Natural-Gas Prices Hit a Record High

Economic digression: I'm always interested to hear economists talk about "market psychology." It's basically a tacit admission that the Invisible Hand is bogus. Theories about market-forces acting for the "greater good" are based on the assumption that economic agents act rationally, *and* employ long (if not infinite) look-ahead. Everybody knows the reality isn't even close, since the "economic agents" in question are human beings, and yet economists still trot out the Invisible Hand whenever they want to soothe the unwashed masses about the latest economic blunder. "It's all for the ultimate good, didn't you know?"

There is money to be made here.

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Thats why its called MCF

continue to protect the oil industry and never hold these people to the fire, and worse they try to make cuts in funding for programs like energy assistance. Really, they should just make a banner that says, "You're Poor, you don't donate to us, so fuck off and die!" and be upfront about it.

Rp

Land and natural resources (simply 'Land' to the economists) don't behave as mfrd goods and services do. In fact, they act as collectibles: they cannot be produced, therefore price increases do not spur a counteracting boost in production. While technically natural gas that has been pumped is a Capital good - it is very nearly pure 'Land', and behaves more like Land than Capital. As such, increases in price tend to spur further increases in price, until someone balks, and the asset price implodes.

It has happened before with real estate (florida real estate bubble) and even tulip bulbs. It may be happening now with real estate. Unfortunately natural gas (and Oil) have a very wide and very inelastic demand. However, as the price rises, alternatives become more and more viable (the substitution effect).

However, if you can keep interest rates low (giving lots of people money) you can bid up asset prices such as real estate or oil - sell, and take a nice profit. I can't imagine anyone in position to do that though. ;)

Building on your observation, all goods and services are dependent on the land. It just doesn't work, period :-)

The economy is a wholly-owned subsidiary of the natural environment.
-- G. Nelson

many things aren't very dependent on land prices - but, every advance in productivity, society, etc. if met by a corresponding rise in land prices.

The invisible hand does a pretty good job with electronics: they can be made anywhere, with a little bit of land to build the foundry, and a bit of silicon (the most common crustal element), and a lot of knowledge. Lumber became expesnive and was substituted by steel, and engineered wood. Silk became expensive and substituted by synthetic. Tea became expensive, and was substituted by coffee. Rum became expensive, and was substituted by Whiskey.

Were this parasitic function of land captured for the public good - the invisible hand would be freed to adjust prices and productivity quite efficiently.

Conversely, those things heavily dependent on land don't work as well: real estate, fossil fuels, raw materials.

Several of your examples, namely lumber, steel, engineered wood, tea and coffee, are all agricultural or raw materials. Aren't we seeing that arable land is essentially maxed-out these days?

The substitution/knowledge economy provides some interesting exceptions, but it brings up that question of the limits of substitution, technology and knowledge. For instance, there's the old argument that increasing technology will somehow allow us to grow ever more food on the same amount of land. Although that has been the trend over the previous centuries, I think that most of us here sense that this trend is pretty much tapped out, and in fact is likely to begin reversing as climate problems escalate. Similar for oil. For all the talk about new extraction technologies rescuing us, I don't think it's going to pan out that way.

I'm willing to entertain the idea that, given enough time, technology may provide us with ever-increasing options, power, etc, but over the next 50-100 years, there is a limit to how many new options become available to us.

In other words, I would propose that substitution itself is a limited resource, over any finite period of time. If a critical resource runs out fast enough, substitution may not come into play. Example: in principle, we can subsitute nuclear energy for all our energy needs. But can we do it fast enough to make an economically efficient subsitution? By which I assume you mean a substitution that is cheap and easy enough to be painless for most people.

To take another example, the inhabitants of East Island evidently didn't manage to leverage substitution. Their resources crashed, too fast to adapt. They didn't start building steel huts :-)

Substitution on a grand scale doesn't happen overnight.

And the examples: lumber (pretty close to raw) replaced by steel (contains a lot more labor - mining, smelting, refining, forging, welding, etc.) or engineered lumber (contains a lot more labor) aren't all raw materials. Certainly the price of steel rises due to fluctuation in demands (china growth, rebuilding indonesia, rebuilding gulf coast), but the relative price of steel has pretty much steadily declined since it was discovered - especially if you consider performance equivalents, we've gotten a lot better at making steel, and a lot better at using it sparingly.

As for the arable land: we're probably at the sustainable limits of how much arable land we have, but we're nowhere near the limits of productivity for that land. Chemical farming isn't that productive per acre, it's VERY productive per worker.

The substitution doesn't have to be cheap, it just has to be cheaper than that which it replaces. For example, alternative energy doesn't have to be cheap (and it probably shouldn't be) it just has to be cheaper than coal.

If all our laws remain the same, very expensive oil will cause a severe drop in real estate value, and an increase in cost food and other goods. I figure this based on the fact that real estate charges what people can afford, and they'll shortly be able to afford much less. People will pay for food - they have to. Fortunately, I think that high food prices are a good thing: they encourage agriculture, particularly local farm-to-market agriculture. While this would increase the farming value of land, the farming value of land is just about negligible for most of the country's population.

This of course is a good thing, since natural gas - in spite of the advertising - is not really a "clean" fuel. It may be a "less dirty" fuel, but it is not a clean fuel. After all, carbon dioxide is now, I think, established as a "waste" product with which no one knows what to do.

This should hasten the world wide switch to nuclear power for electrical generation, which is much, much cleaner and safer and now, almost infinitely cheaper.

I just got my November heating bill -- average temp 4 degress lower than Nov 2004, usuage 90% of Nov 2004, bill 150% of 2004.

It was much higher than last year.. I cannot waot for the second one..