Must the Government Combat Americans’ Addiction to Foreign Bananas?
Suppose a serious policy of “energy independence” were actually implemented, rather than being merely spewed out along with the rest of the political hot air. Would we be better off? Absolutely not. We would be vastly poorer because we would have to sacrifice a great deal more of the non-oil products we now produce and consume in order to acquire the petroleum products we demanded.
In a sense, every good or service we wish to consume raises the same question: make or buy? If we choose to make it ourselves, we must forgo the value of the goods we might have produced had we allocated our time, effort, and other resources in alternative ways–in the economist’s lingo, there’s an opportunity cost. If we choose to buy the desired good or service instead of making it ourselves, the value of the goods we could have enjoyed had we spent the money for them, rather than for the good actually purchased, represents the opportunity cost. So, whether we make or buy, there’s always an opportunity cost. Rational people answer the make-or-buy question by choosing the option with the lower opportunity cost.
If we were talking about bananas, everybody would see immediately the foolishness of seeking “banana independence.” Nobody would fall for half-baked arguments about our addiction to foreign bananas or our love affair with banana bread. It’s obviously uneconomic to grow millions of bananas in this country; it could be done, but doing it would entail much greater costs than buying them from producers in places better suited to their production (that is, places where they can be produced at lower opportunity cost).
The argument with regard to oil, or anything else, is identical.
Nor is it necessary for the U.S. military to police the Middle East in order to ensure access to oil for Americans. The Gulf sheiks have no desire to drink the oil brought up from beneath their desert despotisms; they have every interest in selling that oil. And once it has been sold, it enters, as it were, a vast worldwide supply pool from which all of the world’s demanders draw, because a barrel of (a given grade of) oil here is the same as a barrel there, and the barrels get shifted around to minimize transportation costs while accommodating everyone willing to pay the world price.
Arguments that we must resort to U.S. imperialism in order to enjoy the imported oil or the security of having continued access to it are bogus. If policy makers really believe such nonsense, they are bigger idiots than we thought–and they ought to fire those thousands of economists on the government payroll on grounds of rank incompetence. U.S. imperialism may spring from various motives, but the popular notion of “war for oil” makes no economic sense.
The U.S. government may wish to exercise hegemony in the Persian Gulf so that politically well-connected big oil companies can reap a bigger share of the handling income from producing and transporting the Gulf oil (but if these companies didn’t perform these tasks, other companies would do so). It may wish to intimidate or suppress Israel’s enemies. It may wish to discomfit the Russians. And so forth. But the idea that unless the U.S. government stands astride the Middle East, Americans will be unable import oil or to have confidence in their ability to import in the future (always at the prevailing world price, of course) is a contemptible argument.
David Ricardo explained these sorts of things clearly two hundred years ago. They are explained in every introductory economics course taught in college. It’s high time the pundits caught up with the essentials of their subject.
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