Tuesday, March 1, 2011

Oil Prices and Foreign Policy

In part because of the centrality of street protests to the public image of the prewar opposition to the Iraq invasion, war supporters found it fairly easy to caricature leftist critiques of foreign policy as "No Blood for Oil" sanctimoniousness.

Today Matthew Yglesias (who was himself a war supporter who has since reformed) puts the argument much more subtly:

The goal of much of America’s terrorgenic policies is to secure our economic interests in the face of oil price shocks, but this holds up to very little cost-benefit scrutiny.

It is an operational fact of our foreign policy that US military support for Saudi Arabia and other autocratic Middle Eastern governments is motivated at least in part by a desire to control global oil prices. It is also an operational fact that US military spending in this region contributes not just to "anti-American sentiment" but to actual identifiable attacks on US personnel stationed abroad.

It's possible the tradeoff - increased economic security, decreased physical security - is worth it, but no one seems to be able to demonstrate this, and it runs counter to our stated goal to prioritize the physical security of Americans over other foreign policy concerns.


  1. hey apeman, saw you venture onto scott sumner's blog, you are braver than i. this has nothing to do with your post here, but i wonder if you read his blog often, and know if whether his ngdp targeting scheme essentially gives the fed the right to buy any assets at any point to boost ngdp, not just treasuries. i'm trying to get a grip on what he's up to

    anyways, i like the blog. keep up the work

  2. thanks, I've got a few too many projects going right now so I've not been able to post often enough to get this thing going, but I'm trying this week and next to at least post once a day

    I'm not sure what Sumner specifically wants the central bank to do under NGDP targeting.

    The main problem with Sumner is not ngdp targeting or any other theoretical viewpoint but a basic misunderstanding of how fiscal policy actually works, and how it interacts with the banking system.

    I am not opposed to ngdp targeting per se, but if you think the US can hit a ngdp target with monetary policy alone it's never going to happen.