Oil Prices, Exhaustible Resources, and Economic Growth

Oil Prices, Exhaustible Resources, and Economic Growth

By James D. Hamilton Department of Economics University of California, San Diego

Abstract

This chapter explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed.
I document that a key feature of the growth in production has been exploitation of new
geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically
followed temporary oil supply disruptions are reviewed, and the possible implications of that
experience for what the transition era could look like are explored.

How's life in Venezuela?

This interview is about how habitants see the situation in Venezuela. ( thank you to my dear friend Carla S. García)

First that must be emphasized is the huge level of inflation which causes everything that we are buying increments the cost every month,the infrastructure like the Sambil Mall totally invaded by homeless and many homes invaded without any right and respect by the owners. Streets are in bad conditions.

The health system is affected by 100% because they never send the lso(it is a money direct to the hospitals and medical institutes, such as a tax:the salary from the doctors,nursers and the rest came from the lso), the only way to treat a disease is to go to private clinics and pay for the service,and the bad bad services from the cuban medics who are not prepare to treat a person!! one of these centers almost kill my mom!! this causes the 50% of the medics from venezuela lives in other country like ee.uu.

Aall we ask where goes the money to came from the oil? we'll never know!

The insecurity probably is the most trouble we can deal,cause every day about 24 deaths u can see it in the news and newspapers ,cause kills stealing things of little value like cellphones ,money and blackberrys for example.

Other is the expropiations to the companies and for that no one wants to make franchises in the country.

Because of all this people don´t respect the laws and rules, and the all we can keep eyes in work to get money to buy only food,wich increments prices all day.

I have to say that food disappears: it can be milk or sugar one month, the next month could be meet.

Chavez says that our salary helps to all of us, but is not true! all salary goes to in food and public services like light, telephone etc and after u pay all this u are without money, so if u can go out to movies or eat out of the house, or anything, u need to save it to do that month after month.
Food it´s so expensive that every month auments the price so we must buy just the necessary (here I think she wants to say that they can buy just the "basic food").

He makes a service like a supermarket but "economic" called "Mercal" and that is so improper: people don´t have any education and eats the food there without pay.

Entertaiment it´s like a privilegy,and the list of troubles go on.

That's it. Of course this is just a point of view of an ordinary girl. If there is some Venezuelan reader who wants reply, you can leave a comment!

"omg u don´t have any idea how lucky u are to live in your country i just love it to walk until 10 o'clock. Here u have to stay in your home at 6pm cause after u can still or kill u in fact u can say thanks to live like that"

(ps: She told me many other things but I prefer do not public them because of...well I think you should know why).

An example about why Communism and Socialism don't work

HAVANA (AP) — "Cuba legalized the sale and purchase of automobiles for all citizens on Wednesday, another major step in the communist run island's economic transformation and one that the public has been clamoring for during decades. Under the law, which takes effect Oct. 1, buyers and sellers must each pay a 4 percent tax, and buyers must make a sworn declaration that the money used for the purchase was obtained legally.

Unrestricted sales had previously been limited to cars built before the 1959 revolution, one of the reasons Cuba's streets are about the only place on the planet one routinely finds a multitude of finned American classics from the 1950s such as Chevrolets Bel Airs and Chrysler Imperials, all in various states of disrepair (see photo above)."

Cuban blogger Yoani Sanchez offers these comments:

"Even with this new legal reform, however, the great majority of citizens are only allowed to buy a used car, which in Cuba means vehicles more than 15 years old, and in particular Russian Ladas or Moskvitches, or Polish Fiats, which were previously marketed through a meritocracy. Some modern cars in State service will be sold to those who meet the strict requirements of belonging to an institution and demonstrating their fidelity to the Government. And those impeccably new ones, recent imports, are destined for a Revolutionary elite that has in their pockets money sanctified through official channels. To drive a shiny Citroen or a late model Peugeot will continue to be a sign of being a member of the powers-that-be."

Source: Carpe Diem

Ending the Global War on Drugs

From the CATO INSTITUTE

NAHB Auditorium
1201 15th Street, N.W., Washington D.C.
(Corner of 15th St. and M St., N.W.)

About the Conference | Conference Schedule | Registration

Although the global prohibition of drugs has manifestly failed to stem the use of narcotics, it has generated enormous costs and perverse outcomes. In the United States, the war on drugs is generating alarming violations of civil liberties, weakening the rule of law, and compromising law enforcement efforts. The U.S.-led drug war is also undermining legitimate foreign policy goals around the world, including the spread of liberal democracy and an effective war on terror. This conference will bring together prominent scholars and international leaders to analyze current policy and propose practical alternatives such as legalization.

Speakers will discuss:

• The impact of the drug war in Mexico, on the U.S. border, and in Central America
• How prohibition helps fund terrorist groups in Afghanistan, Pakistan, and beyond
• How Washington's anti-narcotics campaign violates the Constitution
• The effects of criminalization on minorities in the United States
• Lessons from South America
• The evolution of drug policy in the United States and what decriminalization or legalization would look like in practice

This conference is supported in part by a generous grant from the Open Society Foundations. Additional funding was provided by Mr. Peter Lewis.

Featuring

Fernando Henrique Cardoso Former President, Brazil	Jorge Castañeda Former Minister of Foreign Affairs, Mexico	Mary Anastasia O'Grady Member of the Editorial Board,Wall Street Journal	Luis Alberto Lacalle Pou Speaker of the House of Deputies, Uruguay

Glenn Greenwald Columnist and Blogger, Salon	Leigh Maddox Board Member, Law Enforcement Against Prohibition Professor, University of Maryland Francis Carey School of Law	Ethan Nadelmann Executive Director, Drug Policy Alliance	Tucker Carlson Editor-in-Chief,Daily Caller

Special video messages from Vicente Fox, Former President of Mexico and George Shultz, Former U.S. Secretary of State

About the Conference | Conference Schedule | Registration

Why extension of unemployment benefits is not good

Here a post by David C. Rose on csmonitor that explains why another extension of unemployment benefits is not good for the economy and its effect to the wages.

Why Congress should not extend unemployment benefits

The president is calling for yet another extension of unemployment benefits. For members of Congress, such extensions have evolved into a new “third rail” of politics – so they don’t dare oppose them.

But in reality, extending unemployment benefits again will interfere with an important mechanism by which the economy recovers on its own. Congress should say no.

John Maynard Keynes argued that recessions are prolonged by wages falling much more slowly than assumed in the models of classical economics. Virtually all economists agree with this point. Like most economists, then and now, Keynes believed that if wages could fall very rapidly, labor markets would clear quickly and therefore unemployment would be short-lived.

Rapidly falling wages produce jobs

For this reason, Keynesian and nonKeynesian economists alike view the speed at which wages fall in a recession to be important for rapid economic recovery. Falling wages increase the profitability of production, and this induces firms to produce more. This in turn leads to more hiring, faster economic growth, and a lower unemployment rate.

Virtually no economist disputes the claim that the faster that wages fall in a recession, the more quickly an economy will recover. Keynes certainly believed this. Keynes’ caveat was simply that this process takes too long, so we should use expansionary fiscal policy to hasten recovery by stimulating demand.

The most obvious way for wages to fall is for individuals to be paid less in the jobs they already have. Although some companies have introduced pay cuts, there are strong institutional impediments to doing so, and therefore most have not. But another way the economy can produce the same effect is if individuals, after losing a job, take new jobs at lower wages than the jobs they originally had.

What does this have to do with extending unemployment benefits?

Someone who is unemployed as a mechanical engineer might nevertheless be able to find a job as a production line worker. Extending unemployment benefits induces such an individual to keep looking for another engineering job. But if that individual took a job as a production line worker because unemployment benefits ran out, productivity in the new position would almost certainly increase – even though the wage associated with it did not rise.

Extending jobless benefits makes wages rigid

Because extending unemployment benefits makes many individuals less willing to take new jobs at lower pay, it adds to wage rigidity, which Keynes (correctly) argued prolongs recessions.

There is abundant empirical evidence that unemployment benefits induce workers to keep looking for a job like the one they lost (see previous work by Alan Krueger, the president’s new top economic advisor). So extending unemployment benefits yet again will interrupt a potentially important mechanism by which the economy self-corrects by effectively reducing real wages.

Why is this so hard to see? Most economists and federal government officials are acting as if the current bad economy follows the standard Keynesian scenario: consumption and investment spending fall for no good reason, causing output and employment to fall below a sustainable trend. Since it takes needlessly long to return to the trend, it is sensible to stimulate the economy to hasten the recovery.

But what if the original problem was excessive monetary and fiscal stimulus that led to a credit boom, an asset bubble, and therefore a level of consumption that was above the sustainable trend? This well describes the recession we are still struggling to fully put behind us. In this case, stimulating the economy to return to an unsustainable trend is not a viable long-run solution.

The ultimate answer is consuming less and/or working more as a nation. This is precisely what an actual or de facto decrease in wages does. Once the economy returns to a sustainable production and consumption trend, uncertainty will diminish as markets stabilize. This will induce entrepreneurs to get back to work on inventing new products and production methods. The increases in genuine productivity that result from this process are the real source of increasing prosperity over time.

The politics of rejecting an extension in jobless benefits

There is simply no evidence to support the claim that extending unemployment benefits hastens recovery by propping up consumer spending. The unemployment rate is still 9.1 percent, and the economy is growing much more slowly at this stage of the recovery than is typical of business cycles. Why continue down the same path when there is a good theoretical explanation for why that path will fail?

What about showing compassion for those who can’t find a job? This certainly makes the politics of rejecting extended jobless benefits that much tougher – especially amid reports of America’s increasing wealth gap and poverty rate.

But allowing real wages to fall is compassionate.

RELATED: Obama deficit plan: Is there ever a good time for a tax increase?

There is abundant evidence that when unemployment benefits run out, people do find jobs – just not the jobs they had before. Conversely, extending unemployment benefits subsidizes longer searches to find jobs like the ones that were lost. Meanwhile, such individuals are not working with others to make new goods, so the amount of goods produced is lower. This prolongs the unemployment of others.

We need to stop focusing on the suffering of those whose unemployment benefits run out, and start focusing on people who will become unemployed or be unemployed longer because of the unwillingness of those who are able to find lower paying jobs, to take those jobs.

Paul Krugman about the earthquake

"People on Twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage."

Paul Krugman, 2008 nobel prize in economics

Or is it a fake?

The G7 recovery leader? The Canada

The Q2 real GDP data across the G7 are now in, except for Canada who is always the last to release their statistics. We now know that the G7 expansion has been nothing short of pathetic. Why? Because among the G7, ONLY Canada - the G7 consists of the US, UK, Germany, France, Canada, Italy, and Japan - has fully regained its GDP lost during the recession (it had by Q3 2010 no less). Canada's in an expansion league of its own.

From the blog of Rebecca Wilder.