Bleacher Bums Forum

What I recommended was that at the end of a period of time, the lease ends, and the land, now with proven oil reserves, is put up for bid.  This gives the company a very strong immediate incentive to drill quickly, and to produce massive amounts of oil from that land before they either lose it or have to pay a much increased lease cost for the land.

Yes, and it was as misguided an idea then as now.

companies always have to balance the desire for immediate profits with the need for long term benefits.  In a time of rising oil prices, there is a strong incentive to restrict production in order to be able to produce in the future at a higher price.  Why produce more than necessary today, merely reducing prices without increasing profits.

This is what illustrates that it is misguided.

In a properly functioning economy, where profits are not the result of theft, or slave labor, or government regulation which distorts decision making or grants a monopoly, or the failure of an economic activity to internalize all of its costs, profit is a measure of how valuable a particular activity or good or service is to society.  Forcing business (or even pressuring business) to make decisions which reduce the total profit, even when that is by reducing the price (at the moment) which consumers pay for the activity or good or service, reduces the total benefit to society.

Wen an oil company delays production because it anticipates greater profit in the future, it is assuring that future demands are going to be met.  Creating pressures to coerce oil companies, or ANY company providing any good or service, to bring a product to market now, when society does not value it as much as society will value it later, is misguided.

"Forcing business (or even pressuring business) to make decisions which reduce the total profit, even when that is by reducing the price (at the moment) which consumers pay for the activity or good or service, reduces the total benefit to society."

What I recommended does not force a company to do anything.  But no company has the right to decide what to do with land that belongs to the Federal Government.  The various companies can decide, each for themselves, how to maximize their profits within the structure of the lease.  They have the choice to enter into a contract with the Federal Government, or not to do so.  Just like any transaction, they have to proceed in accordance with the strictures of the leasor.  The strictures I recommend may not seem reasonable to you, but that is because you, not the recommendation, is unreasonable.

Saying that the government should not have rules that affect the marketplace is meaningless, since the government, as the landowner, IS a part of the marketplace and any action, or for that matter any inaction, has an effect on the marketplace.  The only thing left to be decided is what effect that government should have.

What I recommended does not force a company to do anything. 

"Forcing business (or even pressuring business)....

Dave, the part in parenthesis is still part of the sentence.

But no company has the right to decide what to do with land that belongs to the Federal Government.

At no point have I suggested that the Federal Government lacks the right to impose the lease restrictions or requirements which we have been discussing.  My comments have focused instead on whether such restrictions or requirements are good or bad for society, which is why I wrote that it "reduces the total benefit to society."

The various companies can decide, each for themselves, how to maximize their profits within the structure of the lease. 

That is true even when the mineral rights are leased from a private property owner.  Government certainly has the power to impose such use restrictions on leases from private property owners, or to require all owners of property to use the land instead of leaving it fallow, or to use the land for agricultural purposes instead of any other purpose, and even require that the crops are planted the first day of January each year.

Now, every one of those things would be foolish and misguided and reduce the total benefit to society.  But government could certainly do so.  I would hope that if someone pointed out to you that such restrictions were misguided and reduced the total benefit to society you could get beyond the question of whether government has the power or authority to impose such restrictions.

Saying that the government should not have rules that affect the marketplace is meaningless, since the government, as the landowner, IS a part of the marketplace and any action, or for that matter any inaction, has an effect on the marketplace. 

Dave, you spent time in the military, so I will use a military example.  Saying that a military action should have as little effect as possible on civilian populations is meaningless, since the military, drawing its members from the civilian population and any military action, or for that matter inaction, therefore has an effect on the civilian population.  And, therefore, Dresden and Hiroshima are fine and not even worth discussing.

Yes,  The very existence of government effects the marketplace.  A good government, which allows unrestricted marketplace choices, enforces contracts, prosecutes fraud, provides a stable currency, borders secure from military invasion, unrestricted international trade, a system of resolving disputes, rule of law, and an orderly transfer of power from one regime to another, effects the marketplace a great deal.  Such a government allows the market to flourish, and that is certainly influencing the market.

That is quite difference from government actions which are designed to influence or produce a particular result, such as taxing the consumption of alcohol (though no other beverage or food)  in order to discourage consumption of alcohol.  Folks are still allowed to drink, though the goal is to get them to drink less.

You are right that to the greatest extent reasonable, government should reduce its role as a player in the marketplace, such as by selling government owned land, but that is not even close to the idea that government should decide how it wants to influence the market and then should set about doing so.

Ownership of property, even real estate, is not static, permanent or immutable.  Not even for government.  The United States has owned more land in the past, and it has owned less land in the past.  You, seemingly, think that should not be a concern, despite the fact that it is a tremendous intrusion in the marketplace, and frequently results in government policies, or property use restrictions which, just like the one we are discussing, reduce the total benefit to society.

http://www.drudgereport.com/flash8.htm

uh oh...protesters inside an Obam fundraiser. I guess the days of fainting upon seeing the messiah are over. I love the part where he didn't even recognize that it was a protest song.

No, I missed it. Would certainly be good news. It's been brutal where I live.

"Government is not limited to the federal government."

In fact, Government is not restricted to the United States.

But we were talking about whether or not the United States Federal Government should take a specific action.  I believe that, as a property owner, the Government has the right to put their land to any use they wish, and right now I believe that increasing the output of oil from Federal land will benefit our society much more than the various alternative uses or non-uses of that land.

You said that the Federal Government should not do as I said because the Federal government should not do anything to affect the market.  But the fact that the action of the Federal Government in this instance will affect the market is irrelavent, since any action, or any lack of action, will affect the market.  Nor is there any way to tell at this point that the action of the Federal Government would have a greater affect on the market than no action whatsoever.

Wrong.  I am making a recommendation on what a the Government should do with it's property.  The issue of whether or not the Government should own land might be a socialist question, but owning the land, the question of what to do with it is a legitimate policy decision.

Great stuff Craig.  Thanks for sharing that.