In Russia, We Pick Winners. In U.S., Winners Pick You!

Katherine Mangu-Ward | June 24, 2009

A good point that isn't made often enough:

"When was the last time human beings modernized our energy sources by making older power sources more expensive?" [asks Michael Shellenberger, co-founder of the tiny, Oakland-based think tank the Breakthrough Institute in 2002 with and Ted Nordhaus] "And, of course, by now you probably know that the answer is never."

Personal computers didn't take off because there was a tax on typewriters, he says. And the Internet didn't sprout up because the government made telegraphs more expensive.

Even economically literate enviros often forget to disaggregate the natural economic phenomenon of price increases in the presence of scarcity from the unnatural price increases brought about by taxes or regulation (which are much less effective at changing behavior and encouraging innovation when they are limited by national boundaries and not the global market.)

Sadly, I'll have to part ways with Shellenberger here:

"There's this idea that the government shouldn't be involved in technology, the government shouldn't be picking winners and losers," Shellenberger says. "Which is sort of a funny thing to say. It's kind of like, well, why not? And when hasn't the United States government been involved in picking technology winners and losers?"

A situation where the government picks winners is just as bad as simply making the losers more expensive. Government benefits in the form or subsidies will have the same effect as government attacks on certain technologies (like coal and oil) in the form or taxes. The same is true of regulatory favoritism for one solution over the other. 

More on picking winners here.  

Comments

Invisible Finger|6.24.09 @ 5:07PM|#

Like it or not, the defense department picks technological winners and losers moreso than Congress. But it's government just the same.

|6.24.09 @ 5:26PM|#

Shellenberger says. "Which is sort of a funny thing to say. It's kind of like, well, why not?"

Among other things, it's fundamentally unfair for the government to intentionally skew the market in favor of some individuals. It's also prone to abuse - the politically connected are more likely to be able to sway the government to favor them. It's not just prone to abuse, it IS abuse.

If your answer is still "so what?" then it's difficult to see what common basis we have for discussion.

Shannon Love|6.24.09 @ 5:32PM|#

I am an amateur student of technological history and I don't think the government has ever picked a technological winner. Instead the government usually simply anoints winners in the free market. Usually, these free market winners have become so successful that they became natural monopolies. This is what happened with electrical utilities and phone companies.

I am at a loss to think of one non-military technology that the government spotted when it was a new, unproven tech and then nurtured it to a commonly used technology. It has simply never happened.

Nuclear power comes as close as any. It began as a military project and was civilian nuclear power was a government project from beginning to end. As a result, the first generation of nuclear power plants were scaled up submarine reactors rushed into production for reasons of national prestige. I think that we might have had a more gradual and more healthy evolution of nuclear power if it been purely free-market.

The military generates new technology but it does so by throwing ungodly amounts of money at a problem to create technology that the free-market has no use for. Only after several decades does the free-market evolve to the point where the military technology can be made cheap enough to meet ordinary needs. It's not clear at all the free-market would not create the technology when they really needed it.

|6.24.09 @ 6:34PM|#

Cue Chad in 3...2...1...

|6.24.09 @ 7:35PM|#

I am at a loss to think of one non-military technology that the government spotted when it was a new, unproven tech and then nurtured it to a commonly used technology.

But... But... The Internet.

Invented in 1969 exclusively by federal employees exclusively using federal monies, the Internet was slowly grown under the purported auspices of universities and other research institutions. But all the time it was steered from back offices by federal agents working undercover through twenty-five years of pump-priming and favorable treatment -- while alternatives such as UUNet and CompuServe were quietly taxed and regulated out of existence -- until the day when deep mole and NSA employee Marc Andreessen finally received the top-level go-ahead to reveal it to the world as the greatest government achievement in history.

Doesn't that count?

|6.24.09 @ 8:43PM|#

SAhannon Love, I don't know if this is a pertinent example. Back in the 60's Texas Instruments had integrated circuit chips for about a hundred bucks a pop. The government, for whatever reason, bought tons of them. This eventually(within 6-7 years) led to the price being around 2 dollars and the rest, as they say is history. ICs are now in many many things. It suggests that the government created a market, and the resulting innovations, by making them affordable.

Or maybe I'm an idiot.

|6.24.09 @ 8:44PM|#

Shannon. Sorry for misspelling your name. I'm poor and my spellcheck bounced.

alan|6.24.09 @ 10:59PM|#

The billions that the milatary and the US government threw into communications research were damn near worthless to the innovation of the net as we know it. If development continued along those lines and as politicians like Gore envisioned it, internet communication would have been stifled as effectively as broadcast TV had been, with a few chosen gate keepers keeping the rest of us in line.

This is who we have to thank for the modern internet, from Tim Berners-Lee Wikipedia entry:


In 1994, Berners-Lee founded the World Wide Web Consortium (W3C) at MIT. It comprised various companies that were willing to create standards and recommendations to improve the quality of the Web. Berners-Lee made his idea available freely, with no patent and no royalties due. The World Wide Web Consortium decided that its standards should be based on royalty-free technology, so that they could easily be adopted by anyone.[14]

alan|6.24.09 @ 11:19PM|#

SAhannon Love, I don't know if this is a pertinent example. Back in the 60's Texas Instruments had integrated circuit chips for about a hundred bucks a pop. The government, for whatever reason, bought tons of them. This eventually(within 6-7 years) led to the price being around 2 dollars and the rest, as they say is history. ICs are now in many many things. It suggests that the government created a market, and the resulting innovations, by making them affordable.

Or maybe I'm an idiot.


No, you are not an idiot. That is why I never rag on you. It is a valid example you give. What I would argue is that though IC whatever positive steps are taken, many more negative steps, make those almost irrelevant.

For instance, AT&T was a monopoly created through edict. For several decades there was very little in the way of communications innovation. I remember how expensive long distance was in the early eighties when my sister would call us from Guam where she was stationed and bill it to us. It was obscene.

Not until AT&T was broken up, a government action correcting previous actions, was anything like a commercial internet possible, much less a market in those damn cell phones (can't read people's minds unless I see them in person).

|6.24.09 @ 11:55PM|#

Would it be alright with everybody if we retired the "In Soviet Russia, blank blanks you!" trope? It was funny the first thousand times.

Chad|6.25.09 @ 12:07AM|#

Katherine, we aren't asking that the government make fossil fuels more expensive. We are simply asking that the government quit making them appear cheaper than the really are.

After literally trillions of dollars of subsidies over the centuries, you might just think that Big Coal and Big Oil could handle competing without subsidies, don't you think?

Note: A free public garbage dump is a subsidy, and in this case, an extraordinarily valuable one.

Hugh Akston|6.25.09 @ 12:10AM|#

Would it be alright with everybody if we retired the "In Soviet Russia, blank blanks you!" trope?

In Soviet Russia, trope retires you!

tassawwuf|6.25.09 @ 12:16AM|#

"In Soviet Russia, blank blanks you!"
this is kind of funny just because it sounds like a pretty plausible standard redaction of the time...
Instead the government usually simply anoints winners in the free market. Usually, these free market winners have become so successful that they became natural monopolies. This is what happened with electrical utilities and phone companies.

didn't Thomas Edison & Alexander Graham Bell use hired thuggery & steal intellectual property & all whatnot? thank God times have changed...

|6.25.09 @ 12:26AM|#

Alright, Hugh, must admit I laughed at that one.

|6.25.09 @ 4:59AM|#

The military has been the birthground of more technology than anyone really wants to imagine, from the early invention of interchangeable parts to advances in ship designs to nuclear energy to airplane design to electronics to communications designs to improvements in medicine.

The only restraining force opposed to this development has been the green movement, which does not like the fact that these technologies have applications in the civilian realm that help people live better lives.

jtuf|6.25.09 @ 7:16AM|#

Solar panels are very popular in New Jersey, because our legislators in Trenton picked them as the winner and offered tax incentives for installing them. There's just one problem. New Jersey is not a desert in the Southwest. We have fairly long winters and rainy springs that significantly reduce the output from solar panels. Arround here, green roofs make more sense. They help sore water, which alleviates flooding. They keep roofs cool in the summer, which reduces power consumption on air conditioning. They can provide food, which keeps food production near the food consumption. They also provide much needed green space in a densely populated state. In New Jersey, green roofs make more environmental sense than solar panels. Green roof advocates have an uphill battles, because the state government has already picked a winner and crowded us out.

..|6.25.09 @ 8:18AM|#

didn't Thomas Edison & Alexander Graham Bell use hired thuggery & steal intellectual property

Yes, that's all it takes. Genius and hard work has nothing to do with it.

|6.25.09 @ 10:17AM|#

What I believe is different about the integrated chips example is that they were brought over the threshold to commercial viability by the government acting as a buyer, a market participant, rather than the government using its powers of coercion (taxation and regulation).

|6.25.09 @ 10:37AM|#

As far as military technology goes. One example that springs to mind is GPS. It was a pretty big leap. With the barrier to entry of actually getting 24 satellites in orbit who knows if it would have gotten off the launching pad. Feel free to correct me if I'm don't know the history of GPS in depth.

David Small|6.25.09 @ 12:07PM|#

Chad, you have a fair point about uneven tax breaks or subsidies, but the GW activist have definitely sought and continue to seek carbon taxes or capping to make fossil fuel usage more expensive.