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Paper Companies' Windfall of Unintended Consequences
Jamie found a post on ScienceBlogs that serves as a stark example of the law of unintended consequences, as well as the ability of private industry to game a system of laws to their advantage. It seems that large paper companies stand to reap as much as $8 billion this year by doing the opposite of what an alternative-fuel bill intended. Here is the article from The Nation with more details and a mild reaction from a Congressional staffer. "[T]he United States government stands to pay out as much as $8 billion this year to the ten largest paper companies.... even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry — handsomely — to use more fossil fuel. 'Which is,' as a Goldman Sachs report archly noted, the 'opposite of what lawmakers likely had in mind when the tax credit was established.'"
Precisely. We live in a society where 'corporate selection' fosters public companies who mindlessly take the action which most increases value for their shareholders. If a law is written such that it can be gamed - it will be.
Lawmakers should take that into account and legislate around it; cause they sure ain't gonna change Corporate American Culture any time soon.
...this is why centrally planned aconomies don't work.
[FUCK BETA]
This is another example where the intention of the law doesn't mean anything, what is actually written and what that can be stretched to mean does.
If a law is supposed to have a specific intention, then it should be written just for that.
If I have nothing to hide, don't search me
You appear to be making the mistake of thinking that this was an accident. It may not be. The "gaming of the system" may actually be by the lawmaker.
I prefer the "u" in honour as it seems to be missing these days.
If the lawmakers find a hole they gain nothing. If they miss a hole they lose nothing.
If companies miss a hole they gain nothing, if they find a hole they gain $8 billion.
Guess which side is willing to devote more resources to poke holes in laws?
we create laws specifically to prevent that.
The only thing this law has prevented is papermills from using alternative fuels.
Are you saying you want a type of anarchy
The parent said nothing about anarchy. No need to erect strawmen.
I think copious legislation should be applied
Your "copious" legislation has already been applied. It is demonstrably counterproductive.
"I assumed blithely that there were no elves out there in the darkness"
Yet too many idiots are trying to turn that into an argument for more legislation. I mean, you'd think they'd learn ...
Ever heard of corruption ?
If the lawmakers find a hole they gain nothing. If they miss a hole they lose nothing.
If companies miss a hole they gain nothing, if they find a hole they gain $8 billion.
If lawmakers find a hole, they gain nothing. If they miss a hole, they get 2% of that $8 billion.
There, fixed that for ya.
If a company misses a hole, the competitor that finds it instead gets the upper hand. If the hole is big enough, it could even outcompete the first one into oblivion by using the power of the state (and our taxes).
Unless something really needs regulating, leave it the hell alone. Food? Fine we need an FDA to make sure our food isn't nasty and contaminated. They probably overstep their usefulness in some cases, and under step it in others, but that's expected.
Unfortunately, industry will stick their noses in when regulations are being written. Wonder why the FDA doesn't have many warning about the mercury in Tuna whereas private consumer groups do?
Let's just say, legally this would be considered hearsay, but it was said that the Tuna industry was literally looking over the FDA'a shoulder when those regs were written.
So, even then, Government is too easily corrupted. Unfortunately, I don't have a better idea.
Well, actually, in this case, the most profitable way was with the law. I'm not sure you entirely grasp what has happened here. Maybe you have and I'm just reading you wrong.
The paper companies already produce about 70% of their energy by using byproducts in the process of making paper. Under the law, if they add just a few gallons of fuel to the process, claim the process requires Gasoline, Diesel fuel or Kerosene, they get 50 cents per gallon on the 70% of energy they already created with the black liquor or whatever it was called. If they used 100 units of energy divided up with 70 gallons of their byproduct and 30KW or whatever the equivalent is of coal powered electricity, then by removing one KW electricity and adding it to the byproduct, they now get 50 cents for those 70 gallons. So at least in this case, they are doing both- "the most profitable (and therefore, at least in this case, most environmentally friendly, way)" and the most profitable way the law made them.
From the portion(s) of the law that I can tell, they don't have to add much more then one gallon of diesel to every batch of byproduct to qualify for the alternative fuel credit. The key point is in calling the process something else that requires Gasoline, Diesel fuel or Kerosene to get the credit for what they were already doing.
I have a better ideia: keep the private sector out of government.
If you look closer, you'll find it's the agricultural lobbies that have gotten these absurd incentives, not the government that decided out of thin air to grant them.
Alright, let's get the government out of it. Oh hey, that reminds me, be careful what you eat, because now there's no limit on the amount of rat feces that a company can put inside of your food. And, with no government involvement, no way to find out either. Have a nice day.
Karma Whoring for Fun and Profit.
The parent was suggesting as little government intervention as possible. What do you think anarchy is?
Anarchy would be no government. Small government leads to a situation known as freedom.
You want to know what a lack of sensible regulation and control gets you - look at the current financial troubles your country has caused.
Actually the current situation is not as simple as that. While the bank failure can be immediately attributed to the repeal of the Glass Seagal Act (which, by the way, no one in legislation has bothered to reinstate), the real problems with the economy can be attributed to the creation of the Federal Reserve (putting banks in charge of the economy in the first place), and the dissolution of the gold standard (allowing the Fed to create as much money as it wants, without creating actual wealth to accompany it).
Government involvement has done nothing but harm the economy since at least the 1920's, when anti-competitive legislation first began rearing up. It's only grown since then - we really do need less legislation: the people and the states will pull themselves out of this mess much more easily without the federal government mucking things up.
If Libertarian philosophy = Anarchy, then:
Democratic philosophy = Socialism, and
Republican philosophy = Fascism.
Given the alternatives, I'll accept anarchy.
I think copious legislation should be applied
Your "copious" legislation has already been applied. It is demonstrably counterproductive.
I cannot think of any instance where government is effective and efficient. What I have trouble wrapping my mind around is the call for more government when it seems to be counter productive. Repeating the same action over and over and over is not going to yield a different result.
Yet too many idiots are trying to turn that into an argument for more legislation. I mean, you'd think they'd learn ...
No, they want to be looked after, including having their thinking done for them.
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It's not perverted; nor is it malfeasant. If you had a more fuel efficient form of transportation, say a bike or motorcycle, or your feet, and bought a new car eligible for a tax credit, and accepted the tax credit, you'd be doing the same thing. I'd be less interested in this and more interested in illuminating the *intended* tax breaks that we perceive as unethical. Congress needs some sunlight (and a good disinfectant).
I did, I intentionally pushed to the logical conclusion of "where do you draw the line". You want food regulated, but what about silverware? Got to make sure we don't see a return to mercury/lead for those, or the use of toxic plastics, but then we have plates, which leads us to..... you see the pattern?
That's not necessarily the logical conclusion though. Free market theories require an informed customer. Requiring accurate and complete product information is a basic requirement of a free market, though more obvious now than when Adam Smith was around. Want to sell cans of Rat Faeces Stew? No problem, so long as you label it honestly. I don't anticipate a big market for it, but go for your life trying. Sell it labelled as beef, go to prison. Existing laws against fraud etc are enough for that situation if applied correctly.
http://marriedmansexlife.com/
Except in our case, the cost of getting the car would exceed the benefit of getting the credit.
What the paper companies have is a benefit of the credit outweighing the initial cost to pull it off.
Alas, we live in a nation where rule of law is paramount.
The letter of the law is what the law is, not the "intent" of the law.
Which means it would be illegal to withhold payments specified by law, and any lawsuit challenging such an act would likely succeed, with penalties.
In other words, you're stuck with the law as written until someone changes it. The government trying to game the law by not obeying it is, if anything, worse than some corporation gaming it by taking advantage of something not foreseen by the lawmakers.
After all, if the government can choose to not obey this law that you dislike, what's to prevent them from disobeying a law you like?
"I do not agree with what you say, but I will defend to the death your right to say it"
How is it ex post facto to close a tax loophole?
If the paper companies sue, they would get laughed at or scolded by the judges as this is an obvious and evil perversion of the intent of the law.
Quite possibly it was written with exactly that intent. We've been often reminded by nearly everyone studying Congress that most proposed laws aren't written by the legislators at all; they're usually written by "consultants" who are part of the lobbying setup and are paid by the corporations interested in the laws. It has come out repeatedly that most members of Congress haven't even read the laws that they vote on. They usually have only read the summaries, which are written for public PR.
So it's quite likely that whoever worked out the exact wording of the law was in the pay of one or more companies who wanted exactly what the story is about. They probably discussed it behind the scenes, until they were fairly sure that the wording would allow their employers to take advantage of the law in this fashion.
It's how things are done. And it's hardly any secret. It's been written about more times than we can probably count.
(Actually, none of this precludes the possibility of a Congressman understanding the issue. The point is that usually they don't bother themselves over such details. That's for their underlings to handle.)
Those who do study history are doomed to stand helplessly by while everyone else repeats it.
THOU SHALT NOT KILL. THOU SHALT NOT STEAL.
But you have to think like a lawyer, and ask how somebody could exploit the law. With your very vague laws, a rich bigot with well-paid lawyers could easily set precedent to outlaw abortion for rape victims, or to punish attempted suicide etc etc.
Your second law could easily be used to jail copyright infringers... or those who aid and abet... etc etc... The law has become very specific -- especially criminal law -- in order to remove these ambiguities.
But I seriously can't fucking believe, that after eight years of the incompetent fucking clowns in the Bush administration, that anyone has the brass balls to try to justify, let alone suggest, more retarded, illegal bravado from the executive branch. You are a complete dumbfuck, just like the tools who passed this law in 2005, and the tools who are currently skullfucking the concept of market economics for their ill-conceived political agenda.
First of all;
because this is a tax credit, it's the bailiwicks of congress and the IRS works for congress not the executive branch, not he Bush administration! Remember what congress giveth, Congress can taketh away, so if you have a problem with this write your congress-critter. The problem you'll have is how do we write a law the disallows a credit for adding a taxable fuel so that taxable fuels with alternative fuels added are not?
Apocalypse Cancelled, Sorry, No Ticket Refunds
Irrelevant! I am differentiating between the letter of the law and the spirit of the law. You're a typical anti-corporate insect.
Wow, I can see the froth.
You object to applying the same argument against individuals. The principle is the same. How does the argument change if the Prius costs is less than the credit? Are the "previously bike-riding individuals" scumbags then?
Well, let's take this scenario you propose then. For sake of argument, let's just say the Prius cost is $30,000 to drive it new off the lot with all taxes and fees included. Using your argument that the cost is less than the credit, let's say I would get a $35,000 credit for buying a Prius. Now, let's say that I buy a Prius for $30,000 and get the $35,000 credit, and then have the Prius compacted into a cube and sent to the landfill for a few hundred bucks. I've just made almost $5,000 and have polluted the environment even more. Further, let's say I just keep on doing this. After buying ten Priuses and throwing them into the landfill, I'm almost $50,000 ahead. Hell, I'd buy as many Priuses as I could if I would have a $5,000 profit from each one. They couldn't make enough of them.
I would consider *myself* a scumbag if I did that.
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