Oakley wrote:if the government steps directly into the role of business or indirectly by subsidizing or making loan guarantees, and that turns out to be the wrong decision, we all must bear the burden of this bad decision.
When you decide to sit on the side lines and let the free markets act, and those free markets burn through precious finite resources that are then no longer available to anyone else - we all must bear the burden of that bad decision.
This is a completely false conclusion. The burden is on the person or business who makes the poor decision. These are not your resources that are lost; they belong to someone else. And even if one were to accept your flawed logic that resources are collectively owned and use by one man deprives another, why would you choose the proven most ineffective way to allocate resources, that being government dictates?
Yes governments make bad decisions, but they also make good ones. The free market answer to peak oil is ignore it, and hope for some future miracle while you keep burning finite resources as quickly as possible. Don't ration it. Don't attempt to charge a price that reflects its real value. Just burn for whatever frivolous reason you can think of. The free market has people driving to their marketing job, to convince other morons to buy SUVs, so they too can burn ever more finite resources. How can you look at the world and think it would be better with even freer markets?
It is true that sometime governments accident on good choices. But there is no mechanism to punish bad government decisions and reward good ones. If a bad decision is made, the cost is simple borne by taxpayers and the government does not go out of existence as would happen to a business that makes fatal decisions. The failure of businesses that make bad decisions takes capital away from these bad decision makers, and they lose the power to perpetuate their influence on resource allocation, while governments, if it is allowed to interfere in the markets and make resource allocation decisions, retain their power to again mis-allocate resources. When you say that the free market ignores peak oil you are in error. There are countless efforts of people to profit from alternatives to fossil fuels; currently the efforts of Andrea Rossi with his ecat machine, whether successful or a failure is a prime example. There is an unsubsidized business in my area where the owner designed his own windmill blades and sells wind systems and solar panels. If you just search the internet, you will find many people involved in developing and promoting alternatives.
You ask how I could favor the free market. You have certain judgements about what will work and what will not. I have certain judgements about what will work and what will not. If the force of government is used to decide instead of people competing in the marketplace to show who is correct, then we only get the judgement of those who have successfully gained control of the seats of power. If you are not favored by their decisions then your view is excluded. This is why centralized management of the economy works poorly and why free markets work much better. I think you are prejudiced by thinking that the current system of government/corporate collusion is the free market, which it is not, but rather economic fascism. The free market is producers exercising their individual judgements and testing them against one another with the market place deciding which of them is exercising the better judgement, yielding a more effective use of resources as judged by those who have needs and satisfy them by making their own choices. You attempt to substitute your judgement about what should be produced and what should be consumed when you demand that government make the choices.
You're clearly an eloquent and pretty smart guy. Do you really believe you couldn't come up with a better system than we have at the moment? Do you foresee a crash coming? Do you not think the crash could be managed better than by running at full speed doing what we are currently doing?
Thank you for the compliment. I do think I can come up with a better system than the current government/corporate collusion that rigs the markets against the average person so that those in power can take a disproportionate share of the economic pie; that better system is freedom, both in our personal behavior and in our economic lives. And as far as foreseeing the future, I think I am quite attuned to what is developing. Why should we rely upon government force to manage our economic lives any more during bad times than in good times? They only mute the good times and add to the suffering during bad times. And as far as running at full speed doing what we are doing, again I point out that it is not free markets that we are doing, but rather government controlled, managed, restricted, plundered markets that we have, not free markets, so I think you argue against yourself.
If a system isn't being run sustainably, then all the externalities are not being fully paid. It's as simple as that. Free market systems try to avoid as many externalities as possible and pass them onto other people, and even the future. This is not sustainable and clearly is not optimal for human welfare.
Lets try and put this into the Easter Island analogy to see what would have worked best there:
Do you think that if Easter Island had completely free markets they would have staved off collapse? I think they would have cut down ever single tree just as they did do. The trees could not be priced high enough in a free market system to make the cost higher than the discount rate applied to the future.
How could Easter Island have worked out better for maximum societal welfare?
The trees should have been priced at a level whereby they were only used at a sustainable rate. This is clearly far higher than the cost of simply cutting down a tree. The additional cost, lets call it a "sustainable added tax" could then have either been redistributed evenly amongst the population giving everyone a chance at being able to buy the sustainably available trees, or invested in ways to try to increase the total sustainable goods available.
Easter Island didn't have to collapse. Commodity pricing by free markets couldn't have stopped it.
I suggest that if the people of Easter Island had property rights and individually had owned the resources on the island, instead of them being collectively owned and exploited by the tribe, that each would have had an interest in managing and preserving his property. The result might well have been different than the destruction of their environment. All you point out by using the Easter Island example is that there is currently a significant imbalance between population and the ability of the earth to sustain that population. The discussion between you and me is how best to solve that problem or to mitigate the damage, and the collectivist solution on Easter Island argues against your position that politicians and bureaucrats should command a solution instead of the inventiveness that exists in individual human minds freely competeing without government attempting to choose the winners and losers.