Posted by: graemebird | February 25, 2009

A Carbon Tax Is A Full Frontal Assault On Wealth In 2009

What is economics? It is not the study of choices under scarcity as is wrongly contended. Resources are not necessarily scarce and economics, properly considered, is out to make these resources less scarce.

Economics is the study of wealth creation. Some extension of the definition is necessary to differentiate economics from engineering, manufacturing, construction, mining and so forth since people in those areas are entitled to think that they create wealth.

Reismans definition is that economics is the study of wealth creation in the context of the division of labour. Now the second part of it is not that important except to let folks know just what we are talking about. That we are talking about money and policy and markets and the price system. Not about test drilling, gravity flyovers, prospecting, surveying… not about any one area of business operation.

So we will stick with the idea of economics being the study of wealth creation. Pretty quickly we find where our own economists are deficient in this regard. Since nine-tenths of wealth creation is really about studying how it is that profit-seeking business accumulates capital. The focus takes us right away from retailing and consumer preferences. We dive head-long into the capital markets. We want to see how companies can be let loose to accumulate capital goods and improve their business operations …….. but all as a tangential effort to seeking for themselves a profit.

The focus on wealth creation, rather than static-equilibrium choices to do with immediate scarce goods allocation, leads to an entirely different mindset. And is one of the reasons our economists are gunning for our destruction right now. Because they are not focused on how our companies will react to this carbon tax and what will it do to their tendency to tangentially accumulate capital whilst being motivated primarily by profit.
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This is not a treatise on economics so we have moved the plot along quickly to focus on tangential capital accumulation as a result of the motivation to make a profit.

CAPITAL AND ENERGY. ALMOST AKIN TO TWO SIDES OF THE ONE COIN.

In our efforts to explain just how damaging a carbon tax will be in 2009 we must talk about the relationship between capital and energy. Capital is needed to gather energy. Energy is needed to produce capital. Energy is needed to run capital. Here we have the essence of the potential for rapid capital accumulation. It becomes pretty clear that cheap energy makes capital accumulation more readily achievable. And that a capital intensive economy, one in which wealth creation has been more than normally successful, must be a highly energy-intensive economy.

In their fawning attempts to please their stolen-money splurging masters our economists have quite forgotten what their act is all about. They talk about the allocation of scarce resources…. but to what effect? A carbon tax has them doing what they believe to be their prescribed task, having gotten hold of the wrong definition. A carbon tax has them affecting massively the allocation of resources but in a full frontal attack on wealth via capital accumulation.

Since we need energy to accumulate capital and capital to gather energy the possibility exists for a capital-energy vortex leading to a collapse. Or failing that, if obstruction to energy production and consumption comes at the wrong time it could lead to decades of painful stagnation.

A carbon tax would not necessarily have done all that much harm in 1960 if we had very good property rights with regards to nuclear power. There was probably an immense amount of low-hanging fruit around in terms of simple things that we could do to be more fuel-efficient. That we will not wish to exploit such low-hanging fruit in the next time period is ridiculous. Since energy prices will be high. But we may not have the capital to be able to invest in energy-efficiency.

Taxes on interest earnings, on retained earnings, and the inflation tax are much more directly an attack on capital accumulation than what a consumers excise or a personal income tax is. We will focus on taxes on retained business profits. This is a direct tax on capital accumulation and ought never be allowed. But even this is not as bad as the carbon tax in 2009. Not that we get the choice to substitute one to the other. We have to get rid of both.

A carbon tax is much worse then a tax on retained earnings when viewed in the context of capital accumulation. Supposing I’m going to start up a coal-fired electricity plant. It might take me two years to commission this plant and five years to turn a profit. So while I’m not making a profit at least I don’t pay income tax. But with a carbon tax I must pay from minute one and keep paying. Now the company income tax on retained earnings will not make me invest in irrational ways. Whereas the carbon tax promotes irrationality in energy production and therefore vandalises the investment resources available by sending them into less productive uses then what they would have been employed in without the carbon tax.

Back to my coal-fired plant. So my wealth creation ability is under attack right from minute one. Supposing I still choose rationally and don’t have a gas-fired plant instead. Well even then, and even when I get to a profit, the level of reinvestment will be reduced thanks to a carbon tax. And after many years the income tax will finally be as harmful as the carbon tax in this example.

But the same goes and moreso if we are trying to set up nuclear plants. This is because nuclear plants take longer to commission. So there is your carbon tax beating you senseless years prior to you having to pay income tax.

Hence it is a lie that a carbon tax can be used to advantage nuclear. It will merely kill both nuclear and coal and everything else as well. Since in 2009 carbon tax is a tax on capital accumulation itself.

A carbon tax will be akin to carpet bombing in the sort of wealth destruction it will produce and obviously so. This conclusion comes directly from the relationship between capital and energy. But its worse than so far described because we are in an energy crisis, only somewhat masked by the financial meltdown. The carbon-tax is a direct attack on the selfsame minority of companies that we will be relying on to help us through the endless murk and onto the distant brightness. Because like it or not we must deal with this crisis primarily with our carbon-based resources.

A company which has great growth prospects ought to issue new shares so long as the share price is higher than what the shares are actually worth. Currently Cougar Energy, Carbon Australia, Linc Energy and others shares of this sort are vastly underpriced. Hence by the mechanism of smashing the share price of these guys with the threat of a carbon tax, we are undermining the ability of these people to raise funds and accumulate capital and provide us with the synthetic liquid fuels we need when the oil price next takes off. Which it will do and the stupidity of (decadal) peak oil denialists cannot prevent it.

In every way that you can think of, carbon tax is even worse than a tax on retained earnings. And taxes on retained earnings are themselves so bad as to amount to a mortal sin. But though carbon tax is far worse this doesn’t mean we can advocate taxes on retained earnings as a way of avoiding the carbon tax. Nor will the monstrous and monstrously idiotic promotion work when run the other way. A carbon tax will not lead to a reduction in the taxes on retained earnings. It will rather lead to total economic stagnation and no relief of any sort in sight.

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Responses

  1. Most cowardly post of the week:

    “DbD – Holy Shit. That is really scary.

    What is a little sad is that there does need to be a healthy debate on the controlled use of DDT in malaria eradication. I live in PNG where it still kills a lot of people (mostly children) and it’s true that it was close to being eradicated before the DDT ban in 1972. It’s what caught my eye. But its efficacy these days is debatable due to stop-start use and massive over-use in agriculture. That said however, there should be a debate while malaria still kills over a million people a year.

    But “DDT Holocaust” hysteria will of course put off most reasonable minded people from even wanting to talk about it. And this Bird idiot does the cause (in fact any cause he “champions”) more harm than good.”

    This fellow knows I’m right. He knows that malaria is killing, in his view, 1 million people a year, and he tries to get these people to see reason by ingratiating himself with the fascists by putting me down.

    Environmentalism lead to millions of deaths. He underestimates the deaths, but by his own admission still 1 million a year ongoing.

    Yet he is putting me down in order to curry favour with the fascists who approve of this killing.

    Most gutless post of the year.

    Most belly-crawling post of the decade. What he does not realise is that the fascists he is trying to ingratiate himself with are now in utter contempt of him.

    • Weakass pooftah actually seems to know kids who have died from this grizzly killer yet in the public society of fascists the most he see fit to do is call for a debate. Get down on bended knee and ask the exterminators if perhaps, pretty please, some province could get a special license to make their own decisions.

  2. Economics being the science studying the creation of wealth, how about putting down the equations of the model ……..

    …..EQUATIONS OF THE MODEL????? EQUATIONS OF THE MODEL???? WHAT IRRATIONALITY ARE YOU COMMITTING NOW YOU DIM BULB????
    NO MATHS FORMULA IS GOING TO HELP SALVAGE YOUR TINY MIND OUT HERE WHERE THE REAL WIND BLOWS IN ECONOMIC SCIENCE.

    ……… you use so we can understand what the f#@k your talking about. (The ability to formalize a problem in mathematical terms is the difference between science and gibberish.)

    WHAT UTTER IDIOCY. DON’T TALK ABOUT STUFF THAT YOU HAVE NO IDEA ABOUT. MATHS IS ONLY ONE TOOL. EVERYTIME YOU GO TO SAY SOMETHING ABOUT WHAT SCIENCE IS YOU COME OUT WITH STATEMENTS OF THE MOST HIGH ORDER FOOLISHNESS. YOU HAVE CONFESSED TO BEING A PUBLIC SERVANT OF SOME SORT.

    UNBELIEVABLE. IS THIS WHERE THE STUPIDITY OF CLIMATE MODELLING IS COMING FROM. A MATHS FORMULA? UNFUCKINGBELIEVABLE.

    THIS IS WHAT I’VE BEEN TELLING PEOPLE ABOUT FOR A COUPLE OF YEARS. THAT IN HIGH PHYSICS THE MATHS-BOY-101 TYPES, POSING AS PHYSICISTS, HAD BASICALLY CHASED OUT ALL THE NATURAL PHILOSOPHERS. THE GREATEST ECONOMIST OF THE TWENTIETH CENTURY WAS LUDWIG VON MISES AND YOU WOULD BE HARDPRESSED TO FIND MUCH IN THE WAY OF MATHS FORMULAS IN ANY OF HIS BOOKS.

    • Ok. Despite this epistemological lunacy from Liam the fact remains that, dearth of maths formulas aside, the carbon tax is about the worst scourge imaginable for our economy right now. Think of it if people were actively out to do harm? How in 2009 could they strategically hurt wealth creation to the greatest degree? Well it would be harder to do better than cap and kill. And carbon-tax would have to be next.

      Not only is it a tax on capital reinvestment. Its also a tax on capital investment before any revenues have been made. Not only that its an attack on energy production companies ability to accumulate capital, and further its attack specifically on capital accumulation insofar as it relates to reducing dependence on traditional oil.

      So in 2009 we would see it as a strategically targeted tax created purposefully for destruction. I don’t know whether Humphreys thinks he’s living in 1960. Or perhaps in the late 90’s when oil was cheap and the SUV craze had just got a head of steam. But we cannot abide this tax now. And its worse that in putting up with it we are promoting oppressive lies by lunatics.

  3. “Railing, flailing, emailing, beyond the paling, male
    in tension, don’t mention the immigrants sycophants, we know who we owe,
    I’m whitey, rightey oh, the science is wrong, it’s taking too long, so
    the dead wood, the bang, the visitors, the carbon, the pyramids, the fascists, the half life of argon, it’s all in the writing, the meaning, the wisdom, and those who can’t see it can get fucked, cunts.” *

    A sheila writing poetry about me.

    Lucky that puffy-faced photo was available or no doubt I’d have to put up with her outside my shrubbery. She could have got a closer rhyme to argon and wisdom then what she settled on. But then the other fascists would no doubt have condemned it as doggerel.

  4. So by your account the more energy-inefficient a business is, the more profitable it will be. How is that supposed to work?

  5. No thats not right. You could have an energy-inefficient company that was losing money. Or one that was making a profit. However if an energy-inefficient company was making a profit you would expect it to invest to become more energy-efficient.

    “So by your account the more energy-inefficient a business is, the more profitable it will be. How is that supposed to work?”

    How did you come up with this idiocy? I didn’t say anything of the sort. If you don’t understand something ask sensible questions.

    Since I don’t have a clue what you are talking about I’ll just throw this in in the hope that it will set you on the right track:

    The people in Hong Kong use more energy per person than the people in Malawi.

    I suspect that what is going on with you is a shitrain of poor definitions. Are the people in Malawi more energy-efficient? What is meant by energy-efficiency in your view?

    Certainly we ought to produce and consume more energy all the time if we are to develop as a society. But that is not to reverse cause and effect. The releasing of that massive energy in the Victorian fires didn’t lead to some sort of wealth gain.

    When we progress as an economy and improve our productive power we lengthen the structure of production. In the first instance this means more energy consumption per person…. with energy-efficiency investment as an afterthought.


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