Putting the “dead” in deadweight loss

Number two!

Number two!

Subsidizing gasoline is such a multidimensionally bad idea, the study of all the different ways in which it’s counterproductive could take up the bulk of a very productive economist’s career. Over the years we’ve written about many of the angles: from air quality and congestion to the effects on urban development patterns, the state’s finances, and even the macroeconomy. So you might think we have it covered. Alas, no.

As Lucas Davis, professor at the Haas School of Business at the University of California at Berkeley, argues in this recent paper, we need to focus on deadweight loss.

Setting aside the environmental and other knock-on effects, there are two broad ways you can go about when you go to put a dollar figure on the cost of a crazy policy like giving away gas.

One strategy is to estimate the difference between the international spot market price and the domestic price, and come up with a figure for the opportunity cost of the subsidy. That’s the approach we’ve usually favored on Caracas Chronicles, and it yields some eye-popping figures. Davis concurs – the figure is massive.

However, even these monster numbers miss a lot of the economic value destroyed by the gas subsidy. The opportunity cost of the subsidy is simply a transfer of money from PDVSA to Venezuelan gas buyers.

As inefficient as it may be, it doesn’t get at the crux of the issue. The real issue is deadweight loss: value that’s not transferred from someone to someone else but is destroyed outright by the transaction.

Deadweight loss arises when you fiddle with prices in such ways that people who don’t really value something very much end up consuming ahead of people who value it much more. As Davis says,

“Subsidies create “deadweight loss” by enabling transactions for which the buyer’s willingness-to-pay is below the foregone revenue from selling oil. In other words, it costs the government more to provide the subsidy than the value the subsidy creates for gasoline consumers. In Venezuela right now there is someone driving around who values gasoline at only $.50 cents per gallon. Gasoline can be sold in international markets for about $3.00, so each time this person uses a gallon of gasoline the world becomes worse off by $2.50.”

I realize this may not be intuitive for many people, so I’ll take a stab at breaking it down.

Suppose you have the last Coca Cola in the desert. In front of you are two people: one of whom has just quaffed a nice, soothing 1.5 l bottle of gatorade, and another who hasn’t had a drop to drink in 2 days. Both of them have $5 in their pocket. But it just so happens that the one who just drank the gatorade is sitting on the Venezuelan side of an imaginary line (a.k.a., a border) where CocaCola is price-controlled at $0.01 per bottle, while the dead-thirsty guy is on the Colombian side of the same border. The Colombian would gladly hand over the full $5 for that coke, whereas the Venezuelan isn’t really thirsty and wouldn’t pay more than $0.03 for it.  Deadweight loss is the destruction of value that occurs when you insist on shoving the last CocaCola in the desert down the Venezuelan’s throat, because Socialism.

The problem is waste. The Venezuelan doesn’t really value the Coke. Maybe he starts spilling it all over the place, or just lets it sit there going flat. But even if he does drink it and gets his “full” 3 cents of enjoyment from it, the Colombian who would’ve obtained $5.00 worth of value from it goes thirsty. The gap between the $5 in value the transaction could’ve generated and the 3 cents it actually did generate isn’t actually transferred to anyone – it’s welfare that’s destroyed. Analytically, that’s the real welfare loss, that is where the waste occurs, and that is what Lucas Davis tries to measure.

His numbers? Welfare losses in 2012 are about US$ 10 billion, or close to $400 per capita.

That may not sound like a whole lot, but when you consider yearly per capita oil revenues on an insanely good year such as 2012 were about US$4,000, it’s pretty staggering. Basically, 10% of our oil income – not our profits, mind you, but our income – is disappearing. It’s not that it’s being given away, it’s not that someone is benefitting, it’s simply vanishing in a puff of logic.

They don’t call it a deadweight loss for nothin’.

This, by the way, is before you consider other economic costs. For example, increased fuel consumption creates more carbon dioxide pollution, more smog, more traffic accidents, etc. While he doesn’t break those numbers down by country, Davis says it is roughly 75% of the deadweight loss. In that regard, adding up economic costs means we’d be looking at roughly $17 billion in total economic costs for Venezuela. And that’s not even taking into account the whole fuel-for-cocaine angle …

Anyway, take a look at his working paper and the accompanying blog post. It’s worth discussing.

62 thoughts on “Putting the “dead” in deadweight loss

  1. That’s a really good example. I don’t know if there’s an economic term for it but gas is especially bad since it’s easy to waste (us chemists would talk of entropy and free energy) and that wasting it has even greater negative consequences (pollution). I was shocked to hear the stories from my Venezuelan friends regarding how careless people can be with gas, leaving their engines running when stopped, etc.

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  2. The only reason Venezuela is NOT number one per capita is diesel. As it turns out, the annual deadweight loss thanks to our gasoline subsidy far outstrips anything else the world does – even Saudi Arabia bites the dust … and they have a lot of it! But when you include diesel subsidies, the Saudis beat us. Which brings the question – how come we don’t subsidize MORE diesel? Is it a problem with our refineries? A cultural thing?

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    • Don’t know. Europeans build and make extensive use of diesel cars and small trucks. It’s (not long ago it was about half the price!) significantly cheaper per liter than gasoline. For about the same mileage per liter. Maybe the Saudis -and Bahrainians and Qataris and Libyans and Iranians- do have many diesel vehicles in circulation and do have to subsidize diesel fuel. Which might in itself be sensible given that diesel fuel is heavier -and cheaper- than gasoline.

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    • Venezuela has large hydroelectric resources which ( in normal times ) substantially lower the use of diesel fuel for the generation of electricity . Largely desertic middle eastern countries have no hydroelectic resources so they are more reliant on the generation of electricity thru the use of diesel fuel . Also temperatures in Venezuela are not nearly as high as they are in the middle east where much electricity is sucked in to feed the extremely high air conditioning needs of those countries..

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  3. I was wondering where Mexico was on that list, but after a quick look around to see where things are at, it looks like as of this year, Mexican subsidies have effectively been phased out. So it can be done without triggering a revolution.

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    • I think the key there is Mexico is rapidly moving up as a middle income country and is running into issues with bridging that gap to a high income country. Part of doing so is eliminating wasteful subsidies and reallocating resources accordingly. More importantly, as disposable incomes increase relative to personal energy expenditures, the subsidies take on much less of an important role for the majority of the population which paves their elimination.

      Venezuela seems determined to go in the other direction from middle income to low income. As real incomes must fall, the clamor for the gasoline subsidies will continue.

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      • On that thought, in Mexico there remains heavy subsidization of mass transport. A ride on the Mexico City metro, for example, is cheap, about 25 cents, and you can go a long way for that. The buses are also cheap (I am not sure how they pay for themselves, because I don’t think a lot of them are public). In any event, the subsidies for middle class car owners slowly disappear, whereas the working poor can still get around. There is less waste. From an outsider’s perspective, it seems smart.

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        • Subsidising mass transport does seem more efficient than subsidizing all motor vehicle transport indiscriminately , thanks canuck for bringing this mexican experience to all of this blogs readers attention . .

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            • On the Mexican gas subsidy, I just googled Mexican gas subsidy, and a bunch of articles came up. On the public transport system, I am sometimes in DF on my pilgrimage to the birthplace of El Commandante Eterno, and when I am there I use the metro and bus system, not because it is cheap, though it is, but because it is convenient and usually much faster than a taxi.

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  4. Two additional factors are important.
    The multiplier effect and the additional loss of revenue from the interest on the loans that are paid out because of the lack of revenue.

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  5. And then ther is the cadivi dollar another crazy subsidy that makes it impossible to travel into Venezuela, and if you do find a ticket, it is quoted as $3000 from the us

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  6. Its just an amateurish hunch but I get the feeling that subsidies have a ripple negative effect in that by enabling the performance of economic activities which otherwise would be uneconomic or suboptimal in their result it prevents resources spent in such activities from being used more productively in other activities . At the same time the money not earned as a result of the subsidy is money which is not spent in more productive or optimal ways by the subsidizing party forefeiting such income , thus resulting in a double loss to the economy . In other words it hides deficiencies and wastes that otherwise would be noticed and avoided. desoptimizing all activities it touches.

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  7. Am no expert, but gulf states may use diesel for electricity generation. I know Abbu Dhabi a bit and they spent amazing amounts of energy for desalinization of seawater alone. Probably its the same in Saudi Arabia, Quatar, Bahrain and Kuwait.

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  8. The Venezuelan doesn’t really value the Coke.

    Well, not that kind of coke anyway…

    In light of the other other other exchange rate; instead of green paper for black liquid, white powder for brown liquid… the subsidy makes a lot of sense. The government’s loss becomes a producer surplus somewhere along the line.

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  9. Indeed, and that is why I have often held in my articles that those who contraband gasoline to neighboring countries might in fact be more patriotic, than those who burn of gasoline in a “cola a Prados del Este”

    And indeed that is why I have lately been urging the poor to massively go to the gas stations and load up on gasoline, until the stations run out of it… so that they then can perhaps swap a liter pf gasoline for a liter of milk… or cerveza.

    http://petropolitan.blogspot.com/search/label/gasolina%20regalada

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  10. Well, it is easy to talk about economic policy without the political consequences. Even though I do agree with the fact that fuel subsidies are a waste of money, I believe it is impossible for any government to increase the price of gas without being hurt politically. Therefore, It is not going to go away any time soon.

    An intersting idea I have heard around is fragmenting the market. This means basically that every driver, depening on how steep their demand curve is, will get charged a different price. I am not arguing for an individual price for every individual, but rather that bus drivers and truck owners get a differnt price for gas than the thousand of soccer moms that drive around Caracas.

    I heard Ricardo Haussman (the mind behind the policies that got the Caracazo going) talking about this idea. He saw it as an intersting one, but not a feasible proposal. I think I disagree. If in Tachira they have chips to control the amount of gas that you put into your car, it should not be impossible to have chips that help the goverment tell how steep your demand curve is depending on what car you drive.

    I say that the middle class should pay more than buss drivers/truck drivers for gas.

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    • Caldera in his second term increased gasoline prices 500-600% and nothing happened.

      To use chips for this purpose would just increase our already so high world wide laughability worth

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      • If having different prices of gas in neighboring countries produces arbitrage, you can only imagine the corruption, arbitrage and smuggling that will occur if you set different gas prices in Venezuela. I can imagine public servants, indigenous people and students demanding a separate price. People buying buses to get cheap gas to smuggle to Colombia. Why is it always more control the answer to all problems in Venezuela? It baffles me that we see not to learn by experience.

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        • There is people that already smuggle gas to Colombia anyways. I just propose a short term solution. This will decrease contraband for sure.

          The answer is more control because the goverment cannot pay the political price of increasing gas prices at all leveles.

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          • Short term solutions are no solutions.
            This reminds me of Matos Azocar a minister with Caldera who used to say “The political takes precedence over the economic”. He couldn’t be more wrong. Economic problems need economic solutions and political problems need political solutions. When you try to solve a political problem with an economic solution or vice versa you are just masking the problem and not solving it. The problem just lies under the surface waiting for its moment to bite you.

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            • En Venezuela llevamos más de cincuenta años posponiendo soluciones racionales a los problemas y distorsiones porque son “inviables” politicamente hasta el punto de hacernos inviable como país.

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        • “Why is it always more control the answer to all problems in Venezuela? It baffles me that we see not to learn by experience.”

          It seems to be human nature to have the need to control everything. It’s also non intuitive that coercion is usually not a good way to control large amounts of people. If people want to do something or don’t want to do something coercion in the long term is not going to work.

          Another thing that is not intuitive is that trying to control prices is the same as trying to control people. Prices are set by people, between sellers and buyers. When someone wants to go against the current (“contracorriente”) an arbitrage opportunity is created and someone is going to take advantage.

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    • The idea that the government is going to be hurt politically MORE by raising the cost of gas than it’s going to be hurt politically by the out-of-control inflation and macroeconomic chaos caused by monetizing PDVSA’s debts to cover the financial hole left by the gas subsidy is…a sure sign that you don’t get it.

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    • When the Caracazo began, Hausmann was a mild-mannered professor toiling away at Iesa. He only joined the Cabinet in 1992. Let’s get our facts straight before we assign blame on people.

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  11. For the govt there are no good options here , only bad ones , it can choose that which hurts least, which in the long run as Francisco says is to raise gasoline prices but which in the short run makes the most noise . A rise in the price of gazoline is like a punch in the face , the rise in prices and level of shortages is like being pummeled hard over a period of time . Primitive response is to forego the hurt now even if it entailes much bigger hurt later .

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  12. If Venezuela weren’t so thoroughly weighed down by impenetrable bureaucracy and corruption (as recent posts emphasize) I would suggest targeted pricing of fuel, say giving discounts to qualifying poor families in proportion to income. As others emphasize, while the bulk of the current subsidy is enjoyed by those who least benefit from it (the wealthier classes), the *marginal* effect on the poor is probably much more significant and the savings of the government in increasing the price of gas probably relatively low at the margin. What’s needed is a way to offset income disparity in Venezuela, any way you see it. Food, water, plumbing, electricity and education are *basic* requirements to pull yourself out of poverty, to ensure good health and productivity. Question is how to transfer wealth.

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  13. I don’t love this alternative methodology. Sure, it tries to capture the fact that there’s additional consumer surplus (those who would consume w/o subsidy get gas cheaper, and new people consume at prices below their willingness to pay up until the marginal consumer). But:

    1) The values of the elasticities are nothing but arbitrary – you cannot really say that the demand elasticity in a country like Venezuela, where there has not been any nominal price change in the last 16 years, is in any sense comparable to that of other “average” countries. Elasticities also depend substantially on substitutes and income levels within the countries, which are affected by Macro and sector specific factors – that is another dimension in which we are outliers. I would assume a more-inelastic-than-average demand curve in Venezuela, which would push the $10bn DWL result much closer to the $13-$15bn that they show for “Subsidy Amount” (Other estimates suggest a higher value).

    2) En el fondo, what you are now considering as additional consumer surplus (and hence not considering a “loss” of the subsidy) goes mostly to the urban upper-middle class. The main problem with the gasoline subsidy is distributive – that extra welfare for the cigar-smoking Enchufado with his gas-gulping Hummer could have been used (along with the DWL) to pay for more fiscales to investigate his shady businesses.

    3) The methodology sort of assumes that one additional dollar of additional welfare in an upper-middle class pocket is worth the same as a dollar of liquid foreign reserves. From a Macro perspective that minds the fiscal and a foreign accounts mayhem we are facing, this wouldn’t be the case.

    All in all, if we are to agree on a methodology to help us anchor the perception of loss for giving oil away for free, I would opt for that methodology which captures such losses in a broader sense – that is, the aggregate subsidy.

    In an exercise not long ago, we used elasticity assumptions to estimate an alternative scenario in which you raise prices and there is some consumption decrease within the country which would free-up units to sell in the international markets. This would further boost the fiscal/external benefits of the reform. But this was not our main scenario – call it conservative, but our baseline estimations assumed no consumption sensitivity to prices. Something like this is to be expected, at least very early in the context of a reform.

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    • I think the value of the study is that it distinguishes distributional aspects of the subsidy (which don’t generally decrease welfare, at least not directly) from the actual welfare-reducing aspects. It’s something we need to keep in mind moving forward.

      As for the elasticity of demand, I remember Eduardo Zambrano starting a project when the paro petrolero happened and a “market” for gasoline suddenly appeared. I don’t think I can find anything about it in Google Scholar though.

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  14. “The gap between the $5 in value the transaction could’ve generated and the 3 cents it actually did generate isn’t actually transferred to anyone – it’s welfare that’s destroyed. Analytically, that’s the real welfare loss, that is where the waste occurs, and that is what Lucas Davis tries to measure.”

    There is no incentive for the Venezuelan guy to work in order to earn the $5 that the Coca-Cola is worth for the rest of the world, because he can pick up pennies from the ground to buy it. At that point, the value chain is disintegrated.

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  15. Whom does Chavismo proclaim it is for? The poor, not the better off. The irony about the gasoline subsidy is that it benefits least the sector which Chavismo says it is trying to help- the poor. After all, the poor cannot afford to own motor vehicles. The gasoline subsidy benefits the better off- those who own motor vehicles. Who are the enemies of Chavismo? According to Chavismo, the better off are the enemies of Chavismo. [Yes, I know that Petare votes oppo. I am talking about narratives.] The gasoline subsidy helps the enemies of Chavismo.

    Had Chavismo the desires or the capabilities to ponder this issue, Chavismo could have initiated a campaign to educate the public about the gasoline subsidy. If the public had heard for a year or more about the way that the gasoline subsidy benefits the Pitiyanquis or the Escuálidos, there would have been a lot less support for the gasoline subsidies.

    As Canucklehead points out in discussing energy pricing in Mexico, it would not be difficult to arrange some sort of fuel subsidy for buses.

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  16. Curiously, the oil subsidies are one of the things I hope THIS government does not change.

    I disagree with the above analysis because the incorrect counter-factual is being used in my opinion. The question should not be how much DWL is being created by the oil subsidies but rather how much benefit are the Venezuelans receiving from the subsidies compared to no subsidies.

    If the chavista government raised the price of oil that means the Government would receive more income, but it does not mean that this income would be transferred back to the Venezuelan people. In all likelihood the majority of this marginal income would disappear in corruption, hiring the Chinses for projects that have already been completed, subsidizing PetroCaribe, and general governmental misuse of the money.

    The Venezuelan people would never get to enjoy all of this extra income. At least through the oil subsidies Venezuelans do get their “fair share” of the oil profits which the government cannot misspend.

    Of course, under circumstances where government funds are put to good use the oil subisidies are terrible for Venezuelan welfare, but until the day comes when we take Uslar Pietri’s 1936 adivce and “sembramos el petroleo”, Nico please leave the faucet running, Gracias.

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    • Even if 100% of the proceeds of a price-hike were stolen (which, c’mon!) Venezuelans would still benefit from:

      -Decrease particulate matter production and smog
      -Fewer acute respiratory illnesses
      -Less traffic congestion
      -Fewer cases of acute trauma from motorcycle injuries
      -Increased propensity to travel on foot or via bike, improving cardiovascular health

      EVEN assuming Venezuelans received NONE of the welfare gain from increased fuel costs, they’d STILL gain from the policy.

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      • Of course Venezuelans would benefit from the things you mention above but its notoriously hard to compare those benefits to that of cheaper gas because of the subjectivity of the measure. Arguably a underdeveloped country without a very high life expectancy has more things to worry about than lung disease. Just to tackle a couple of your points.

        -It can be argued that motorcycle purchases would increase given that they have much higher MPGs than cars and thus would be much cheaper to drive, leading to more motorcycle injuries.

        -Any significant increase in gas prices (unless it was counterbalanced with a similar subsidy for the now more expensive public transportation and increase in its capacity) would likely lead to a massive reorganization of Caracas with the people who live in Guarenas, Guatire, La Guaire and commute daily moving much closer to the city. Getting something much more similar (making barrios in El Avila) to Rio de Janeiro, because commuting daily would be too expensive for these people.

        I am not saying that the oil subisidies are a good policy just that the benefits of removing them are nowhere near as clear cut as that analysis makes it seem and that we have to think about the unseen effects and not just the seen.

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        • Right now gas is effectively free, there isn’t any legal currency to pay for exactly one liter of gas at VEF 0.0097. People usually pay for it with chump change, like if was a communal pot of coffee in the office, or if the pump guy had just given a speech about having a sick kid and needing some chump change. There are higher price points where this effect remains.

          For example, Even if you raise gas prices a hundred times (10,000%), to VEF 0.97 per liter, it would still be ridiculosly cheap. An entire gas tank would cost VEF 20 – VEF 50 or USD 0.30 – USD 1.2, a motorcicle would pay VEF 2 to 5. You can’t even buy lunch with VEF 50. I don’t doubt bus drivers and taxy drivers would jump on the opportunity to push a 10,000% increase on their fares, like they did prior to Caracazo, but it wouldn’t be justified this time either. If anything this is the right government to freeze prices and then increase costs for these drivers.

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      • Last benefit ok in the very looooooooong term. In the short/medium term? C’mon Quico, that’s undiluted comeflorismo.

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    • And that was when Uslar Pietri went wrong. He assumes the government had to be el sembrador. He did not look at the possibility of the citizens doing the siembra.

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      • I agree 100% with this. I’m curious how would you envision the citizens doing the siembra? In other words in what way would the oil profits be transferred to the Venezuelan people? It’s a question I’ve about and have not come up with any satisfactory answer. The best I’ve come up with is in some way dividing ownership of PDVSA among the Venezuelan people. Giving them a share upon birth or something of the sort and having PDVSA pay dividends. The question to me is do you make these shares transferrable or not and what happens when the person dies. Does his share disappear go to his family or what.

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        • Basically you set up a trust into which all Pdvsa´s resultas petroleras have to be deposited, and you pay each Venezuelan born his share.

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            • Strictly on a what comes in… less what is needed for Pdvsa… what goes out basis… and the government, if in need would tax each citizen on his share.

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        • 1) Privatize 100%
          2) Optimize royalties for all extracted natural resources; deposit them into a dampening account.
          3) Daily, distribute the income average to every registered citizen, equally.
          4) Citizens accumulate, transfer, or spend it any way they want.
          5) Government’s budget is exclusively from taxing the success of the market.

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      • Think of poverty as an externality and government a social construct to cope wiith the problem.

        Alternative: outsource the solution to private enterprise eg pdvsa.

        Other alternative: read ayn rand, smile self-contentedly, sleep tight.

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    • What fair share? subsidizing the rich and crime?

      Poor people don’t see much of it. Public transportation in Venezuela isn’t particularly cheap, specially taking wages into account. In Quito (the second largest subsidizer of gas in the Americas), minimum wage is USD 400 while a bus/trolleybus ride is USD 0.25 and a taxy ride in the city is like USD 5. In Venezuela minimum wage is USD 67 while a bus ride is USD 0.10 and a taxy ride is about USD 3.

      Rich people get to drive SUVs for every errand even if it is two blocks away paying USD 0.10 for every gas tank (for an SUV). But they could well afford to pay more to fill up the Meru, 4tunner, Explorer, etc.

      Border smugglers make an insane profit which is being used to consolidate criminal organizations both sides of the border.

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    • Rafael,
      Of course, if you compare this insane subsidy with an even more insane scenario (the national budget is stolen *in its entirety*) then, yeah, fuel subsidies are a great idea.

      I have to admire your chutzpah though. Takes guts to defend the oil subsidies in this blog.

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      • Wrong!

        If gasoline was priced in Venezuela at its international level… how much oil do you think governments could give away to other countries or even the poor in Massachusetts?

        One of the benefits for many politicians of low gasoline prices is to help to create the illusion they are not stealing much!

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        • This is a good point, but you could say the same thing about all the hard money subsidies Venezuela has given to the likes of Argentina and others. People know how expensive dollar are but that has not led them to rebuke the large gifts Chavez and Maduro have given to other countries.

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      • Of course it is an insane scenario but we also have an insane government!

        It seems to me that the government’s MPS (marginal propensity to steal) would be larger for each additional dollar the government receives making this windfall even less productive to the Venezuelans.

        I am likely wrong and the cost-benefit analysis leaves common Venezuelans better off with less subsidies but probably not by that much. The margin being small enough for political opponents to spin in it into a net negative for the Venezuelan people and use it for political gain, which is likely why prices have not been raised.

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  17. I think another lost opportunity from giving away gas has not been discussed much. In Europe, for example, about 60-70% of the final cost of gas is taxes. Those taxes in theory go to create, grow, and maintain the roads and infrastructure. When I see the spectacularly bad conditions of Venezuelan road infrastructure, and how clearly insufficient it is in terms of capacity, safety, etc. I always think not only of the great damage the almost free gas has done, but also the damage from roads not having their own source of funding, such as fuel taxes. I think one of the keys of being a serious country is having clearly bounded funding for everything. In Chavismo, the funding seems to come from one big bag of money, instead of several well-organized boxes. This makes accountability impossible because the money doesn’t belong to anybody; no le duele a nadie.

    Finally, I’m a car enthusiast and I love driving. A few years ago I finally realized, during a trip to Venezuela, that I’d rather pay through the nose for fuel in Europe, in order to enjoy beautiful, plentiful, and well kept roads every now and then (road trips are expensive), than having cheap gas, but suffering horrible, primitive, and unsafe roads daily.

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      • True. I think European fuel taxes are excessive, but they do serve a purpose and that’s what I wanted to point out.

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        • Yes, but as they have often been used to subsidize coal, in Germany and Spain, these are outright discriminatory against oil.

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          • But that’s a problem of misused fundings, it’s not a fundamental problem of fuel taxation. Hey, I’d rather pay no taxes, just like anybody would prefer, but there is no free lunch and the funding for roads has to come from somewhere. Might as well come from a source at least theoretically close to the roads, which would be the fuel consumed while using them. Like I said before, I think Europeans pay way too much tax for fuel, but at least in principle I think it’s the way to go.

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  18. A lower gasoline price in Venezuela increases consumption which increases the price of world gasoline which increases the subsidy which increases the subsidy which increases the consumption which increases the world price of gasoline, ad infinitum.

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