Inertia Wins!

My colleague Drew Tidwell and I just sent the following letter to Time:

To the editor:

Michael Kinsley’s latest missive in Time falls prey to one of the oldest traps in economics — Bastiat’s broken window fallacy. Kinsley begins, “Oil prices are low. Too low. Let’s finally impose a big energy tax and use the windfall to help create jobs.”

The problem is that an energy tax cannot create new jobs. Just different ones. The money Kinsley hopes to inject into the economy must first be taken out of it. Add in collection costs and the usual political malfeasance, and we have a net loss to the economy.

There’s more.

Kinsley argues that last summer’s high oil prices were essentially a “tax” on consumers. The money just went to oil companies instead of government. But he forgets that oil companies do not have control over their prices. If they did, then why would oil prices ever drop? Kinsley’s logic does not follow.

Ryan Young and Drew Tidwell
Competitive Enterprise Institute
Washington, DC

The rest of the piece is similarly incoherent.

(cross-posted at Open Market)

My friend and former colleague Jacob Grier wrote an excellent article for Doublethink about coffee. Jacob traces the rise of Starbucks and its recent troubles from smaller — many would say better — competition.

It’s worth a read. Jacob knows his stuff. But he doesn’t look down on people who don’t. As someone who typically orders “regular old coffee, please” and stubbornly clings to antiquated Small, Medium, and Large sizes, this is appreciated. Good coffee, and good economics to boot. Much to be learned.