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Writing in the Wall Street Journal, Ronald Bailey tries to help President Bush get the "energy initiative" monkey off his back.

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  1. Ron, one of my space advocacy discussion groups has been talking about Bob Zubrin’s latest missive on switching from an oil-based energy infrastructure to a biomass/alcohol one. What’s your take? Zubrin is frequently long on zeal and short on facts* (especially facts that suggest that his position isn’t as strong as he wants his readers/listeners to believe), so I take this sort of thing with a grain of salt from the get-go. Not to mention that I’ve read enough about alternative energy sources to know that there are some serious questions about the viability and cost effectiveness of turning to a large-scale biomass energy economy. Just how efficient is the conversion of biomass to alcohol? How much energy goes into producing the biomass in the first place?

    Of course, I’d love to see us increase our energy diversification–not just to avoid getting 20% of our oil from the crazy Middle East but because it strikes me as making better long-term sense. We will eventually run into problems meeting our energy needs if we continue to rely principally on oil and coal, after all. Though I agree that a “Manhattan Project” for energy is unnecessary. Plenty of us see the writing on the wall, and I’m confident that we’ll develop a robust energy infrastructure based on something other than oil and coal soon enough. My bet is that we’ll crack the fusion nut, but who knows?

    *Not to trash Zubrin too much–he’s been a heck of a salesman for colonizing Mars.

  2. Pro: I’m glad you asked.:-) See my column tomorrow on bioethanol.

  3. Ron, thoughts on Bush pimping “nanotechnology”?

  4. This is so totally a free market issue. When there’s a cheaper way to heat your home or transport your ass, it will replace oil with no help from the government. Best to let the market develop it without interference, government funded energy initiatives have an abysmal track record.

  5. Warren: No argument from me. I’m interested in the whole issue from the “where do we go from here” angle, but I think the market will provide the ultimate solution. Oil looks to stay expensive enough to drive some development of alternatives, but we’ll see how that plays out. Of course, whichever president happens to be around when we make the transition to something else will claim that HIS program did the trick. And the media and the public will largely buy that claim. Argh.

  6. link on front page goes to the wrong place

  7. Sorry to spoil the little “the market will cure our energy ills” mantra, but two things that the always evil and incompetent government could to to give alternative energy a kick in the pants are raise taxes and jumpstart R&D through better-targeted government procurement. Sorry again for throwing a statist turd into the liberatarian punchbowl…can’t help myself.

  8. “raise taxes” on gas that is

  9. budgie, I hardly see how raising taxes on gas will jumpstart alternative energy use or research. If anything, it will decrease demand slightly, leaving us attached to the “dinosaur blood” teat a bit longer. Ditto for providing R&D funds for this either. The person/group/corporation that can make a new energy source worthwhile should reap the rewards, not be on the hook with Uncle Sam for it.

  10. I love the people who call our government “evil and incompetent” but yet still want to give them more money and/or responsibility.

  11. Lowdog: I think “evil and incompetent” was a bit of sarcasm directed at us. Gas taxes are not necessarily a bad idea. If you can establish that there really are negative externalities from gas consumption, there are worse things you could tax. Also, the incidence of the tax would mostly fall on foreign producers. That’s good. But that’s assuming that the money goes into deficit reduction or reducing other taxes. If you start talking about spending the gas tax money on something, I’m no longer on board.

    As for government-funded R&D, that’s pretty silly. If you can develop a viable alternative energy system, you’d make trillions. There are plenty of problems facing alternative energy, but a lack private incentives for development isn’t one of them.

  12. “I love the people who call our government “evil and incompetent” but yet still want to give them more money and/or responsibility.”
    I thought that was the shibboleth that gets me in the door here. You might want to dust off the sarcasm detector.
    “I hardly see how raising taxes on gas will jumpstart alternative energy use or research. If anything, it will decrease demand slightly, leaving us attached to the “dinosaur blood” teat a bit longer. ”
    You’re right. I was assuming that sales taxes would be considered part of higher prices, which would in the long term bring about reduced demand and then an aggressive search for alternatives. But I guess there is some alternative universe that defies this typical pattern.

  13. FXKLM has his sarcasm detector on hooray.

    “There are plenty of problems facing alternative energy, but a lack private incentives for development isn’t one of them.”
    No that is the point exactly…lack of private incentives is certainly one of them. Certainly not the only one, but one nonetheless. No one is saying that innovations would never have developed on their own, but I think it’s safe to say that computer technologies that made the internet possible were sped into development and commercial production through government initiative. Yes or no? Or does ideological purity trump common sense here?

  14. budgie: If I discovered a plentiful and environmentally friendly alternative to oil today, I’d be richer than Bill Gates by March. The private sector is spending plenty to research this. If someone has a plausible energy idea that’s worth developing, it’s not hard to find someone to back it in the private sector. Investors go wild for that stuff. If an energy idea is so expensive or speculative that it can’t be funded in the private sector, it’s almost certainly not worth persuing.

    How’s this for a compromise though: One possible problem with developing an energy source to replace gasoline is that it would take a very long to get from development to a fully functional distribution system. I can understand companies being worried that their patents will expire before they can really profit from their development. Why not promote development of alternative energy by offering extra-long patents for alternative energy inventions? It won’t cost society or taxpayers anything unless it works and it would, as much as possible, avoid government discretion in who gets the handouts. Deal?

  15. Budgie, did you even read the article?

  16. One way to reduce “our dependence on foreign oil” is have a large import tax on imported oil and use 100% of the revenues raised to cut tax rates on domestic producers of oil.

    It will never happen though because it would 1) raise gasoline prices 2) raise post-tax profits for domestic oil companies.

    Imagine any of our spineless elected representatives calling for higher profits for oil companies at the expense of gasoline consumers. Not gonna happen. There are those who actually want to do the opposite, namely install the windfall profits tax that creates disincentives to invest in domestic oil production, all in the name of somehow helping the “little guy at the pump”.

  17. Happy, that’s a trade war not an energy policy.

  18. This is absolutely a market issue. The thing to do is to tell the oil industry that their gravy train is over. Cut off all corporate welfare to big oil, stop basing governmental policy i.e Iraq war around oil, hold them liable for their environmental damage, and force them to compete in a free-market. I firmly believe that is a competitive market alternative would hold it’s own very well when the TRUE costs of oil production (without preferential treatment from the state) were accounted.

  19. Alternative energy would be profitable TODAY if the true accounting of the costs of oil were taken in. Imagine if the oil industry were actually held accountable for the costs of the pollution they inflict on society i.e. extraction and cleanup of accidents. The oil industry is sucking the teat of the nanny state while alternative efforts are forced to compete with this coddled and protected industry.

  20. It’s kind of ironic, FXKLM’s remedy of extending patents as an incentive. The irony is that the oil industry itself developed without patent protection (I’m not even sure if Rockefeller & Andrews refining breakthroughs were patented). Instead, it developed under a ‘private monopoly’ that the politicians saw fit to eventually break up. Patents are, of course, a government-granted monopoly to a first developer.

  21. I’m not putting down patent, by the way.

  22. What’s newsworthy about the declaration that US citizens are addicted to oil is that they are not… while US politicians have long been addicted to the madcap theory that they can “protect” the oil underground in the Middle East.
    I guess we shouldn’t be surprised, as they also think they can “protect” my unborn baby.

  23. Well to claim that investment in alternative energy R&D couldn’t possibly lead to any useful developments is way too broad a statement. It’s more that there are a lot of potential troubles that-a-way.

    Ethanol is a very good example – some scientists claim that ethanol takes more energy to produce than it produces. Other scientists (possibly the majority) claim otherwise. Well how is this to be determined? Well by a lot of mechanisms potentially – but the most basic mechanism at work here is the price mechanism.

    For the sake of argument lets say that ethanol is generally a great fuel, but also for the sake of argument lets say there exist marginal plots of land, which actually burn more fuel than they produce (because they require more oil derived fertilizer etc.). How is this situation to be prevented? By the price mechanism. However what happens to this when you throw in government subsidies (“and here’s a present for you Archer Daniels Midland”)? It no longer works.

    Now, this is all a lot of theoretical stuff and if it can be backed by a great deal of evidence that ethanol always produces more energy than it burns it is also entirely irrelevant (then ethanol sounds like a great deal. Lets use it). However, whether ethanol is energy efficient is precisely a source of controversy it seems. And that’s what market mechanisms could help clarify (prices are intellegent) and subsidies obscure.

    But maybe I should just put full faith in the government, eh? Evil and incompetent? Why never! And especially not the administration that brough us torture out in the open and mismanaged Katrina etc. etc.. Admitedly, I’d be a little more trusting with a less incompetent set of people, but even then I’d have my doubts.

  24. I’ll confess to being confused by the whole ethanol subsidy thing. If it makes sense economically, why would there be a need to subsidize it? If it does not make sense economically, why subsidize it?

    Granted, there may be gasoline pollution effects that are unpriced in the equation, but this is not a reason to subsidize something else (i.e. ethanol). It would be a reason to make consumers/producers of the polluting activity pay for the downside of the pollution though. Again, how this translates *intelligently* into subsidies is beyond me. Perhaps lobbying has something to do with it?

    I guess/hope I’ll learn more in tomorrow’s ethanol article on Reason.

  25. Of course for anyone in the federal government to claim we are addicted to oil is a little like your heroin dealer saying you have a problem with that stuff (only worse).

    We have subsidized roads and a subsidized interstate highway system, subsized oil companies, subsidized american car makers (even though non-american vehicles are often more energy efficient), subsidized intervention in the middle east and in other oil producing parts of the world (although this hasn’t been particularly effective), etc.. Sheesh – and this is all just the general contradictions we have here, not even getting Bush specific.

  26. warren:

    I think you’re mistaken. besides the fact that the economies of scale favor petroleum energy sources, and that costs are lower because a substantial infrastructure is already in place, up-front costs/ immediate investment is a consideration that belies the “the cheaper will prevail” meme. I suspect that a hybrid vehicle is cheaper in the long run because of savings on gas purchasing, but the up-front costs are prohibitive for many people.

    further, are Bush’s initiatives to fund private companies’ r&d, or at research institutions, especially universities? funding basic research at universities would seem to have multiple benefits, including a more broad-based discovery of knowledge that might have multiple applications.

    lowdog, the money could be funneled through a (quasi-) independent government entity, like NSF, with its emphasis on peer-review of grant applications.

    I think budgie’s ideas have merit.

  27. If passed, Bush’s Advanced Energy Initiative will do real damage to human progress. It will do so by throttling capitalistic, free enterprise initiatives to answer the desire for less expensive energy. Also, the Bush plan may well serve to work against its stated goal, the development of alternative energy sources.

    The government development of alterative energy sources will act as a disincentive to private entrepreneurial attempts, which by their nature of having to consider profitability via voluntary patronage are vastly more realistic. The disincentive would act against both the development of cheaper energy and cheaper usage of existing energy sources. Private companies will fear competition from politically favored concerns. There would be a “crowding out effect” dynamic.

  28. http://amazngdrx.blogharbor.com/blog/_archives/2006/2/3/1742583.html

    Comment on the Zubrin article. He has a very powerful argument for an alcohol based transportation economy.

    The eco devestation involved would be mind boggling.

  29. Happy the simple answer is that the ethanol subsidies are a complete scam like the rest of the agricultural subsidies and would be among the very first things to go if libertarians took power. The LP should rename itself the Anti-Corn-Law-League.

  30. budgie:

    …government could give alternative energy a kick in the pants (by raising) taxes

    A ridiculous point that misses the point! Of course government force that punishes existing enery source producers and comsumers will encourage alternatives, any alternatives. Why don’t you just advocate criminalizing oil and natural gas production, budgie? That’ll do it.

    …and jumpstart R&D through better-targeted government procurement.

    What?? Giving you the benefit of the doubt, and assuming that you actually meant what you said; do you really think that bribing companies with tax dollars will produce R&D of economically viable energy alternatives?

  31. budgie:

    I think it’s safe to say that computer technologies that made the internet possible were sped into development and commercial production through government initiative. Yes or no?

    No, not even close. The computer industry was relatively unregulated from the start. The computer revolution is a triumph of free enterprise. Can you imagine what the results would have been if, in 1979, the government had a program to put ever increasing computer power in most American homes at ever more affordable prices? I shudder to imagine.

    Your point also reveals an ignorance of the history of the Internet. The Rand company was working on development of what was the proto-internet for themselves and tp market to other concerns before the DOD contracted with them.

  32. biologist:

    basic research at universities would seem to have multiple benefits, including a more broad-based discovery of knowledge that might have multiple applications.

    Even at its most benign, where the discoveries are made available to all comers, research with its goal as alternative energy (BTW, this is not basic research) is at at best unnecessary and at worst, harmful to the development of energy technologies. If government money is funding a certain approach, that approach will tend to dominate cuz companies will tend to reason that it is most economical to follow that approach and let the government fund it. This will work to the detriment of other approaches.

  33. A goal “to replace more than 75% of our oil imports from the Middle East by 2025” is unworhy of the application of government force. Forcing people to share that goal is authoritarian.

    I have a better idea: Investigate and repeal all regulations that impede the more economical use of energy and the development of alternative sources. If alternative energy sources and technologies can’t make it in the market, they don’t deserve to make it. Also, end any and all direct subsidization of both conventional sources and alternative sources. In a general program of reducing and eliminating biz taxes, give tax credits for scientific and engineering research. These policies will engender the utilization of the flow of information as only the free market can.

  34. rick barton, please define basic research as you see it, if that isn’t basic research

  35. As the non-stupid among us already know, there’re no good reasons for the gov’t to subsidize or tax anything in this case, unless making things more expensive and inefficient while supporting various pet pork projects is a good reason.

    My understanding is that corn is one of the worst sources of ethanol (so the perverse gov’t keeps THAT apparent price low with subsidies), and that sugarcane is one of the best (so the perverse gov’t keeps THAT apparent price high with price controls).

  36. Rick Barton…

    My my my. You really do have faith.

    By ignoring real issues involved in the development of new tech, you can claim free markets will take care of the issue. But the huge infrastructures inherent in most energy companies function much like large government programs and are VERY unlikely to be nimble in adopting new ways of doing things, particularly when that requires a new infrastructure. Governments, since profit is not their only incentive, can think about these issues, help to develop new ideas and help to implement the development of the infrastructure that supports an industry.

    This was done in the case of oil, and will be done in the case of whatever replaces it. It is not a question of whether or not government involvment will/should occur, it is a question of what kind of involvment.

    Some of your suggestions on that front are reasonable. But support for research has society wide benefits since many ideas that are worth having are not profit making. Only if money is the only scale of worth used is your point of view valid. If humans have other ways to evaluate worth (they do) then spending money to support basic research is a generally good thing to do.

    Free Markets don’t work. If they did, they would exist. They don’t.

  37. biologist,

    I consider investigations into, for two examples, thermal properties of materials, and the decoding of genomes to be basic research. Research with alternate energy sources as the goal seems that it is not basic research cuz it’s not fundamental to a wide range of disciplines. Although I don’t favor tax funding of basic research, it is more ethical than applied research cuz the beneficiaries are more likley to be the folks that paid for it since the range of possible beneficiaries is so large.

    Also, it just occurred to me that there is a question of basic research that is so basic that mostly just investigators who are doing the research and others who are interested will benefit. By my reasoning, is this research less ethical than even sone applied research?

  38. MainstreamMan:

    My my my. You really do have faith.

    Faith? Never. Evidence and principle? Always

    But the huge infrastructures inherent in most energy companies function much like large government programs

    To what infrastructures do you refer? Give examples. What makes you think that innovation will only come from large companies anyway? Also, private companies, of all sizes, in a free market have to depend on voluntary patronage of their innovations in order to profit. This makes their innovations more realistic and economical than government innovations.

    It is not a question of whether or not government involvment will/should occur, it is a question of what kind of involvment

    What?? So you’re saying that government involvement in alternate energy sources is somehow an ethical certitude? I don’t think that you really wanna say that.

    If humans have other ways to evaluate worth (they do) then spending money to support basic research is a generally good thing to do.

    There are many values that are not measured dollars and free and voluntary actions can and do satisfy those vales all the time. I just bought “cage free” eggs, which tend to be more expensive, cuz I feel sorry for the chickens in the cages. The market gives me, and others who feel the same, a way to satisfy that value.

    It’s not a question of: Should money should be spent on basic research? (please see my comment @ 02:59 AM)It’s a question of: Should the government pay for it?

    Free Markets don’t work. If they did, they would exist.

    The evidence is that government intervention is not due free markets not working, it’s due to people with the power of government, using that power to take that which they cannot acquire via voluntary interaction. Government intervention, which stifles the free market, is also due to government misjudgment and the imposition of the wills of political power on different political minorities.

  39. Ronald Bailey in the Wall Street Journal. Matt Welch to the LA Times. The Reason Gang may yet save America’s ass from statism.

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