Recognize this market?

So, imagine this scenario: there are 3 people, Andy, Billy and Charlie.

Andy has a product to sell. Billy is compelled, under penalty of death, to spend whatever money he has on this product, regardless of price. Is it a mob protection racket maybe?

Now Charlie won't buy Andy's product no matter how cheap it is. Even if Andy were giving it away, Charlie wouldn't take it.

So before going further, what price should Andy charge? Since neither Billy or Charlie decide based on price, Andy should charge as much as possible right?

By now you probably recognize this market as a free health care market. This is basically the reason why health care can't be a functional free market. One side can charge as much as possible, and the other must continue to pay and pay and pay, just to survive. The market is not balanced or free when one side isn't free to choose whether or not to participate.

As my friend, Franklin, once said, "You can't wait for heart surgery to go on sale."

Nobel for Linus Torvalds

The Nobel people ought to consider Linus Torvalds for the next Nobel Prize for Economics. The open source model of software development has exposed a new kind of market, one where the cost of producing and distributing a product falls to zero, leaving only the cost of designing it. "Open source" is now even spreading to other cheaply produced products, even though they don't actually have "source". The Linux kernel is by far the most successful open source product. Through his work with Linux, Linus has proven that this kind of market can work and that people are willing to give away the effort of designing a product for the seemingly small benefits of notoriety and creative expression.

I suppose it might make sense for Richard Stallman to share in the Nobel Prize, for creating the GPL, but the idea of giving him an economics award is almost too much for me.

Oil Supply & Demand Crossover

There seems to be a disagreement about whether high oil prices are caused by speculators or simple supply and demand. That speculation hasn't driven up other commodities, suggests speculation alone doesn't drive up prices. And there are no reports of hoarding or oversupplies of oil. But there's not so much oil that buyers can withhold buying buying to drive down prices.

It seems possible that we, as a planet, are now consuming exactly as much oil as we are producing. And it's clear that demand is increasing faster than supply. That is, we may be at the point in history where demand is about to surpass our supply. It's not Peak Oil, but it's the Oil Crossover point of supply and demand.

Peak Oil is a useful event to consider, but isn't valid for temporal predictions because it primarily considers supply. The predicted effects of Peak Oil are based on supply _and_ demand, but the predicted occurrence is based solely on supply. This doesn't make any sense at all.

The supply and demand crossover point is a more meaningful point in time. The Oil Crossover is the point in time when the predicted effects of Peak Oil will actually begin. The world doesn't need to have topped out its potential oil supply to experience global shortages. Rapidly increasing demand will do just fine. And, you may have noticed, demand is rising rather rapidly.

The danger is that policy makers are considering the right effects but at the wrong time. Policy makers use optimistic estimates of oil supply as an excuse to delay restraints on demand. Given this global unwillingness to restrain demand even slightly, it should be no surprise if it's rising demand that eventually brings us to the effects of peak oil, rather than shrinking supply. Nor should there be any surprise if we've finally reached the Oil Crossover.