What the FLC?
It's not what it sounds like. I hope some of you are wondering what FLC is...
I plan to use the abbreviation FLC a fair amount today. So let’s get it over with. FLC is short for fully loaded cost.
Keep It Simple
Ockham’s Razor is one of my favorite principles. While exceptions can prevail, I believe almost anything reduces to the simplest explanation being the best. Many challenges divide us philosophically, politically, socially, and economically.
So why FLC?
I am not a fatalist. There are all sorts of problems and challenges we get bent out of shape over. I believe most problems are just one good idea away. Once the better idea comes, nostalgia and hard-nosed Capitalism become partners and dig in to fight the better idea. Someone always has something to lose when a new idea arrives. The better idea typically emerges but not without avoidable pain, discomfort, and distress. For me, that is the better way to think about problems that seem intractable. I also believe if you are in the business of making X, it is in your SELFISH interest to indoctrinate your customers to believe the status quo rules and there is no need for any adjustments. So for today give me the benefit of the doubt and let’s talk about why the idea of fully loaded cost (FLC) is an idea whose time has come!
Explain Yourself!!!
What do I mean by fully loaded cost? Our economy creates innovative products all the time. My ideas here are not novel and I think they are sensible. Any product that costs a certain amount for the consumer but creates OTHER COSTS for others is the root of many of our problems. I hope that each of these (or at least some of them) makes my opinion about FLC clear and interesting!
Premise: Travel by Road is Necessary
People will travel by car or truck for the foreseeable future. I reject virtue-signaling how they should do it. I merely want anyone who operates a vehicle to play the fully loaded cost to society of their travel. If someone wants to drive a 9000-pound pickup I just don’t want the driver of a 2500-pound subcompact to subsidize them. I don’t think you need to subsidize the opposite behavior either. I generally believe in NO-DISTORTED markets and believe we will get to efficient solutions when we ruthlessly excise the corruption. When I casually consider the externalities of driving the following jump out as obvious:
Sometimes we hurt, kill or damage the property of others. This is priced in insurance.
Every mile we drive, we leave pollution behind that hurts all of us collectively. This is not priced accurately and dramatically understates the impact. It is UTTERLY ridiculous to not set taxation levels on fuels based on the grams of pollution that results from its burning. Just because a car might run a long way on plutonium it would be ABSURD to allow it as a motor fuel. Adjust taxation on diesel in accordance with the DAMAGE it transfers to the innocent bystanders.
Every mile we drive DESTROYS collective property. This is not priced accurately. The shortfall is borne in aging and unsafe infrastructure.
Items 2 and 3 are massively distorted and highly underestimated. Those who love the current system yell (1) no new taxes (2) manipulate the system behind the scenes (3) pick winners and losers — hint they are not you and I. The costs of driving are not complicated. Damage to the roads and damage to the environment are obvious. The difference is the gap to the FLC.
Why Do My Roads Have So Many Potholes?
Roads get damaged based on how much someone drives and how heavy their vehicles are! This makes the CULPRIT of how bad roads and bridges are due to personal trucks, commercial trucks, and electric cars.
The FLC of driving is how much YOUR vehicle deflects and damages the road.
Destruction and poor maintenance of the roads are PLAIN TO SEE. Destruction of the environment is trickier. There is consensus for each of them just to different degrees. In Minnesota, our consensus of the former came home when the 35W bridge collapsed into a river.
Political gridlock means we classify this as an intractible problem (1) Liberals might want to raise gas taxes. (2) George W Bush against the backdrop of the 9/11 attacks pursued tax cuts to PREFERENTIALLY favor pickup trucks IF AND ONLY IF they weighed MORE THAN 6000 pounds and reward them with tax deductibility (still a thing). It was an ACTIVE POLICY of some automakers to add steel wheels to their vehicles to get them to 6000 pounds. (3) States like Wyoming PUNISH the purchase of electric vehicles — let’s screw the libs. (4) Policies of the “sky is falling” type are to give preference to the purchase of electric vehicles. What is the truth? People who buy a Rivian pickup are driving an 8500+ pound vehicle!!! Why not just make a dump truck your daily driver?
The truth is a sensible automotive policy would be to TAX THE VEHICLE based on the number of miles driven BASED on its mass plus the total amount of carbon in the atmosphere. In that way, the user would be paying the FLC.
WHAT MIGHT RESULT? — The (1) roads would be SAFER, (2) people would move toward more rational vehicle choices, (3) those who are damaging the roads would be paying for it (4) the marketplace would provide new options once the distortion of subsidy is lifted (5) the people who do not drive would not be subsidizing the profligate misuse of a public asset.
In the spirit of facts are stubborn things, ponder this in terms of how much the cost of goods is transferred to others. Think about this the next time you consider someone who drove your tomatoes across the country on a tractor-trailer instead of in a local greenhouse. Why, exactly, is it SENSIBLE to subsidize the tasteless tomato and lay off a large portion of the cost on those who didn’t want a crummy tasteless tomato in the first place?
Am I tilting at windmills? I am quite sure that for many of you, the next paragraph will be SHOCKING.
“A fully loaded tractor-trailer weighs 80,000 pounds, 20 times more than a typical passenger car at 4,000 pounds, but the wear and tear caused by the truck is exponentially greater. One analysis contends freight-hauling trucks cause 99 percent of wear-and-tear on US roads, but only pay for 35 percent of the maintenance.”
THE REAL WORLD — What I was reminded of when I wrote this was an unusual location in north-central Minnesota. The sand in that area is the right diameter for fracking. It is NOT LOCATED on an Interstate-class road. Firms that engage in hydraulic fracking bring their heavy trucks into the area and largely destroy a set of secondary roads. The State of Minnesota needs to maintain the road. The RIGHT SOLUTION is no oversized trucks on that road. If the sand is genuinely important let the fracking firms upgrade and maintain the road instead of a free ride on taxpayers. I am not against fracking. What I am against is firms engaged in some practice in which they extract a mythical profit and lay the rest off on taxpayers. The difference in costs is the FLC. If you think this is an isolated practice. Consider the fact that the Federal government often BUILDS A LOGGING road for outsourced firms to lumber out national forests. It would seem rational to expect the company that does the logging to build the road that they need to make their bid work. It would seem Weyerhauser can afford the FLC. I am NOT AGAINST LOGGING — it just seems absurd that taxpayers need to build a road to make the deal sensible. If you are interested in learning more, check out the footnote. The PRC is infuriating.1
Rest assured I have several examples of this crazy principle. My commitment to shorter posts means one example will have to do. Please join me in the comments. My sense and opinion is FLC primarily describes a lot of the painful challenges in our economy be it pollution, soil quality, and recycling. The guiding principle is whoever originates the product should retain the responsibility for the FLC of the product including the impact on society. Here are a couple of previous posts that discuss similar concepts.
Regardless of what your FAVORITE activity happens to be, what is wrong about charging upfront for the fully loaded cost of an activity. This single action would discourage bad behavior and encourage limiting necessary behavior to the greatest extent possible.
The Poll & Music
Today is about the simplicity of the answers once we commit to change. I consider it a great myth that change is beyond our capacity. It starts with deciding what is going on is no longer tolerable. While she never got a residency in Vegas, amongst the young Disney kids who became music stars I always considered this the very best of voices that appeared in the era. Realization is the key step and how we get to change. Listen at least till at least 01:00 and I am sure you will appreciate a great voice. I think we could readily plug her voice into a revival.
Here are some possible topics for the comments if you are interested in the dialog:
What is the FLC of driving a mile in a given vehicle?
What is the FLC of a 20 oz bottle of Coke?
What is the FLC of ultra-processed food?
In the poll, what about “all of the above?” Big change doesn’t ‘only’ come from one source. To quote Marge Simpson, “One person can make a difference, but I guess most of the time they shouldn’t.”
Do I have to point out that’s a joke?
TLC of a cheeseburger and fries to society must be staggering in future medical costs and lost health productivity just like cigarette smoking is. Thanks for making us think about this dynamic.