Abate,
I still don't get what you are saying when you say "i can't help but notice how vicitimized you seem to be by the belief that the application of economics is rational."
I think you are saying - Joe-× believes that the application of economics is rational but it isn't therefore Joe-× is a victim of his own faulty beliefs.
Should I merely disagree or explain why?
Oh, what the heck... I'll try to keep it (somewhat) short...
There is no separation between politics and economics. They are all the same thing - the study of human action aggregated into simplified generalizations because it's impossible for anyone to comprehend and process all the individual data points. Economics as a science (especially as practiced by the Chicago school) is an attempt to quantify the generalizations in order to make them seem more empirical than what they can be.
As human beings, we have needs and wants. Consult Maslow for details. To summarize this as briefly as possible - people are looking for happiness. Since human beings in rebellion against their Creator can't, don't, or won't find happiness where it is in nature - they seek happiness in other ways. Economics is merely the pursuit of happiness. Politics is the pursuit of happiness by force. Politics is merely one method.
Economics is perfectly rational. There is no such thing as an economy or an economic system. They are abstract concepts. Again, the purpose of these abstract concepts is to simplify the observations about a whole bunch of individual actions. Economics is all about individuals attempting to satisfy their unfulfilled needs. As individuals, everyone has different needs. What seems like an irrational need to me might be perfectly rational to you. In acting, individual actors are doing what is rational to them. Discounting those who are truly mentally ill, every actor is acting rationally according to his own value system.
It is human nature for individuals to choose those actions that they believe will provide the optimum ratio between satisfied needs and expended effort. It is human nature for individuals to prefer minimal effort and maximum satisfied needs. Some people (ascetics / stoics / cynics) achieve this by taking deliberate action to minimize their needs. Others achieve this by satisfying their needs through the use of force. The equation being used by these folks is that it requires less effort to coerce others than it does to motivate oneself. This is politics. Politics is perfectly rational. Millions of years of evolution have imprinted the possibilities offered by power permanently on the human psyche. Despite all best attempts to civilize ourselves, some percentage of human actors have concluded that it is OK to harm others in the pursuit of one's own goals. It is impossible to prevent people from reaching this conclusion.
A free market requires an absence of coercion. This absence of coercion can be brought about in one of two ways - all individual actors acting as free agents can choose against coercion or an external agency of some sort can be used to provide disincentives (penalties) for use of coercion. The first option is rightly called utopia or fantasy. It doesn't adequately account for human nature. Only the second option is viable. How the second option is executed determines the amount of coercion in the marketplace of human actions. Various arrangements have existed throughout history to employ the second option. Most of these arrangements have involved coercion. Some arrangements call for only punitive coercion (natural law) while others call for pre-emptive coercion (regulation of behavior).
You seem to think that regulation is necessary. You assert that since the "free market" has negative outcomes for some actors in some situations, that regulation to minimize or eliminate these negative outcomes is necessary. You provide an example of situations of applied regulation that you have declared "works" - social security. You provide an example of de-regulation, un-regulation, or under-regulation (I'm not sure which) that doesn't work - gas prices. From these examples, you apply inductive reasoning to conclude that regulation is necessary. From this conclusion, you assert that free markets are either not possible or not desirable (I can't tell which.)
Really, most of what you say has no meaning to me. I think your examples are flawed. I think your conclusions are incorrect. I think your assertions are dangerous.
The oil industry is regulated. Some of the regulation is created by the oil industry to increase the difficulty for new competitors to enter the market. Some of the regulation is created by the sellers of alternative forms of energy with the hope of shifting customers into their own markets. Some of the regulation is created by well-intentioned (environmentally-motivated, economically-motivated, etc) opponents of the oil industry. As soon as some one thinks of regulation, the lobbying begins. The lobbyism that you are talking about consists of many different actors with many different motivations. It appears that you are implying that only the lobbying of the oil industry against regulation harmful to the oil industry is bad.
I can't say whether oil industry consolidation is good or bad. By itself, it is neutral. It could be the means by which incompetent oil industrialists are saved from their own stupidity. It could be the means by which efficient producers drive inefficient producers out of the market in a way that benefits consumers. It could be motivated by a desire to create a vertically integrated and abusive industry that can charge outrageous prices. These are all different points of view. As far as I can tell, they are all possible valid arguments. You seem unable to see any possibilities other than your own explanation.
You've stated that the "way to tell a perfect market has failed is when all of its players' profits are rising faster than their costs adjusted for inflation." I'm sorry, but this statement is just loaded with ridiculous fallacies.
You cite "Exxons Q3 earnings release of $9BB net income. For context, Microsoft reported just over $3BB for the same period." So what? What does that mean? What "should" Exxon's earnings have been? Is $9BB too high? What is the right number? Are you arrogant enough to think that you (or the government) can or should dictate what they should be? I mean when Grassley says something that ignorant at least you know he is motivated and owned by the ethanol lobby.
You say "If a market does not have enough players to instigate sufficient competition...you have... by definition... a case where a market has failed." Again, that fails to account for all the possibilies. It could be that the market relies on a natural resource that is held by a single vertically-integrated property owner. It could be that the market is something that requires some kind of unique intellectual capacity. It could be that the competition had been cleared by government regulation that made the cost of entry into the marketplace prohibitively high. Your hypothetical tells nothing on its own.
You say "or there is illegal price fixing, you have... by definition... a case where a market has failed." This one just seems self-contradictory. You don't define illegal. You don't define price fixing. Even without these definitions, if you have a situation where an actor or actors is/are acting in a way that violates some externally imposed regulation, you don't have a free market - you have a regulated market. If the regulations are not regulating, it isn't the market that has failed; it is the regulations and the regulators.
Supply and demand IS the biggest reason for all prices, but it isn't the only reason. There are other variables that impact prices to a lesser degree.
Sorry I was wrong on my short prediction!
Joe