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It's a bit premature to prepare a tombstone for hydrogen fuels cells:


wiesbadenzahnarzt.de Yes.......... The UK appears to be, predictably, suffering from trying to "cut" their way out of a near depression.

Tans......... How much power over a globalized monster of a $15 trillion economy do you think any president has?

Also if you put the gang back in that immediately cut taxes below what was needed to run the show, AND went on a record setting spending spree, ginned up at least ONE costly and unnecessary war, w//o passing the hat to pay for it, and the did, Haha! actually make the DEEP cuts they (think) they'd like to see the current admin make....... what do you think would be the outcome?

Sherman Folland

Gary Becker, you are one of the best theorists to influence my field of health economics. But theory alone is not science. Your blog is devoid of empirical content. I have done studies of the relative efficiency of nonprofit, for-profit, and public hospitals. I and others find that there is little or no difference. A meta study by Hollingsworth of over a hundred studies finds little difference, perhaps a small preference for the publics. After this experience I will no longer trust conclusions on government versus private enterprise based solely on theory.


we have a natural advantage in wind.


Wind? Indeed! Read and learn?


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thank you


Jack, the very premise of your argument implies that you consider the automobile industry as the most productive use of capital. It is not. When capital is allowed to flow freely, normally it will flow towards the most productive uses of it. As these industries expand they demand more labor. So, yes, resources including labor committed to the automobile industry would ultimately be better suited at more productive uses. No, it doesn't happen over night, and it doesn't mean the automobile industry declines to 0. It just means it declines to its optimal (most productive) scale.

As far as what industries are more productive, well that is really tough to figure out right now with all the government interference. Hence amongst other reasons, why so much capital is as you say, "idle."

I intend to broker my 2nd billion buck deal soon.


David, "When Capital is allowed to flow freely, normally it will flow towards the most productive users of it". Really? Then how do you explain the free flow of Capital that resulted in the "Dot.com Boom", the "Housing Bubble" the development of exotic financial instruments such as "Mortgage backed Securities" or "Derivatives" that are essentially non-productive? Or any of the Booms and Bubbles that have resulted in Busts throughout History?

This doesn't speak well for an uncontrolled "Free Market approach to Capital flows". Perhaps these instances are just "Abnormal" circumstances that should be ignored...


David...I'm not an expert on what happened to the car industry, but some of the problem is that of our car mfgs. both domestic and foreign, doing too good a job. Today's cars run twice as long and with a longer time on the road than in the past. Then, the car biz is the first to get clocked in recession; in a mess like this one, not only do sales plummet but those thrown out of work return, or default on their "Smart Leases" and/or 60 month financing, and pick up a still OK "beater" for $1,000 or so.

I do not posit that the car industry is the "best use of capital" but is, as we've seen a "good use" of capital. As you likely know stock valuations and P/E's give a good idea of the productive use of the capital invested.

As for the "industries expanding" the auto industry "expands" only as each car is sold. DEMAND as ever calls the tune..... though the business deductibility of them certainly sweetens the game.

Good thing, that we finally got rid of the enormous "Hummer" subsidy that made the "biz use" of top-heavy, gashogging rigs over 6000 GVW cheaper to drive (for them) than the compacts used by most working folk. I really dislike such market distorting and wasteful subsidies.

Ha! It's interesting to consider what size the new car biz ought to be! Today's cars don't rust out, but still we see lots, perhaps most, strapped middle class folk using the equation of "Well....... it costs more to replace the transmission, or replace a head gasket, than the car is worth". Meaning it could not be sold to cover repair costs of $1,000, $2000. Then that car goes to the crusher while they head off to spend upwards of $20,000 for a new one with a string of payments which also can not be sold for what has been spent. As the (former?) middle class becomes more strapped I suspect more will head to their local mechanic and fewer to the new car lot, but who knows? Americans are "funny" about cars.

As for bailing out GM and Chrysler? Chrysler having been sliced and diced by being sold to Daimler and then the "private equity" group. Would you rather have seen all that productive capacity, tech, patents et al end up being sold at garage sale prices? Perhaps with China picking it up on the cheap? Keep in mind than Ford, having borrowed earlier, did not want to see their competitors broken up either as they all share many suppliers.

And! we're on the cusp of having to retire and replace the gashogging fleet built while oil was $10-$18. Detroit should do well with cars that relate to current realities.

So this is just another instance where community interests trumps "The Market" that NEH does a good job of describing.

Well, as is being debated (bandied?) on TV I too would rather see fewer market distorting bennies ladled out by government with the energetic help of, is it 150,000 now? registered, rent-seeking lobbyists? As an Alaskan it seems a real hoot for oil cos flush with gobs of retained earnings derived from their windfall as oil prices have been manipulated in the futures ""market"" to have gotten away with retaining their special deductions.

But as surely you know? THE reason for idled capital is none other than a lack of D E M A N D. It has been a long time coming, and great camouflaged by the magic of the false housing boom in which those with a few grand, or zip, to spend can "create" $250,000 of housing demand to be paid for (ideally) over the next 30 years. The 2.5 million starts per year at $250,000 average put a lot of folks to work. Now.......... decimated for a long time.

I'm glad you're pulling off billion buck deals in this mess, and remember, those oodles of capital really don't have to go to the "most" but only to ventures that can do a bit better than return the record low interest rates today. Careful, though as the skinnier ones MIGHT have to perform at higher interest rates in the future.


Hilarious replies from leftists. Multinationals cannot exist in a competitive free market. The only reason these multinationals even exists is the government. Protectionism, "Too Big to Fail," Regulatory Capture, occupational licensing, classic patent law, are what create multinationals and big businesses. Real capitalism is about competition between smaller firms. The competitive pressures on individuals and firms regulate the market much more effectually than a bureaucrat in Washington--who doesn't know you or myself. Government failures >> Market failures.


Jack, I enjoy the debate, but your last one was a bit long winded.
On your 4pmish post, great examples of how capital flows freely to the most productive industries: The technology sector and financial sector are amongst the most productive industries in the US.

On your 5pmish post, gosh, you break from the argument into many others, but I think you miss two key points related to the original. First, most of your points in the beginning are related to the product--its advances--which supports my technology point by the way. No disagreement there, but the problem is not product: It is costs! Costs are crushing the industry competitively mostly due to labor.

Second, "the bailout." I am glad you bring this example advocating government intervention. You may be surprised that I agree, but fundamentally for different reasons. This is a critical point: The government did not "bailout" the auto industry. "Bailout" is a popular term that is imprecise. The government essentially invested in research and development in promising pioneering industry. Basically Uncle Sam said, radically innovate fuel efficient cars and we will give you tax payer money. In other words, it is a new auto industry. Government intervention with investment in R&D can be a good thing, if done strategically bilaterally and smartly in support of maximizing production possibilities. The bilateral strategy in this case is not just a new competitive auto industry, but lowering our economy's highest economic cost; energy. A good use of resources in my opinion--i.e. PRODUCTIVE.

The market is the community.

Agree with you on demand destruction in the economy. If it aint there it aint there, but that supports market efficiency.


David...... it's a big elephant to try to accurately depict and fraught with lots of quishy...... issues. Perhaps among the reasons I wander...... and wonder!

Capital flows are complex..... with the big stuff having the abnormalities? NEH describes. Then there are those millions of micro-biznesses that keep many alive but which pay barely wages with NO return to capital at all.

The tech and financial sector as highly productive? Tech is fairly easy to measure -- in some cases -- as one can tally up the sales and profits of an Iphone or the thin margins of today's computers.

But! with a sector like H/C, apparently able to foist its inefficiencies off on the insurance parasite/increasing premiums, economic curiosity of the US being some two decades or more, behind on adopting the tech one does wonder how to close the loop and gain some efficiencies before we drown in the costly mess.

The cancerous growth of the financial sector? A few decades ago the "financial sector" was but a side note to a bustling economy of mfg and services that dwarfed "Wall Street" despite those being the years when the geniuses thought conglomerates and as much vertical integration as they could get away with being all the rage.

Difficult to measure I suppose, but I'm NOT seeing anything that looks as though billion buck hedge fund scammers are earning what they carve off, much less being worthy of taking their daily and weekly INCOME largely as preferentially treated capital gains. (BTW don't most of us create a capital gain? if we use their concept? What was minutes ago being milk and coffee grounds elevated by a talented barrista to a delightful latte worth much more than its ingredients? A gallon of gas having added value by delivering it to my town and dispensed in a convenient manner?

Just now the "financial sector's worth" would have to be discounted by a 65 -85% total corruption and the phenomenal losses related to the "mistakes" of derivatives greatly flawed "product" and the utter corruption that allowed such a nasty virus to take down the economies of the world. Our prisons likely have too little room to make things right.

"Costs?" In the auto biz? Au contraire! I tried to explain that the UAW guys and others assemble a car today in just 30 man-hours and it's a much higher quality product than any time in the past.

The mid-range Chev's that have always cost something like a third or half a year's pay for a middle income earner, may SEEM more expensive today due to the middle class household being short $10,000/yr that they've been robbed of by those of the top few percentage.


.......... and the income disparity trend continues....... Ha! with the new car offerings sitting there while we use the internet (tech?) to swap parts and keep our oldies running for 250,000 miles. Lack of demand. No bucks to "go shopping".

Usually I'd not want Unc Sam to bail out and mandate the direction, but IF they have done so in the name of lessening the impact of our having built the most wasteful, gashogging fleet in history, then....... a reluctant "OK". (I'm old enough to recall the last "gas crisis" and Chrysler responding with small, efficient K-cars, only to see oil prices collapse to $10 and stay there for a long time. "C" literally lost the company by responding to the wrong signal....... but Lee saved it with the profitable "Mini-vans")

It IS a community GOOD to spur the conservation of NON-renewables and spur the adoption of cleaner RENEWABLES.

And no......."The Market" is neither god nor "the community". To stick with car examples...... it was not "the market" that demanded seat belts and safety features. And, "the market" was short-sighted and dumb enough to have built the huge fleet of gas guzzlers you see on the roads every day.

But, in keeping with "government failures" admittedly the community failed to take the opportunity offered by $10 oil to levy ascending levels of taxes on NON-renewables. Moving some of the tax burden from labor and creativity to non-renewables would have been incentive for billions of small "market" decisions that would have created a more efficient "transportation machine" than we have along with making us FAR less vulnerable to market manipulators, be they OPEC or our "own??" CFTC schemers.

It is The Community that decides to build Central Park and protect it from the billions that could be "earned" were Trump & Co to "maximize its value" as condos, or? gambling casinos?

Lack of demand? and "market efficiency?" Probably NOT! Efficiency is far more likely to come from a roaring economy of strong demand and full employment. Consider....... and we do have to go back some years! Ha! to imagine actual wage increases, which would spur the employer to implement labor saving devices. With the roaring market he'd have the retained earnings and borrow capacity to invest in better plant and equipment.

In today's downward spiral? He's already laid off his newer employees and is now cutting the more skilled and productive folk........ and as you see he can't convince a banker that there is enough demand to justify that fancy new facility......... and if needed? well lot's of folks available for crappy wages, part or full time........ so we head for the economy of the third world where 20 men with shovels do what we do with two and a backhoe. Nothing good down that road.

Vivian Darkbloom

A few comments ago, I raised the issue as to why the government "stick" (Pigovian taxes) should be more preferable than the government "carrot" (primarily tax subsidies). Well, quite fortuitously I came across the following testimony by Donald Marron to Congress which explains very well the comparative advantages of the former to the latter as regards tax policy on energy:


This is important government versus market issue. And, it is very topical as we contemplate what went wrong with respect to the Solyndra debacle, and why, and how to prevent future such mistakes.


The leftists above demean economic liberty because they distrust that which they cannot control.


great article ...have a nice day :) :)


Vivian: I guess I've been "with" you and Marron for 45 years or so. I'm not sure why, but recall debating college friends in favor of gradually increasing taxes on NON-renewables nearly a decade before the first "oil crisis" and "shortages" when we were but 30% dependent on imports. I favored then, as now, a revenue neutral shift that would lessen the income and creativity tax burden so as to reward those who found ways to lessen their consumption of non-renewables, and at the same time, offer a non-subsidized edge to those bucking the oil era momentum and developing more sustainable and cleaner alternatives.

It's difficult to imagine any logical resistance to such a plan. But many will recall the, prescient Carter having tried to sell one thin dime of demand dampening gas taxes and getting clobbered for it, while we probably sent 5 or more dimes to develop the skylines of the Mid-east and other OPEC members who conspired to raise prices.

The price gouging effort eventually failed and we again "enjoyed" the fruits of $10/bbl oil. That should have been a GREAT time to have gradually imposed increased taxes on NON-renewables, but ha! instead we went on to build the current fleet of gashogs and for a decade or more giving a HUGE gashog tax break to those using 6,000 GVW super-pigs for "business", like realtors driving their clients around and wealthy builders "with a tax problem" to drive around to inspect the progress of their home building.

Clinton had a better idea than Carter, as instead of just a "gas tax" his was an across the board "BTU tax" on all NON-renewables. It was a brilliant idea as we had to raise revenue after the 12 years of Reagan/HW deficits anyway. But Ha! talk about "entitlements!" the American people apparently think they are entitled to cheap gasoline and seemingly few have the attention span to understand making it revenue neutral. Well, salesman that he was and is, Clinton got clobbered too.

So here we are with the gas signs winking $3.75 or more, NO one is going to propose the gradual increase in NON-renewable taxes that would still be the best idea.

Had we adopted Carter's thin dime and Clinton's BTU tax on non-renewables with a posted progression, alleviated by income tax rebates, the billions of small "market" based decisions would surely have put us in better stead than we are today.

Still............ I'm not sure the Pigovian taxes alone "gets us there". When oil went up sharply a few years ago the $4 gas was just a minor nuisance to those well-heeled enough to drive their special tax deduction Lincoln Navigators and jumbo "P/U" trucks and if they did desire to change behavior it would be some time before they'd "downsize".

If we had a decade or more, even though many would not change their consumption habits, and gasoline was our only option, the gradual increase in taxes would eventually lessen relative demand.

But today? When we've been surprised to find ourselves awash in natural gas, and with oil price gouging busting our chops, we should be moving much faster than tolerable increases in Pigovian taxes on gasoline would spur.

NG BTU's are something like HALF the current price of oil BTU's and virtually all of NG's costs are distributed in OUR economy, while we import 70% of the oil we consume. (Though in fairness we export some "finished" oil products that lessen the percentage.)

Here in Alaska we've people falling all over themselves to somehow find a means of marketing our NG with a pipeline to tidewater and a fleet of LNG tankers headed, they fantasize, to "Asia" where NG prices (for now) are much higher than in the US. The economic truth is that Alaska NG is and will be "stranded" until NG prices double or more and it's feasible to build costly means of shipping it.

But here we are with L-48 with a surplus of NG, which with a lot of costly infrastructure we "could" export, ha! for one half or one third what WE are paying to ship oil across oceans. I see NO "market" mechanism that is going to overcome the inertia of consuming much more costly oil.

So in our "Failure" week........ should government provide some considerable leadership on moving us toward more NG and less oil to our seeming great advantage both in cost and cleaner air?

I say YES! as somehow the chain of "no demand" as we've but ONE NG car..... a Honda to be sold only in So Cal, and it does not behoove the sellers of gasoline to spend scarce dollars to put in NG refueling pumps. (The actual retailers of gasoline are on THIN margins, so except for oil company owned stations they've virtually not margin to play with on a speculative new fuel delivery system)

In summary; how do or did we decide there was reason to implement a Pigovian (stick) tax? Well, it was because we identified a need to change behavior........ no getting around it. But surely the income tax was not created in perfection by god or "our founders" and lots of conservative folks think it should be a "consumption tax" to........... change behavior, so we're now at the point of deciding which behavior is desirable to change....... and how fast.

Here in AK I find a 4WD vehicle that both pulls and pushes better than pull alone and a LOT better than push alone. Soooooo, likewise I'd suggest there are times to use either pull/push and times to use both. We're in one now.

Sebastian Guerrero

This post has a couple of blind spots:
- people do not elect leaders to represent their views, but rather to entrust them to make informed decisions.

- No discussion of externalities.

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Es symbolisiert den reifen und einen neuen Anfang. So wählen Sie einen geeigneten brautkleider für die große Tag ist sehr wichtig. Sweet 16 hochzeitskleider Sie können wählen kurzen Heimkehr abendkleider oder Quinceanera Kleider! Jetzt haben wir mehrere Stile vorzustellen, sie sind sehr schön und eignen sich für diesen großen Tag.

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I can't wait to wear it for my June 2012 wedding.


Oy, yet another Small *inefficient* Government Non Sequitur (SiGNS)...

1. Competition is the basis for efficiency
2. Government is not efficient
3. Reduce the scope of government

The conclusion...does...not...follow. Let's try again...

1. Competition is the basis for efficiency
2. Government is not efficient
3. Force government organizations to compete for taxes

Yeah, of course. As neoclassical_libertarian commented about Hayek...the relevant information is so decentralized and dispersed that planners only have access to a microscopic percentage of it. But guess who has access to all it? Taxpayers!

If you want government to operate efficiently then you simply allow taxpayers to directly allocate their taxes among the various government organizations at anytime throughout the year. Just like with donors and non-profit organizations. Taxpayers won't have a choice whether they pay taxes but they'll have a choice which government organizations will receive their taxes.

In other words...donations to government organizations should be 100% tax deductible...aka pragmatarianism.

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what are the "more productive industries?" And would auto resources and employees be better suited at them than the several trillion of idle capital on the side just know and the pool of 15,000,000 under and UNemployed?

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Just a quick note to say great to see people blogging about climate change and if you want more information on the topic you might like to check out my blog. Links are always welcome, if you like the site but more importantly it may provide you with a few interesting stories for your readers.


To have only two effective political parties constitutes a market duopoly?? No it does not.

In a market duopoly the two sellers will be content to divide the available sales and not compete on price. With a two-party politcal system competing for offices, it is winner take all. The winner gets all the spoils and the loser gets nothing. So they will continue to compete.

Prof. Becker should know better.


Big Ed: Would that such were the case! Truth is the "competition" changes only 3% of Senate seats, often from retirement, and those having to sit out a term have a chance to head for K-Street and really cash in!

Presidential level? Hillary falls to Sec of State -- a bigger job than the Senate position, McCain continues as he was before, The Palin cashes in BIG time on her sudden fame..............

Though parties are powerful they are not quite a duopoly either; today's Democratic Party is very different from that of the JFK, LBJ and McGovern years while the "country club" Repubs who simply wanted pork and low taxes has lost much of their power to the whackright extremists you see running for President today. Arguably the multi-party aspect of parliamentary systems is being cleared by movements within the parties.

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