[peeb]

Originally Posted by subego 

I hope my edit shows I wasn't trying to force you into such.

No problem.

Originally Posted by subego 

This issue, assuming I understand what you are proposing (as always, I invite correction), is that calling this a "gas tax" is inaccurate. It seems to me that you are calling for a road tax. It would be a tax on gas now, because that's the primary thing being consumed. As other forms of energy become feasible, you'll have to tax those too, otherwise your road fund will dwindle to nothing.

Correct. A gas tax is an imperfect measure of road use, but it's one we have, and it's pretty good - much better than anything else that is likely in the next few years, and free to implement since it exists already. You are right that ultimately it would need to become a fuel tax, or road miles tax, or something like that.

Originally Posted by subego 

The theoretical problem with this (separate from the legion of practical problems) isn't that the tax gets passed on to consumers as another fixed cost of production and distribution (though that happens), the problem is how you affect the overall efficiency of the market.

Originally Posted by subego 

I'm sure you're familiar with the concept of the "perfect" market, wherein the further away your market is from perfect, the more reality will deviate from the models.

Sure - they depend on accurate information about costs, which is what this system (more or less) does.

Originally Posted by subego 

Getting supply to where it's demanded is one of the requirements of a perfect market.

Surely you mean that it is one of the results of a perfect market?

Originally Posted by subego 

When you enact a road tax (this counts just as much for tolls) you are disincentivising getting supply to where it's demanded. This is much worse than the fixed cost hit... though in your proposal you get whacked with that too.

I don't think so. By passing on the cost of roads on a per liter or per mile charge you are making consumers sensitive to the costs of choices. Whether or not they drive or choose some other way to get the job done is informed by the full costs of their choice, making it a more perfect market, no?

[subego]

Originally Posted by peeb 

I don't think so. By passing on the cost of roads on a per liter or per mile charge you are making consumers sensitive to the costs of choices. Whether or not they drive or choose some other way to get the job done is informed by the full costs of their choice, making it a more perfect market, no?

It makes a more perfect market for roads.

The result of that would be a less perfect market for the industries that relied on the free (subsidized) use of roads.

[peeb]

Originally Posted by subego 

It makes a more perfect market for roads.

Well I'm looking at this as a market for the world of transport choices. Let's take an example of the kind of thing that full cost pricing of roads into gas costs would allow: Right now, much of the costs of roads is built into general taxation. This effectively means that there is a hidden subsidy for travel. Goods that travel a long way actually cost more than we think they do, because the costs of that travel are paid for from general taxation. The market does not have all the information it needs to make the most efficient allocation of resources.
Passing on the full cost would allow local production (of agricultural products, for example) to compete on a more level playing field - this is what I mean by creating a more perfect market. The consumer has more information about the true costs.

Originally Posted by subego 

The result of that would be a less perfect market for the industries that relied on the free (subsidized) use of roads.

Taking away subsidies from industries always gives more information, which helps create a more perfect market. Direct subsidies always distort markets, and make them less perfect.

[subego]

Originally Posted by peeb 

Passing on the full cost would allow local production (of agricultural products, for example) to compete on a more level playing field - this is what I mean by creating a more perfect market. The consumer has more information about the true costs.

You're focusing on market distortion to the point of ignoring the other factors that go into a perfect market.

One of those factors is competition.

I can't disagree with the fact that subsidized roads knock the playing field off level for local production, but do you disagree that subsidized roads make a market open to more competition?

It seems to me this boils down to a math problem. How much do you pay in subsidy vs. how much do you save from more competition?

I'll be honest, the only reasons I can give for thinking you save more from competition is because that's what makes sense to me, and most people seem to agree. Neither of these are acceptable arguments.

So I can't prove my position without running some numbers (which I'll do). If you have some numbers that prove your position, I am keenly interested...

Really. An actual provable answer to this, whatever that may be, is far more useful to me than my supposition.

Regardless of how right I think I am.

[peeb]

Originally Posted by subego 

You're focusing on market distortion to the point of ignoring the other factors that go into a perfect market.

One of those factors is competition.

Let me get this right, you're talking about competition between companies who use roads, rather than competition between companies who use roads, and companies who use rail, air, or more efficient distribution mechanisms?
So your argument is that if roads are subsidized, this somehow improves the competitiveness of companies who use them? I'm not sure I follow. It's not like it makes things cheaper - you're paying the cost of the transport from taxes, you just can't choose whether you want to or not. It certainly harms competition from non-road companies and solutions.
A more mundane example of this distortion is the choice of whether to drive, bike or take the bus somewhere. Driving (and to a lesser extent taking the bus) is artificially cheaper because of this subsidy.

Originally Posted by subego 

I can't disagree with the fact that subsidized roads knock the playing field off level for local production, but do you disagree that subsidized roads make a market open to more competition?

Well, subsidizing anything makes it cheaper to compete within that subsidy area, but ultimately harms competition. If you take the broad view of transport and distribution, subsidizing one solution ultimately prevents the market from finding the 'highest and best' solution.

Originally Posted by subego 

It seems to me this boils down to a math problem. How much do you pay in subsidy vs. how much do you save from more competition?

I don't really accept your argument that subsidy creates competition. Taken to it's logical extreme, would giving all companies completely free transport at the public expense increase competition? Maybe, but the cost of subsidy would outweigh the benefit of reduced transport costs.

Originally Posted by subego 

I'll be honest, the only reasons I can give for thinking you save more from competition is because that's what makes sense to me, and most people seem to agree. Neither of these are acceptable arguments.

Right - the political reality is that people want cheap gas and transport, and in a democracy politicians are liable to pander to that. It's a bad idea from an economic perspective though, and we have to do a better job of explaining to the voters why that is the case.

Originally Posted by subego 

Really. An actual provable answer to this, whatever that may be, is far more useful to me than my supposition.

Well, there are a lot of theoretical and experimental proofs of this in the realm of other subsidies, particularly in trade support. The problem is that the system is so complex that it's hard to 'prove'. The premise that the government can make the system more efficient by targeted subsidy than people making choices themselves using all the information they can is pretty dubious though.

[vmarks]

peeb, I wanted to share this commentary with you and the others.

I do hope you'll read it all.

Subsidies Don't Explain Energy Market

RALEIGH – No government should give special tax breaks or subsidies to oil and coal companies. Can we all get agreement on that?

Good. Now, let’s get real. Tax breaks and subsidies for the energy mainstays of our economy are unwise. But they don’t get anywhere close to an explanation of why oil is the primary driver of transportation and coal is the primary driver of electricity generation. For that, the best resource is to study the physics and economics of power generation, as I have previously advised.

A good reason to discount the “government favoritism” explanation for our current energy mix is that alternative energy is vastly more subsidized per unit of output. As the Wall Street Journal observed in a Monday editorial, a recent report from the U.S. Energy Information Administration estimated that tax breaks and subsidies for traditional coal technology amounted to about 44 cents per megawatt hour of power produced. The subsidy per megawatt hour of natural gas was even lower, 25 cents. And that taxpayer-sheltered, wildly expensive option of nuclear power has us on the hook for $1.59 per megawatt hour.

How about so-called renewables? They are major-league rip-offs of the taxpayers. Solar energy receives a subsidy of $24 per hour. Wind is slightly less abusive at $23. “Clean coal” technology is even more abusive at $30.

---- I'll stop quoting there, go and read, please.

[peeb]

vmarks, I'll go take a read of that later - in the meantime, I presume you're chiming in to support the idea of a gas tax that reflects the full cost of government spending to support road infrastructure?
---
edit. Oh goodness. I just sat down with a cup of coffee to read that 'article' (all of half a page of unsourced opinion). Boy was I disapointed. You've quoted a right-wing blogger who is plucking figures out of the air (they're plain wrong, not that we can check them, because he doesn't day which hole he pulled the out of) and quoting press releases from his own foundation as if they are sources. If you want them to be taken seriously, you'll have to provide some evidence. Meanwhile, we established very firmly the degree of subsidy that the govt gives Big Carbon is enormous.

[subego]

Originally Posted by peeb 

Let me get this right, you're talking about competition between companies who use roads, rather than competition between companies who use roads, and companies who use rail, air, or more efficient distribution mechanisms?

Maybe I'm missing something, but this question gives me the impression you're saying that the market distortion due to road subsidies is large enough to make trucking genuinely competitive with rail.

Is this even remotely true? What's the average cost per ton per mile with a truck and a train? Isn't it something like two dollars for a truck and two cents for a train?

My understanding is that rail is a so much cheaper means of transportation that the only reason a business would choose road over rail is because of time or access.

[peeb]

Well more or less, yes, but we're dealing with the margin, which is where interesting financial choices happen. This affects business decisions to locate closer to railheads or to consumers and producers. It's a systematic distortion that probably shows itself up most clearly in whether it is cheaper to centralize and mass produce or decentralize and locally produce.

[subego]

Originally Posted by peeb 

Well more or less, yes, but we're dealing with the margin, which is where interesting financial choices happen.

We're talking a difference between them of two orders of magnitude. How big can this margin be?

[peeb]

The margin is the point where the two curves meet. Your two orders of magnitude figure applies only to situations where you are moving through a rail corridor. 80% of freight is transported by road, despite these cost differentials.

The margin is the point on the graph where it is about the same cost to transport by rail or by road (or to source locally) small changes at this margin can produce large effects that are difficult to predict.

Short answer: I don't know how big the margin is. I suspect it is substantial.

A simpler case would be to compare road transport against local production, since with rail it depends so much on the locations relative to railheads. In this case, for every increase in fuel cost (or transfer of cost from general tax subsidy to actual gas tax cost) additional businesses would move from the more expensive side of the graph to the less expensive (when compared to trucking from a distant factory). There won't be a simple linear relationship between any of these factors though.

Does that make sense?

[BRussell]

Originally Posted by subego 

My understanding is that rail is a so much cheaper means of transportation that the only reason a business would choose road over rail is because of time or access.

Really? Then why are trucks so popular and trains so unpopular?

[peeb]

Originally Posted by BRussell 

Really? Then why are trucks so popular and trains so unpopular?

As I mentioned - it's because rail only operates on fixed corridors. If you want to transport where it goes, it's much cheaper. Look at the amount of money from taxation that goes into supporting a road network over a rail network.

[Chuckit]

I'm not an expert, but it seems logical that they would prefer trucks because those can go on roads while trains can't, and we have a lot more road than rail in this country.

[subego]

Originally Posted by BRussell 

Really? Then why are trucks so popular and trains so unpopular?

What I said in what you quoted. Time (faster) and access (more places you can get to).

[vmarks]

The point, dear peeb, is that you keep advocating for huge tax increases in order to push the cost up, in order to push usage down, no matter what the cost to people's lives and livlihoods, when doing so will have no appreciable result.

If everyone in the USA did everything that you asked (by some miracle) then the carbon dioxide output at 2020 would be about equal to that of 1990. This is not significant.

Finally, if by some miracle every country in the world met the same target, which in places like India and China would result in human suffering on a massive scale (because their energy production under such constraints couldn’t come close to serving the needs of their teeming billions), the resulting effect on the climate might, indeed, be discernible but still so small – roughly two-tenths of a degree by 2100 – that few if any tangible benefits would flow from the “accomplishment.”

My Nobel Moment - WSJ.com -- john christy said that "California and some Northeastern states have decided to force their residents to buy cars that average 43 miles-per-gallon within the next decade. Even if you applied this law to the entire world, the net effect would reduce projected warming by about 0.05 degrees Fahrenheit by 2100, an amount so minuscule as to be undetectable. Global temperatures vary more than that from day to day."

Your notion of making energy so expensive that people cannot use it, cost to human lives be damned, is a dangerous one. That's right, you're dangerous. You're plans would cause disaster and death, with no real benefit.

[peeb]

Originally Posted by vmarks 

The point, dear peeb, is that you keep advocating for huge tax increases in order to push the cost up, in order to push usage down, no matter what the cost to people's lives and livlihoods, when doing so will have no appreciable result.

No, I'm asking for people to pay their way and stop asking for subsidies. The gas tax should pay for road infrastructure. It's not a question of pushing usage down, it's about stopping welfare scrounging.

Originally Posted by vmarks 

Your notion of making energy so expensive that people cannot use it, cost to human lives be damned, is a dangerous one. That's right, you're dangerous. You're plans would cause disaster and death, with no real benefit.

Energy is already expensive, I'm asking that people pay the actual cost for it, not expect subsidies from the state and other taxpayers for their subsidized energy.
The idea that if I don't subsidize your gas use it will cause armageddon is laughable.

[subego]

Originally Posted by peeb 

A simpler case would be to compare road transport against local production...

Does that make sense?

Okay. This took me awhile. I wanted to be as sure as possible I wasn't talking out of my arse... much. I should hopefully have quicker follow-ups, but I can always count on you to surprise me with a zinger.

What you say does make sense, and I accept this as a reasonable substitute.

There is also no dispute from me of the notion that any kind of transportation subsidy is going to negatively impact local production.

What I want to be sure of though, is whether you dispute the idea that a transportation subsidy increases overall competition by giving the consumer access to more markets.

The more markets the consumer has access to, the more firms that are in competition with each other. More competition generally leads to lower prices. Edit: having to provide for more markets also creates economy of scale benefits.

Note that (at this point at least) I'm not saying that the lower price offsets what is paid in general taxes for the subsidy. I'm just wondering if you agree that there is some sort of measurable effect of this increased competition. IOW, it is an effect due to a factor other than the lower price you get from firms not having the fixed cost of paying for the roads they use (the subsidy), and that this effect benefits a consumer even if they don't directly make use of the subsidy.

Again, I'm not asking you to say this offsets the taxes, I'm only looking for confirmation you believe it exists.

[peeb]

Originally Posted by subego 

Okay. This took me awhile. I wanted to be as sure as possible I wasn't talking out of my arse... much.

I appreciate your thoughtful and serious response. I really do.

Originally Posted by subego 

What I want to be sure of though, is whether you dispute the idea that a transportation subsidy increases overall competition by giving the consumer access to more markets.

Well, let's think this through. By subsidizing transport, you are making it possible for firms that would otherwise be uncompetitive to compete, at the same time as you force other businesses (who have lower transport costs but perhaps greater expenses in other areas) out of the market by making their goods relatively more expensive. The details are going to be monstrously complex and highly specific, but my guess is that it is a wash - you are not increasing competition, just displacing it.

Originally Posted by subego 

The more markets the consumer has access to, the more firms that are in competition with each other. More competition generally leads to lower prices. Edit: having to provide for more markets also creates economy of scale benefits.

I don't think you are actually making more markets available, you're just shifting which markets are able to compete. Economies of scale are a particular type of maximization that generally rely on cheap energy and cheap transport - whether or not those are really 'economies' once you factor in all the subsidies is a hard question - my guess is that we are artificially subsidizing massive scale at the expense of small, local businesses.
My problem with this is that small to medium enterprises employ more people per dollar and in absolute terms, and generally have better pay and conditions, and they keep dollars circulating within communities. We're subsidizing the process of turning the whole of the US into Detroit.

Originally Posted by subego 

Note that (at this point at least) I'm not saying that the lower price offsets what is paid in general taxes for the subsidy. I'm just wondering if you agree that there is some sort of measurable effect of this increased competition.

I get where you're going - I think we'd have a tough time measuring it, but I suspect we're just moving it around, not creating any more.

Originally Posted by subego 

Again, I'm not asking you to say this offsets the taxes, I'm only looking for confirmation you believe it exists.

I think it kind of exists, but my sense is that it's just displacing local competition. Small farms closer to cities loose out to large farms a long way off - more competition? I kind of doubt it really.

[subego]

Originally Posted by peeb 

I appreciate your thoughtful and serious response. I really do.

Likewise. Especially when it comes to economics, where far more people think they know what they are talking about than actually know.

With someone I (mistakenly) pegged as a pinko no less.

Originally Posted by peeb 

Well, let's think this through. By subsidizing transport, you are making it possible for firms that would otherwise be uncompetitive to compete, at the same time as you force other businesses (who have lower transport costs but perhaps greater expenses in other areas) out of the market by making their goods relatively more expensive. The details are going to be monstrously complex and highly specific, but my guess is that it is a wash - you are not increasing competition, just displacing it.

This is a good point, and I wasn't quite sure how to answer, but in thinking about it I think I've stumbled onto the idea that has been eluding me.

You are exactly right that you are displacing the competition. In a sense that is exactly the idea. How your subsidy is going to displace the market is going to be more or less along straight lines: the distance the good has to travel.

The markets you have access to as a consumer (or have available to service as a producer) aren't a distance, they're an area. Stretching out the boundaries is going to have an exponential effect on area.

Of course, as you have pointed out, you don't get the the whole circle. By making the displacement you are cutting out local production, so how this affects your market access will look more like a half-donut, but the "donut hole" centered on you will have less area than the donut itself (up to a point).

At least if I am correct in the idea that the displacement from a transport subsidy is linear. The thickness of the donut stays the same no matter how big you make it. There could be some factor at play that changes the thickness as you make it bigger.

Off the cuff it seems more likely to me that the effect is linear, because that is more or less the way people travel. In straight lines.

Why am I hungry all of the sudden?

[peeb]

Originally Posted by subego 

You are exactly right that you are displacing the competition. In a sense that is exactly the idea.

How your subsidy is going to displace the market is going to be more or less along straight lines: the distance the good has to travel.

The markets you have access to as a consumer (or have available to service as a producer) aren't a distance, they're an area. Stretching out the boundaries is going to have an exponential effect on area.

OK, bearing in mind that we know we're not talking about zones, but gradients, let's assume for a minute that the distance from the consumer to the limit of unsubsidized profitability is r, and producers who are economically viable without subsidy fall into r squared x pi. Once you introduce a subsidy, you are moving the zone of profitability to a torus described by r(2) squared x pi - your first circle.

Originally Posted by subego 

At least if I am correct in the idea that the displacement from a transport subsidy is linear. The thickness of the donut stays the same no matter how big you make it. There could be some factor at play that changes the thickness as you make it bigger.

Well let's assume that it is, since I think we have no way to know. In practice there may be other limits to how big the donut can get, but your argument is that you get an ever increasing area filled with willing suppliers the more you subsidize transport.

Well, ok, but there are a couple of issues with this - the first is that we assume producer density within that area is constant - I highly doubt it is. I think it would be fair to assume that producer density drops off as we move away from centers of consumption (ie cities), so while the area of the donut grows, I'm not sure the level of competition necessarily gets more fierce.

The other issue is, what happens with this scenario if you imagine an economist's featureless plane with regularly spaced cities, each of which has a donut of profitability around it, then expand the donuts until some overlap? I think this is likely the case in reality, in which case each donut will in fact have the option to serve several cities, reducing the level of competition even more.

Who knows, this is all highly speculative, but my bigger worry is that you don't get something for nothing with your fuel subsidy. I'm pretty sure the consumer will feel that having the extra disposable income to pay for produce from further away if they want to (bananas in February?) is better value for money than the government deciding to automatically subsidize banana transport.