down. So for the climate change obsessed, burning Russian refineries and the consequent increase in fuel prices is a good thing. A great thing, according to the theory of the second best! And something that harms our alleged arch enemy to boot! What could be better?

Well, what could be better to someone who thinks logically is the real question. The freak out over the refinery attacks is clearly symptomatic of people who refuse to think logically. People who apparently elide the word “foolish” from Ralph Waldo Emerson’s epigram that “a foolish consistency is the hobgoblin of little minds.”

The administration’s draining of the Strategic Oil Reserve is another example of its foolish inconsistency.

There are many other examples. One that also checks the Russia and energy boxes is the insane pause on US LNG development approvals. This will also “impact global energy markets,” and not in a good way. And in particular not in a way that helps those whom we hope will help Ukraine.

When European natural gas prices reached stratospheric levels in the immediate aftermath of Russia’s invasion of Ukraine, Biden proclaimed that the US had Europe’s back, and would replace Russian gas with good ol’ ‘Merican LNG.

Suckers!

The administration’s obsession with keeping down the most visible price of energy (that paid at the gas pump) also clashes starkly with an array of other policies that will dramatically increase the cost of energy. The push towards electrification of everything, with the electricity generated by renewables, is just one example. Renewables are not cheap. They are expensive. Hella expensive–just look at how much higher electricity costs are in jurisdictions here (e.g., California) and abroad (e.g., Denmark and Germany) where renewables penetration is highest. Driving up demand (e.g., by penalizing the use of ICE vehicles) of a high cost resource is a recipe for higher energy costs. Much higher.

The force feeding via vast subsidies of high cost efuels and hydrogen will also inflate energy costs, though here (not coincidentally) the cost will be concealed in your tax bill and higher interest rates (required ot get people to buy US debt).

In sum, to call Biden administration energy policies “schizo” is an insult. To schizos. It is full spectrum contradiction and incoherence that simultaneously strives to lower energy costs and raise them, and to protect Russia while demonizing it.

The increasing concentration of the futures commission merchant (FCM)/clearing broker business has been a pronounced feature of the world derivatives markets in recent years. This has raised concerns among at least some regulators, including CFTC commissioner Summer K. Mersinger. In a speech generally rah-rah-ing clearing mandates, Commissioner Mersinger did raise one discordant note. Specifically, implementation of the Basel III standards would contribute to further concentration in the FCM/CB space:

Second, the Basel III Endgame Proposal would weaken the clearing system by exacerbating the downward trend in the number of entities offering client clearing services.  In January 2004, there were 177 futures commission merchants (“FCMs”) registered with the CFTC.  Twenty years later, as of January 2024, there are 62 FCMs registered with the CFTC, representing a 65% decline. But over the same period, there has been a dramatic increase in customer funds held at FCMs to support derivatives trading.  In January 2004, FCMs held over $87 billion of customer funds.  Today, that smaller number of FCMs is holding five-and-a-half times that amount of customer funds—$490 billion.  And of that customer money, approximately 60% is concentrated in the top five FCMs. [Footnotes omitted.]

This is a problem because

Third, a further decline in the number of FCMs would create systemic risk. In addition to concentration concerns, a decline in the number of FCMs would raise serious challenges regarding the portability of customer positions should a clearing member fail.  Consider this potential scenario: a clearing member defaults, and its customers’ positions need to be ported to a different clearing member; however, porting those positions proves difficult or even impossible because the Basel III Endgame Proposal has both decreased the number of clearing members and reduced client clearing capacity at the remaining clearing members.  This outcome of the Basel III Endgame Proposal would increase systemic risk, not reduce systemic risk.

It’s a shame nobody saw this coming.

Oh wait. Someone did. Thirteen years ago: “Moreover, this means of facilitating connections of end users to multiple CCPs tends to encourage the concentration of client business in a small number of clearing member firms. This concentration has systemic implications.”

(See also here, from the Chicago Fed.)

On this blog, I have also written on numerous occasions how various aspects of Dodd-Frank contribute to consolidation among FCMs. Regulatory overhead is a largely fixed cost, which contributes to scale economies and hence concentration. Moreover, diversification effects and the need for big balance sheets to intermediate large derivatives positions also contributes to concentration. Note that the OTC dealer market has always been quite concentrated for these reasons, and this concentration has migrated to the cleared world as clearing of OTC derivatives has been mandated.

Commissioner Mersinger did not identify the causes of increasing concentration that has already occurred among FCMs: her speech focuses on how the Basel III End Game may make this problem even more acute. But she does not recognize that the central clearing that she lauds in her speech is a major driving force of the trend she laments: “But recent policy proposals in the United States risk upending the success we have experienced through the efforts of the G-20 and the move to central clearing.” In other words, central clearing good, but you are screwing it up, Basel.

I said Basel! Not Basil!

In actual fact, regulation generally, and clearing mandates specifically, have been the major driver of market structure in the post-Frankendodd era. It’s good that regulators are starting to recognize the systemic risks inherent in this structure. It’s disappointing that they don’t recognize that what they praise lavishly (and pat themselves on the back for) is the underlying source of the problem.

Recently major commodity trading firms have plead guilty to, and/or had employees convicted of, violations of the US Foreign Corrupt Practices Act. The companies collectively have paid billions in fines, and the convicted traders face decades in the Club Fed.

Corruption is bad, uhm-kay, but the rather lurid focus on the traders is unbalanced and gives a misleading impression of the real root of this evil. It takes two to tango: in these situations, the briber and the bribe taker. Here the bribe takers are the real drivers, and they derive their power from the simple fact that they are agents of nationalized companies. That is, the “root causes” here are the nationalization of resources, and the creation of national companies that control access to resources. Yet the bribe payers get most of the attention.

The firms that have been charged and plead are not a random selection of trading companies. Instead, they are the biggest oil trading companies–Vitol, Trafigura, Gunvor, and Glencore. Not grain traders or softs traders or even the metals, natural gas, or power trading operations of these companies. Why? Because whereas national oil companies are common, traders dealing outside oil markets are typically not dealing with national companies.

As the DOJ put it in its announcement of a $1.5 billion 2022 plea agreement with Glencore:

Between approximately 2007 and 2018, Glencore and its subsidiaries caused approximately $79.6 million in payments to be made to intermediary companies in order to secure improper advantages to obtain and retain business with state-owned and state-controlled entities in the West African countries of Nigeria, Cameroon, Ivory Coast, and Equatorial Guinea. (Emphasis added.)

The fundamental problem here is that South American and African countries with oil tend to be extremely corrupt. Indeed, they are likely corrupt in large part because they have oil. It is also likely that national oil companies are the norm in such places precisely because they provide a structure that allows elites to appropriate oil resource rents (via bribery and various tunneling schemes).

Levying substantial penalties on trader will reduce these companies’ derived demand for corruption, and this will reduce bribery income of kleptocrats. But if the big guys leave, or sharply reduce their activities in these countries, their place will be taken by dodgier outfits who will pay bribes. The recent experience with Russian and Venezuelan sanctions shows that eliminating illicit transactions in oil is devilish hard.

The incentive is immense. According to the DOJ, Glencore paid about $80 million over 11 years to get access to oil flows that generated hundreds of millions in profit–roughly a 5-to-1 ratio. Basically what will happen is that the dodgier outfits will pay lower bribes to get these benefits, with the lower bribes being a compensating differential for the legal risk.

Nationalization was originally adopted because international oil companies (IOCs) were allegedly exploiting nations with oil resources. Even if that was indeed true, nationalization merely changed the identity of the exploiters from the IOCs to local elites who obtained power by force, or yes corruption, or both. Further, nationalized companies are notoriously inefficient and putting them in charge has reduced the value of oil resources, further reducing the benefits that the citizens of these nations (as opposed to the elites) derive from these resources. (To get an extreme example of the grotesque inefficiency of nationalized companies, look at PDVSA especially starting with Chavez over 20 years ago. But wherever you look, the inefficiencies are manifest.)

In sum, bribery by major oil trading firms is just another symptom of an underlying disease–resource nationalism. The focus on the payers of bribes, rather than on those who demand and receive them, obscures that fundamental truth.

It is a challenge to identify the worst of the worst Federal agencies, but the Environmental Protection Agency is clearly a heavy favorite.  (The security organs are in a class by themselves.  Here I refer to civil regulatory agencies.)

In a strong effort to cement winning this dubious distinction, last week the EPA announced new tailpipe standards that reduce by 50 percent allowable emissions of CO2 (relative to an already reduced 2026 level).  This is transparently intended to throttle internal combustion engines (ICE) and jam electric vehicles (EVs) down our throats.

The administration is crowing about this:

“Three years ago, I set an ambitious target: that half of all new cars and trucks sold in 2030 would be zero-emission,” Biden said in a statement, adding that the country will meet that goal “and race forward in the years ahead.”

Biden said in a statement issued in his name—written by someone else, of course, because he couldn’t form these sentences by himself.

 In numbers pulled straight from its collective ass, the EPA claims the reduction in CO2 emissions will produce $100 billion in benefits annually, the vast bulk of which are due to chimerical gains from ameliorating climate change. 

As the much-missed Sonic Charm (still mordant on X, but not in the blogosphere) said: all large calculations are wrong.  And that goes exponentially for any calculation involving alleged climate benefits and costs.  Despite all the claims about scientific consensus (which should make you neuralgic in the aftermath of Covid, where almost all claims about The Science flogged by governments and the media have turned out to be the inversion of the truth), estimates of the impact of changes in CO2 emissions on climate are speculative in the extreme.  And those speculations pale in comparison to estimates of the impact of climate changes on welfare, including effects on wealth, income, and living standards.

Climate is a complex system.  Economies are complex systems.  Only fools and the evil have the hubris to claim to know how small changes in one variable will affect outcomes in the interaction between two complex systems. 

Where does the EPA fit here? Both, clearly. 

It is particularly perverse that the EPA is attempting to socially engineer economic outcomes—namely, what vehicles people drive—at a time when the manifold defects of EVs are becoming clearly manifest.  Their performance sucks in multiple ways, including limited range, declining range over time (as batteries age), poor performance in cold weather, and long recharging times (human time is valuable—did the EPA take that into account? I crack myself up sometimes).  Repair costs are astronomical.  And the putative environmental benefits are dubious when the entire vehicle lifecycle is considered, or when the environmental impacts of mining the myriad materials EVs need are taken into account.  Moreover, there are other environmental costs—notably substantial road degradation and substantially increased particulate emissions from tire wear, both due to the great weight of EVs.

Increased awareness of these effects is turning EVs into the Typhoid Marys of automobiles.  Sales are well below what had been projected as consumers have become aware of the clear inferiority of EVs relative to ICE vehicles in doing the things people want—and need—their vehicles to do.  EVs are clogging dealer lots, and they don’t want to buy more.  Resale values are in the tank.  Insurance costs are prohibitive. 

EVs are far more expensive to drive off the lot, and are more expensive to operate, than ICE vehicles.  Is it any wonder why Ford is drastically cutting its production of electric F-150s, and why every other auto manufacturer is hedging on its previous promises to go all electric in the near future?

Two rental car companies—Hertz and Sixt—have recently pulled the plug on their EV fleets (figuratively and literally) because the economics are so atrocious.  The disastrous Hertz plunge into electrics cost the CEO his job.   

EV skeptic Toyota is looking pretty damned smart now, ain’t it?

The inadequacies and defects of EVs are particularly pronounced for anyone who lives outside of a major metro area, and the more exurban or rural you are, the less suitable EVs are for you.  So this regulation represents another front in the war on suburban, exurban, and rural America.

And maybe that is part of the plan.  Recall my post on the war on cars generally.  They want you to walk the road to serfdom, and to jam people into villages (soothingly named “15 minute cities”), just like castellans did in the 11^th century. 

Put differently: from the perspective of the progressive, globalist types who want to eliminate personal mobility (for the proles, that is, not for them), all the aforementioned bugs of EVs are features because they drastically raise the cost of mobility. 

Not to mention the strains that increased EV usage will place on already creaking electricity grids and generation systems.  The interaction between this regulation, and the EPA’s equally (or even more malign) regulations of power plants, poses extreme risk to the nation’s electricity system.

To compound the lies, the administration claims that this will be a boon for the domestic automobile industry:

Biden added that U.S. workers “will lead the world on autos making clean cars and trucks, each stamped ‘Made in America.‘”

As. Fucking.  If.  This regulation will wreak havoc on the existing ICE-centric US auto industry (and the entire supply chain for it), with all of the baleful consequences that will have for capital value and employment.  The US industry has shown little prospect of having a comparative advantage in EV manufacturing.  Note the huge losses Ford has racked up on a per vehicle basis on its electronic version of the stalwart F-150.  GM’s EV operation has also frolicked in pools of red ink. 

Trump claimed that the US auto industry would face a bloodbath due to Chinese manufacturing of cars in Mexico.  That is nothing compared to the ensuing bloodbath—economic bloodbath; it’s a metaphor!—if the EPA guts the ICE industry. (“Guts” is a metaphor too! Can’t assume anything these days, right?)

These regulations are beyond sickeningly perverse.  They represent an extreme exercise of arbitrary power in the service of a delusional ideological agenda embraced by a tiny sliver of the citizenry. 

And when I say extreme, I mean by the standards of rational behavior, not by the standards of the current American administrative state. Sadly, what the EPA is doing has strong parallels in what virtually every other Biden administrative agency is doing—don’t get me started on GiGi’s SEC.  Or the FTC.  Or the DoL. 

Extremism in the exercise of administrative power is definitely a vice.  It is the enemy of personal freedom, personal choice, and economic prosperity. 

Rein in the administrative state?  Is that even possible?  Doubtful.  The only sure remedy is the Carthaginian one.