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Actually, pulling oil out of the ground is a technically complicated and uncertain process. The relative ease of finding and extracting oil is one of several enduring myths that complicate public policy moving forward.

In light of the blog's subject, I often wonder if envy drives much of the worst resource policy in Canada.

That people want to get rich quick or get to the head of a first-come, first-served line-up or competition for valuable resources is understandable. After all, our universal (sic) health care system essentially operates on a supposedly fair first-come, first-served basis.

Many so-called progressive and left-wing Canadians support first-come, first-served rules of access. In a world where envy figures as an important factor one should not be too surprised because other systems of resource allocation would privilege existing property owners or the wealthy.

Curiously enough, many enviro-activists support first-come, first-served rules of access. These progressives, left-wingers and environmental activists view themselves as favourable to the cause of Canadian aboriginals despite how the first-come, first-served tradition has deeply hurt Canadian First Nation communities.

I much prefer the Getty museum or the Huntington. You might be interested in this story from several years back about the curator of the Getty and some shady dealings in antiquities. .http://www.nytimes.com/2005/10/04/arts/design/04gett.html

Jon, yes, the Getty museum is even more spectacular.

That's an interesting article - apparently the Getty Foundation has also returned some antiquities as a result of pressure from Greece and other countries in recent years.

On balance, I think I'd rather live in a world where people aren't incredibly rich and there's somewhat mediocre government-funded museums than in a world where a few people control a non-trivial percentage of the nation's GDP and give away a fraction of that enormous wealth to their favourite causes.

But I just can't figure out why all of the employees at the Getty museums are so friendly and nice - is it because they work for a private sector employer, or is it just California?


"Actually, pulling oil out of the ground is a technically complicated and uncertain process."

No. Not in Saudi Arabia. Not once you have proven reserves. Not from Getty's POV (which is what the post is about.) For a businessman dealing with ibn Saud, pulling the oil out of the ground was perhaps the least complex part of the business. Think about the politics. Think about the financing. Think about the tranport issues once you have the oil produced. Think about cartel pricing.

Please do not try to confuse a post about J P Getty with the complexities of *searching* for resources *at* *the* *margins* of what is technically possible.

Simon: Getty took the time to learn Arabic which supports your hypothesis. The drilling wasn't complicated (this was 1949 so it was pretty basic technology) - but he took a big risk paying a fairly large sum of money for land with no known reserves. But here's a question - why would Getty be prepared to take that risk, and why did the Saudis allow him to absorb both the risk and the profit? Perhaps because, being born into the oil business, he knew how to solve the transportation etc issues? And again it's a case of the difficulty of dealing with large numbers - $80 million, $800 million, $8 billion - they're all large sums of money.

That's an interesting article - apparently the Getty Foundation has also returned some antiquities as a result of pressure from Greece and other countries in recent years.

Yes, I recall that in some cases they agreed to transfer ownership but that the items in question are now on permanent loan.

Many of these countries simply are unable to care for the items, lacking in many instances even basic climate control whereas a place like the Norton Simon--another LA favorite and another shockingly wonderful museum from private collection--carefully manages temperature, humidity, UV exposure.

Conversely, even the Uffizi only regulates the environment of important works. Too much of the art is left housed in sweltering conditions.

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6W6G-463Y44B-4&_user=10&_coverDate=06%2F30%2F2002&_rdoc=1&_fmt=high&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1383149463&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=129c18dc9e016d73d84c6e9ea781afc9

But I just can't figure out why all of the employees at the Getty museums are so friendly and nice - is it because they work for a private sector employer, or is it just California?

Businesses take public relationships seriously and in a very democratic way. Government employees usually do not, so perhaps you guess right. Not to insult the hosts, but every trip to Canada has involved at least one restaurant fudging the bill and then protesting when caught. That's really unheard of in the US. Even if the customer is wrong, at a minimum the restaurant manager will apologize for the "confusion" and offer something with high value to you and low value to the restaurant (desert).

I've got a Swedish friend who lives in the US but is quite active internationally. He does business thorough Europe, and in places like Dubai and China. He's made the claim that people in the US are exceedingly fair-dealing.

Thoughts?

Frances;

I'm not sure that the facts support my hypothesis.....I didn't know that I had one! I suspect that, as economists, we can't help but see arguments about incentives and rents and competition that overshadow the dry facts.

BTW, are you sure that you can describe Saudi Arabia circa 1949 as having "no known reserves"? I'm under the impression that British were careful already back in the Treaty of Versailles to ensure that their sphere of influence in the Middle East contained most of the oil? Wasn't BP already active in the Arabian peninsula before WWII?

But to come back to economics, while this is far from my area of expertise, I am very ill at ease with the assumption that major long-term petroleum development contracts are awarded on an economically fair basis between competitive resources owners and development firms, free from political considerations. (And Getty learning Arabic supports *that* hypothesis.)

I guess, in westslope's eyes, I'm just envious.

Simon: I'm not sure why you would want to segment the various aspects of the oil business. In addition to the aspects of the business you raise, was there not some likelihood of hold up or confiscation? Just keeping proved reserves can be a challenging task. That the expected rents or winner-takes-all prizes are large is another issue.

What is POV? Point of view? And if so, it the POV ex ante or ex post?

Getty makes me think that material wealth is an insufficient or incomplete source of motivation. Social status or some measure of social worth matters.

Frances: Why did the Saudis stick to their contracts at that time but nationalize assets later on? Why do most Muslim countries honour contracts with western multi-national resource companies but not Libya, for example? I suspect that neo-marxist ideology helps justify taking but so do many ideologies so really I have no idea.

And FWIW, I find service is significantly better in the USA than Canada regardless of whether the institution is privately owned or public. Perhaps you have stumbled across some regional differences in the USA?


I actually live in the USA (for a few years) and have lived in Canada (for the balance) and I would say that my experience of service in the USA, private or public, is worse than in Canada in most respects. Yes, I can see a primary care physician quickly. Other than that, ...

Micro-economists tend to imagine a world where property rights are clearly defined and exchanges occur through voluntary transactions. But who has the property rights to what is buried in an ancient tomb? I would say that, in the absence of identifiable descendants, the tomb is collective, public property.

It will surely depend on what country we're in. Canada, I would've thought, is like the UK, where discovered treasure belongs to the Crown.

Other countries, I don't know, but here's what Wikipedia says about the US:

http://en.wikipedia.org/wiki/Treasure_trove#United_States

One could argue that the oil in Saudi Arabia belongs to the people of Saudi Arabia. But that doesn't prevent rulers from selling the mineral rights, and using the proceeds as they see fit. That's what governments do.

I know what a Georgist would say: Land Value Tax. I agree with them (though I am not a Single Taxer). As long as the resource you're privatizing is not a natural monopoly (which rightfully belongs in public hands), like the water supply (sadly privatized under Thatcher here in England), there's no reason to keep it in public hands.

[Although as a huge aside, it might be that a zero-carbon economy (if nuclear fusion does not happen) would be massively reliable on public subsidy funding the construction of fission plants, and then you get the problem whereby a privatized energy sector is built on corporatism. Then the argument for keeping energy public is stronger.]

Btw, there's also a third option:

* Private property
* Public property
* Commons

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