We Really Want You To Work More Hours...

We Really Want You To Work More Hours...

So we're cutting your pay. If your employer used that as a strategy, do you think it would work? Dr. John Lott's op-ed piece at Fox News today points out that many politicians are making essentially that argument:

If a product is in short supply and if you really wanted more to be produced quickly, would you want companies to think that they could earn a lot of money making it?
You would think that the answer is pretty obvious: No profits, no oil. To encourage more production, companies need to think that there are more profits to be made. With all the anger over high oil prices, more production to lower prices would seem to be a high priority.

If you really want oil companies to increase production, create more competition, and drive down prices, then you want them to think that they are going to make a pile of money at it. Or perhaps you think that telling them that they aren't making a pile of money at it is a strong incentive to work harder.

Lott also points out that the "obscene" profits of the oil companies are, relatively to other corporations, nothing special:

While the energy companies during the first quarter of this year had an average profit margin of 7,4 percent, the average Dow Jones Industrial Average company earned 8.5 percent. For example, ExxonMobil, which Obama has singled out for particular criticism, made an “obscene” $40 billion in profit, but that is on $404 billion in sales.
Much of the discussion concerning record high profits is misleading as it focuses on the dollar amount of the profits not the profit rate. As sales have also gone up over time, of course total profits have gone up, too. Nor are looking at just a couple of years particularly useful.

Look, I hate paying these gasoline prices too. I would prefer gasoline be cheap again. But I would also like to see our fuel coming from somewhere where the locals don't have their turbans wound too tight. Pick one.