Thursday, November 13, 2008

Going Green

Over the past few years there has been an obvious rise in talk of going “green:” environmental awareness, reducing carbon footprints, sustainability, conserving energy and looking for alternative energy sources.  And this week has been a great one for such talk.  

The first article I noticed this week was an op-ed piece in the New York Times by the notorious Al Gore.  After a brief lecture on the climate crisis, he arrives at his point:  We can solve the climate crisis, economic crisis and energy security crisis in “exactly the same steps.”  The basic logic here is that through “large and rapid investments in a jobs-intensive infrastructure initiative” we can begin to save the planet, save our economy, and reduce our dependence on foreign oil.  He then lays out 5 steps we should take to carryout his plan.  One of the more aggressive points is a “unified national smart grid” of power lines placed underground that we will all connect our electric cars to, effectively sharing energy amongst all.  How utopian.  It might be significant to note that Al Gore has refused Obama’s offer to become the next “Climate Czar.”

The next article I found was from The Economist warning of a “Global Green New Deal” that would be shoved down our throats by Obama and the Democrats.  They explain that massive government spending and subsidies are the wrong way to go green, citing the ethanol subsidies in America that caused a misallocation of investment (creating a boom-bust and driving up food prices) and solar subsidies in Germany “one of the world’s most sunless countries.”  Yet, despite these warnings, The Economist grants that there is a “case for giving the economy a boost through government spending.”  Further, they congratulate Obama for planning to introduce a cap-and-trade system on carbon emissions.

Then, I noticed an article on the Huffington Post by Tom Friedman arguing that we need an “overwhelming force” to bring us into the green revolution.  And that “the Cheney line – let’s let the market work” will not work because we have too many “legacy subsidies and tax incentives for dirty fossil fuels.  The whole thing is totally skewed. This market has been gamed from the beginning.  If we’re going to game the market let’s at least game it so that clean fuels are on an equal footing with the dirty fuels.”

Then, you have the T. Boone Pickens approach, whose California proposition 10 was rejected probably based on the large increases in public debt.  Pickens’ approach is basically to use hybrid-electric cars, natural gas (which we produce here in the USA) in large trucks, and we populate the plains from west Texas to North Dakota with windmills to generate our electricity. 

It should also be noted that both Friedman and Pickens have appeared in several interviews with a variety of media, including (ahem, Scott) The Daily Show with Jon Stewart this week, discussing these very ideas.  And these recent discussions are only the beginning.  A simple google search of “green economy” or “green jobs” reveals the iceberg of information beneath.  Other outlets such as Wired magazine have been promoting green everything for a while now.  A search of perpetual motion machines will result all sorts of gadgets and miracle contraptions.  The public interest is certainly out there.

The really interesting take-away from all this is that even though some of these ideas seem diametrically opposed, they all come from the same premise:  We can reduce our dependence on foreign oil, save the environment and our economy all with the same steps, as Al Gore says.  And more importantly, saving the planet does not imply killing our economy.  Berry foraging in hemp loincloths in the mountains is not part of the deal anymore.  The hippies have lost, it seems (and I was so looking forward to wearing my new hemp loincloth).

So, it seems that the crux of the argument comes down to the old government intervention vs. market forces.  When phrased like that it sounds like a no-brainer:  let the market work.  However, I think there is something to be said about reversing the momentum behind “Big Oil.”  The reality is that there is a huge infrastructural competitive advantage behind oil and huge governmental preference for oil thanks to lobbying.  What’s the scenery like on the drive down I-10 from Houston to Beaumont?  How many natural gas or bio-diesel filling stations have you seen lately in your area?  Does your car even run on natural gas or bio-diesel?  Can you convert your car?  How much more does a hybrid cost compared to a gasoline version of the same car?  In my area the answer is none of the above, but I can drive a quarter mile and find 10 gas stations.  How will the market ever reverse that?  Is the government the only whale in the sea that can cause a big enough wave to get all these little fish swimming in the right direction?

I can also see argument for investing in the kind of concrete that Scott mentioned in one of his posts.  Instead of investing in unnecessary strip malls, we should invest in things that are profitable and create real jobs (not to mention cool jobs like windmill technicians and solar roofing experts).  Could we also reverse our trade imbalances by becoming the world leader in green technology?  I can also see the very serious danger in the government trying to prop up technologies that are doomed to fail just because they are deemed “green.” 

So, I will leave the discussion here.  As I alluded, I think this is a great way to visualize the lassaiz-faire vs. government intervention argument?  Is it best to leave it to the market to decide?  Or is our market so un-free that we NEED the government to intervene?  Does the oil industry have such a ferocious grip on our economy that we need something equally huge to stop it?

I hope that my fellow bloggers will help me out on this issue, and I’m pretty sure they will.

1 comment:

  1. I figured I'd just use a long comment instead of another post.

    First, this is an old problem for markets, in that nobody owns the sky, the ocean, etc., so nobody has an interest in maintaining it as their "property." Overfishing, pollution, etc, are all difficult problems in this respect for free markets to solve, and it shouldn't surprise anybody that this is a commonly pointed out failing. We don't have a problem with extremely polluted backyards and living rooms, after all, only those places that nobody owns.

    So, to get a real market solution, somebody has to own the "sky" that all those smokestacks dump smog into. To me, that's a scary idea. Equally scary to me is having the government regulating it, as we all know what politics does to rational decision making. There will always be a segment of the population that wants us living in loincloths, and their vote counts just as much as yours or mine. And frankly, I don't trust the wisdom of the masses anymore. They are putty in the hands of the demagogues. I'm not a big fan of democracy of late. Look what its got us. We should go back to limited franchise. But that's another discussion.

    As for infrastructure, I don't think there is quite the case here for . Yes, the present system favors fossil fuels, but it handles ethanol well enough, with some modification, and I can tell you biodiesel will also work in the same lines with only minor modifications. Its not that chemically different.

    In reality, pretty much any non-corrosive liquid could be handled by the present infrastructure without much difficulty. Gasses cause a problem in that they are difficult and expensive to transport (that's actually the big problem with natural gas, and believe it or not, an awful lot of chemists are working on this problem. If it is solved, it will be a very, very big deal), and solids don't flow. The real issue is cost and volume. We use a lot of fossil fuels, and it is pretty cheap to dig a hole in the ground and pump stuff out, compared to some chemical process or whatever.

    I'm pretty sure that if somebody came along with a super-cheap process to produce safe, cleanly burning liquids at the volumes required to sustain the present demand, they could make it into the market. The oil companies own all that infrastructure; they would get in on the act, not get wiped out by it. I don't think they pose much of a barrier. Trust me, one of them would sell the others out for a buck and a guaranteed continued existence in the marketplace.

    For the pollution problem, I really don't have any good open-market solutions for you. Milton Friedman has a very good economic discussion of this problem in his book "Free to Choose," among many other topics. Of course, he's the father of the Chicago school, so you can't trust all his economics, but a lot of it is really quite good. I recommend it.

    As for all those other things: those are social problems, not economic. We will never "solve" the trade imbalance save through bankruptcy. Nations have always practiced mercantilism. They probably always will. And the best resource allocation comes through open market pricing. If the prices are right, the investment will be right, and things will work out. And our prices will be right if our ethics are right, and we don't meddle in the affairs of others and steal through government redistribution "programs." That's the big question, and I imagine on this front we will fail. God runs the economy better than we could ever hope to, but WE want to be in control. WE want to decide who should get what, not the "arbitrary" forces of the market a.k.a. the laws of the universe and the laws of God.

    Sorry, it doesn't work that way...

    Anyway, that's a subject for another post.