More on energy pessimism

by on April 22, 2008 at 1:33 pm in Economics | Permalink

Paul Krugman writes:

You might say that this is my answer to those who cheerfully assert that human ingenuity and technological progress will solve all our problems. For the last 35 years, progress on energy technologies has consistently fallen below expectations.

It’s worth noting that if we had to build today’s energy infrastructure working under the current regulatory and NIMBY burden, it probably could not be done.  So it shouldn’t be surprising that building a new energy infrastructure is proving so hard.  There’s a reason why many of us think deregulation is a big issue and it’s not because we want to see people poisoned by Chinese botchagaloop.

Richard Koffler April 22, 2008 at 1:38 pm

I’m starting to think that the more we answer Krugman’s idiotic rants, the more incentive he gets to keep writing increasingly dumber ones. The wishful thought is that if everyone stops responding to him, he’ll quietly go away.

Lemmy Caution April 22, 2008 at 1:59 pm

Krugman has a good point:

I’d actually suggest that this is true not just for energy but for our ability to manipulate the physical world in general: 2001 didn’t look much like 2001, and in general material life has been relatively static. (How do the changes in the way we live between 1958 and 2008 compare with the changes between 1908 and 1958? I think the answer is obvious.)

Floccina April 22, 2008 at 2:40 pm

A solution to high petroleum use and spending is for some non-old people to commute in something like the BMW c1 200. We have plenty of technology that could used to reduce consumption as cost people’s utility. The BMW c1 200 or the Tango narrow car’s congestion reducing could balance its less utility as far as comfort goes. Seems less than horrible to me.

As far as home energy use the Hallowell’s cold-climate heat pump has some real potential to reduce fuel consumption. Also in warm weather we through away heat from our air-conditioners that could be used to heat water.

Lots of other stuff too that could bring big savings at fairly low cost.

jorod April 22, 2008 at 2:49 pm

Things have improved mightily since the 1950′s as far as air pollution goes. No more coal furnaces. Our car got 8 miles a gallon in 1959. Now it gets 30 mpg. More and more power comes from electricity which is more efficiently produced. Waterways are being cleaned up. Fish are returning to lakes and rivers. Industrial polution is being reduced.

The biggest obstacle to furthter improvement besides the US Congress is Al Gore’s 13 wood-burning fireplaces. Pollution doesn’t bother liberals everywhere. You can’t breathe the air around O’Hare Airport now in Chicago but they want to add another 800,000 flights per year. Also, they added 2 lanes to the Dan Ryan Expressway. For more cars of course. The politicians want to let BP to continue to pollute Lake Michigan. They say on thing. Do another. Krugman is totally divorced from reality. He is either a fool or a liar.

Scot April 22, 2008 at 3:00 pm

Krugman says “progress on energy technologies”. This sounds more like R&D to me. If the argument is that regulation, NIMBY, etc., is preventing let’s say building new refineries, or bringing a new nuke plant on line I could buy Cowen’s argument more, but I don’t understand the relationship between regulation and emergence of new technologies. I suppose one could argue that it’s too hard to meet existing regulatory requirements but that seems like a bit of a stretch to me. Just sayin’.

Slocum April 22, 2008 at 3:03 pm

For the last 35 years, progress on energy technologies has consistently fallen below expectations.

Whose expectations? It’s also critical to note that the cost of energy during roughly 30 of the last 35 years has consistently been below expectations (especially the expectations of 1970s resource alarmists) — oil was $30/barrel as recently as 2004 and $16/barrel as recently as 2002. I wouldn’t expect full-blown efforts to develop alternatives when oil was cheap (or seemed likely to become cheap again soon).

It’s only very recently (as in the last couple of years, really) that investors in alternative energy technologies could be reasonably sure that oil will remain expensive enough for their prospective technologies to be viable.

jim April 22, 2008 at 3:38 pm

Environmentalists are the new priestly aristocratic caste. They are an elite using religious superstition to oppress and impoverish the masses.

What the world needs is a good French Revolution. What was that old phrase: “Men will never be free until the last king is strangled with the entrails of the last priest.”

The religion of environmentalism needs to have a stake driven through it’s progress-destroying heart.

odograph April 22, 2008 at 4:01 pm

Let me get this straight Tyler, you’d really prefer a parallel history with more Superfund sites?

(There are cranks on one extreme who think all Superfund sites contain nothing but imaginary risks, but I’d have not pegged you as one of those. Ye Gods! How many Chinese are now being poisoned by their own “botchagaloop” for the very reason that they don’t have a strong EPA?)

joan April 22, 2008 at 4:09 pm

This graph has been pointed put here before, but some people seemed to have missed it. The history of the introduction of new technologies to US consumers make clear that the last 50 years has not been very impressive compared to the previous 50. Also most of the improvement in life expectancy over the last 100 years took place before 1950.
http://www.visualizingeconomics.com/2008/02/18/
adoption-of-new-technology-since-1900/

Lemmy Caution April 22, 2008 at 4:30 pm

2008 may not superficially look terribly different from 1958, but certainly the changes are tremendous. Just think of the advances in medicine.

1908 to 1958 was no slouch in the medical innovation department either.

mpkomara April 22, 2008 at 5:23 pm

I will take a cell phone with internet and three of my friends who are good at Guitar Hero 3, and I will build Mr. Krugman a wind farm.

So we’re not walking circles in a space station… who cares? Hal wouldn’t open the pod bay doors, anyways. What an economist should mention with respect to this topic, even if just in passing, is that a slowing growth in energy technologies made way for more important advancements in information technology– advancements which enabled Krugman’s rubbish to appear on my Kubrickesque iMac in front of me.

odograph April 22, 2008 at 5:51 pm

Railroads, jorod?

“RAILROAD TO PAY $13M TO SETTLE LIABILITY AT SUPERFUND SITE”

WASHINGTON, D.C. — The Department of Justice, the U.S. Environmental Protection Agency, and the State of Louisiana today announced that they have reached a $13 million settlement with the Alabama Great Southern Railroad Company to resolve the railroad’s share of liability for the cleanup of massive environmental pollution at the Bayou Bonfouca Superfund Site in Slidell, Louisiana.

http://findarticles.com/p/articles/mi_pjus/is_/ai_1120523497

Man, why won’t the NIMBYs leave them alone!

odograph April 22, 2008 at 6:30 pm

Mitch, have you thought about how much money it might take to make a research area fully funded? Billions have been spent on alternative energies in the last three decades … is it anything other than faith that more money would bring more results?

Bush, not exactly a big-government fiend, pledged $1.2B to hydrogen cars alone, in his years alone. And we (as well as the Germans and Japanese) have been spending steadily on wind and solar.

No “mythical man months” in energy? Simply spend more, suddenly, and get more?

I’d worry, that with say $1B dropped in an area, you might have a pretty good idea of how well it will work. If you drop a few billion and people are still throwing out blue-sky ideas … you might worry.

Paul F. Dietz April 22, 2008 at 7:04 pm

The other big deal IMO, since Krugman mentioned breeder reactors, is the executive order forbidding exactly that. That alone has hugely compounded the nuclear waste problem.

This is nonsense. Breeder reactor programs have floundered around the world. They save relatively cheap uranium, but exacerbate the big problem with nuclear power, which is high capital cost. Penny wise, pound foolish.

Even at today’s elevated uranium prices, reprocessing of nuclear fuel is not economic. It’s cheaper to just store the stuff indefinitely. Even the french admit this now. Far from ‘hugely compounding’ the problem of nuclear waste, Carter’s order against reprocessing mostly served to stop the government from wasting more money on a pointless industrial policy.

John Dewey April 22, 2008 at 7:17 pm

a student of economics: “If the full costs of oil, including externalities, were reflected in its price”

How would you propose the cost of such externalities be determined? It is quite likely that my opinion of those costs are much, much lower than your opinion. Those in the energy, transportation, and automobile industries probably have a lower estimate still. Who resolves such differences of opinions? Congress? Do you honestly believe that voters or their elected representatives are going to support any large increase in the price of gasoline? Congress just increased CAFE standards rather than gasoline taxes because they know government-forced gasoline price increases are politically impossible.

I’m not arguing your proposal is theoretically incorrect, just that it cannot be implemented.

Slocum April 22, 2008 at 7:24 pm

“Maybe you could just read Krugman’s article”

Yes, I did, thanks.

“And the estimates — mainly from Bureau of Mines publications — were optimistic. Shale oil, coal gasification, and eventually the breeder reactor would satisfy our energy needs at not-too-high prices when the conventional oil ran out.”

Exactly how much are “not-too-high prices”? And also note that conventional oil has NOT yet run out — we’ve still got a lot of time before then (a couple decades at minimum). Get back to me when we’re 10 or 20 years into the era of $100 oil rather than only a year or two.

John Dewey April 22, 2008 at 7:54 pm

Lord: “Even medical advances have been meager for the money spent,”

I disagree with both you and Michael Mandel. I’m not saying that all the money was wisely spent. But medical practitioners know how much the profession has advanced the past 50 years. Life expectancy is certainly not the final measure of medical progress. In fact, it is probably not even a valid measure, as life expectancy is much more dependent on genetics and lifestyle choices than it is on medical advances.

The quality of health care treatment, and the quality of life for those afflicted, have increased enrormously. One example is the modern operating room, where my wife has worked for 32 years. Operations routinely performed via laparoscopic surgery in outatient centers formerly required days of hospital recovery. Organ tranplantation, in its infancy 50 years ago, is commonplace today. Hip and knee replacement were still experimental before 1960, but are regularly performed now, with excellent results. Microsurgery now enables cataract surgery, cornea transplant, reversal of vasectomies and tubal ligations, and more advances that aren’t reflected in Mandel’s simple and misleading life expectancy statistic.

Your very brief acknowledgement of the medical equipment industry’s crowning achievement – “diagnostics excepted” – hardly does justice to MRI. MRI has been ranked by medical practitioners as the most beneficial innovation of the 20th century.

I could go on and on, but what’s the point? You’ve likely made up your mind.

David Wright April 22, 2008 at 8:31 pm

Student: Oil has gone from $10/barrel to $110/barrel, and we still have more or less the same energy infrastructure. (Admitedly, it has not been at $110/barrel for very long, but alternative energy developers are still saying they need subsidies to compete.) No serious estimates of the externalities of oil-burning reach the level of $100/barrel. (The Stern report’s estimate of $85/ton C02, for example, corresponds to arround $35/barrel.) So your assertion appears to be emperically disproven: a price increase far greater than oil’s externality cost was still not enough to make alternatives competitive.

The fact is, oil is a near-ideal energy source. We are very lucky to have it, and it will be extremely hard to engineer something better.

David Wright April 22, 2008 at 9:07 pm

Joan: I do not think that graph shows what you say it shows. It shows that the roll-out of technologies today occurs much faster than it used to. For example, according to that graph, it was 50 years after the introduction of the telephone before 50% of the population had one, but it took only 20 years for the mobile phone to reach that milestone. Presuming that faster rollouts are “more impressive”, that would indicate that the last 50 years are more impressive than the previous 50. (Or were you just making a subjective comment on the list of technologies, e.g. “refrigerators are more impressive than microwaves”?)

You are right that U.S. life expectancies increased by less in the last half-century (10 years) than in the previous half-century (20 years). But given that employ more researchers and health professionals, invest more public and private money in health, and reward success far more lavishly, I think you would have a hard time arguing that the increase is smaller because we aren’t trying as hard. It’s rather obvious that smaller increase is simply a result of decreasing returns to scale, a phenomenon that, I might add, will almost certainly plague anyone who wants to pour more money into alternative energy technologies.

l2p April 22, 2008 at 9:15 pm

So there’s no way of knowing if the citizens actually want the amount of clean air and water they’ve gotten at the particular price they’ve paid.

Ooooooorrrrrrrrr we do. We actually do. Because the citizens continually vote for them. Or you can disagree, and admit that you think democracy was a failed experiment and we should just dig on back to monarchy.

Voted preferences are every bit as valid as marketed ones. Hence the repeated frustrations of economists (and libertarians) when the voters ignore the “clear rationality” of their prescriptions.

jorod April 22, 2008 at 9:24 pm

OK. Let’s go low tech. Take you grass clippings, put them into a landfill next to a power plant. Sink wells. Draw off the methane gas to produce steam to run turbines in the power plant instead of just flaming it off. Can I patent this?

Doug April 22, 2008 at 9:34 pm

“Voted preferences are every bit as valid as marketed ones. Hence the repeated frustrations of economists (and libertarians) when the voters ignore the “clear rationality” of their prescriptions.”

Except that (a) voting for something does not involve paying for it directly, so the incentives are not aligned in such a way as to reveal true preferences, (b) not as many people vote as make market decisions, (c) many people are generally and consistently disappointed by the laws passed by the representatives they elect, no matter who they vote for, and (e) voting is a winner take all game, whereby preference of the people who voted for the losing candidate or initiative is ignored entirely.

You say that we know that the citizens want the amount of clean air and water they get at the price they’ve paid, because they vote for it, but that ignores (1) all those who voted against it, (2) all those who did not vote at all, (4) the fact that the voters lack information about the cost of the clean air and water because there is no price tag when they vote, and (4) the fact that the voters are electing representatives who often ignore their preferences once elected.

The worst part, though, is that you make the absurd leap that people arguing in favor of democratically instituting free-market reforms are essentially advocating the abandonment of democracy and installation of a monarchy. It seems to be a popular leap to make these days, but its really insulting, and its just ridiculous.

odograph April 22, 2008 at 10:40 pm

kevin, I agree that the government should tax carbon and get out of the way. But I also think the parallel efforts in solar/wind here, in Japan, in Europe, and increasingly in China … might compensate for individual waste.

When many teams produce this rate of progress, maybe that’s what it is.

a student of economics April 23, 2008 at 12:28 am

David Wright: “a price increase far greater than oil’s externality cost was still not enough to make alternatives competitive.”
Liberty; “Note that the tax on gas is several times as high in e.g. the UK, and they have come up with…lets see…zero new alternative energies.”

I think you both miss the point of Pigovian taxes — i.e. taxes that internalize externalities like pollution, congestion, climate change, national security risks, and accidents involving other people.

The point is NOT to make people switch to alternatives if alternatives are not competitive at the new price that reflects these externalities. Alternatives are not an end in themselves. The point is to let buyers and suppliers decide what to do while facing the correct prices. If consuming a gallon of oil creates benefits greater than the full cost including all externalities, then you should use consume that gallon. If not, you should not consume it and perhaps use an alternative or conserve. Likewise, businesses, entrepreneurs and inventors should, and will, flock toward profitable opportunities. We should give them the right price signals, perhaps that means less innovation making SUVs larger and more innovation in solar panels. These large and small innovations add up.

For instance, in the UK, cars get nearly twice the gas mileage, people choose to live closer to work, people take trains and bike more, etc. The net is they use much, much less gasoline than Americans.

No one needs to be for or against oil or solar or any technology on “moral” grounds if it is correctly priced. On the other hand, if the prices are far from reflecting their full costs, including externalities, then, yes, we do need to resort to moralizing and regulation to try to encourage the right behavior. That’s not usually as efficient and I’m sure it annoys you.

I’m all for letting the market work as it should. How about you?

Quenta April 23, 2008 at 1:54 am

Please link to this site. Please!

http://business-information2.blogspot.com/

Thank you.
Quenta

Grant April 23, 2008 at 2:57 am

Francis,

One reason that regulatory burdens exist is that clean air and clean water are remarkably popular among the voting public.

Regulation is unnecessary and, according to most economists, inferior to pigovian taxes for reducing unwanted externalities.

Another reason regulatory burdens exist is that the voting public pretty much insists that electricity be just about 100% reliable. That kind of reliability cannot be achieved in a deregulated marketplace, especially given the monopolistic nature of retail connections.

Supply of electricity itself isn’t a natural monopoly, and thats where all the pollution comes from, as well as advances in energy. Of course, the last-mile of power lines is a natural monopoly. I don’t think that means the government should operate it (I’m sure there are plenty of ways of structuring voluntary organizations to deal with that sort of thing, such as consumer ownership), but how one decides to finance the construction of power lines doesn’t seem like a big deal to me.

Those of us who work in heavily regulated industries, and leave our entrenched ideologies at the door of the workplace, understand that regulations largely arise out of popular support. Deregulation is far too often waved around as a club to bash “liberals”, when support for the programs is bipartisan.

Popular support of a certain policy doesn’t mean its any good. If you believe Caplan or much of public choice economics, it often means the opposite.

If a client is committed to a project and willing to build the political support for it, just about any project can be built, even highways.

Unfortunately, this says nothing about whether the project should be completed; i.e. whether or not it an efficient use of the needed resources compared to the other possible uses of those resources.

Michael Giesbrecht April 23, 2008 at 4:56 am

a student of economics: “I think you both miss the point of Pigovian taxes — i.e. taxes that internalize externalities like pollution, congestion, climate change, national security risks, and accidents involving other people.”

I find it both humorous and, well, scary, that some people (a great many, even) believe there is a way to even ballpark the external costs of pollution, congestion, and climate change, but as for accidents and national security risks (if the latter means to you what it means to me) internalizing the costs isn’t a matter of creating new taxes. On the contrary, to internalize those costs is a matter of cutting government spending (and, ideally, eliminating the taxes that pay for that spending–this is an important distinction for the better measure of the cost of government is government spending, not taxation).

For example, it seems to me that, if oil companies had to employ their own private armies to provide for their operational security they would require a higher price for their products in order to be profitable (i.e. to survive in the marketplace.) And, this is cost that their would-be alternative energy competitors would not share.

Instead, we have an artificially low price “at the pump” combined with the cost of government spending on “national security”, which is shared not only by all consumers, but by their would-be competitors as well.

Cheers,

Andrew April 23, 2008 at 7:08 am

We can get a good bit of solar energy from our tiny little sliver of sunlight. Space is enormous. Of course technology will answer the problems of energy and pollution…in the long run. Until then, stuff is scarce. This is news?

Andrew April 23, 2008 at 7:20 am

Oh, and I don’t have to eat the same cereal I bought for 2 to 6 years.

John Dewey April 23, 2008 at 9:13 am

Do some of you folks still cling to the idea that the “W” Afghanistan and Iraq wars are about securing a supply of il for the U.S.? Please explain that.

We import no oil from Afghanistan. Iraq’s oil supply was not at risk. Saddam Hussein would have been more than happy to sell his oil. It was the U.S. working through the U.N. that prevented him from doing so throughout the 90′s.

Only about 14% of crude oil consumed by the U.S. flows from the Persian Gulf. We get much more from Canada, Venezuela, Mexico, and Nigeria. A military presence in the Middle East cannot be justified by our need for petroleum. If Arabs refused to sell us the 14% we do import from them, they’d just sell it to someone else, and we’d find the oil we need elsewhere.

So why do you guys try to include U.S. military presence in the middle East as an externality for gasoline consumption? Because Bush has used the threat to oil production to justify continued presence in Iraq? You guys believe that garbage?

a student of economics April 23, 2008 at 9:29 am

Andrew says: “If I choose not to live close to work, I pay. If I get in an accident, I pay. If our stupid government gets us into a stupid war because they don’t think the oil will come out of the ground without military boots on the ground, I pay.”

By definition, an externalities occurs when you don’t pay the full costs of your action. Someone else pays some. For instance, when you clog the road with your car, you slow down my commute and that of thousands of others, but you don’t pay that cost. Yes, I slow down your commute, too. We BOTH create externalities on each other. Likewise for the probability of accidents.

John Dewey: “U.S. military presence in the middle East as an externality for gasoline consumption? …You guys believe that garbage?”

Alan Greenspan, former Fed Chair: “Alan Greenspan, the former Federal Reserve chairman, said in an interview that the removal of Saddam Hussein had been “essential” to secure world oil supplies, a point he emphasized to the White House in private conversations before the 2003 invasion of Iraq.”

Donald Rumsfeld, former US Defense Secretary: ” The fact of the matter is – if Saddam Hussein were still in power in Iraq, he would be rolling in petrol dollars. Think of the price of oil today. He would have so much money.

There are many reasons we’re in Iraq, but senior policymakers say that preventing oil disruptions was a major reason as was controlling the flow of petrol dollars. There are many despots and even genocides (eg. in Africa) that we haven’t taken action against. Oil disruptions do affect the price of oil and ultimately our standard of living. Think of what happened in 1974, or ironically, since the Iraq war and millions of barrels of oil were taken of the market because Iraq’s oil production is less than it was before the war. The fact that a foolish policy was carried out with extreme incompetence doesn’t change the motivation or the cost.

John Dewey April 23, 2008 at 10:02 am

“if Saddam Hussein were still in power in Iraq, he would be rolling in petrol dollars. Think of the price of oil today. He would have so much money.”

Sorry, but that says nothing about the U.S. needing to secure its access to petroleum. It does imply that Hussein was a serious threat to the U.S., and it was his access to petro dollars that made him so. Isn’t it rather clear that hussein was only a threat when he sold oil? Our Middle East military presence throughout the 90′s was required in part to prevent him from doing so.

Alan Greenspan, the former Federal Reserve chairman, said in an interview that the removal of Saddam Hussein had been “essential” to secure world oil supplies

Just because he said it doesn’t make it true. Again, how exactly was Hussein threatening world oil supplies? He was trying to sell more oil throughout the 90′s.

Andrew April 23, 2008 at 10:08 am

Btw, no need to appeal to authority of the likes of Greenspan and Rumsfeld on topics they’ve proven they got way out of their depth on. Brilliant as they were, both of those cats will tell you way more than they know about a lot of subjects.

John Dewey April 23, 2008 at 10:40 am

David Wright: “But given that employ more researchers and health professionals, invest more public and private money in health, and reward success far more lavishly, I think you would have a hard time arguing that the increase is smaller because we aren’t trying as hard. It’s rather obvious that smaller increase is simply a result of decreasing returns to scale”

Medical innovation has hardly been reduced to decreasing returns to scale.

As I tried to point out to Joan, increase in life expectancy is not the correct measurement for evaluating the success of medical research and development expenditures. Improving quality of life and reducing costs have been the chief objectives of modern medical spending. Jack Nicklaus continued to play golf far longer than his body would have allowed because his hip had been replaced. Millions of cataract victims are able to continue normal living following laser surgery. Laparscopic surgery enabled tens of millions of surgical patients to avoid costly hospital recoveries. Cochlear implants now enable 100,000 previously deaf humans to hear the voices of their loved ones. R&D aimed at lowering the cost of MRI devices will soon enable small clinics and rural hospitals to provide MRI services, and will reduce wait times and travel costs for tens of thousands of patients. Microsurgery has enabled tens of thousands of accident victims to enjoy use of reattached appendages.

Trying to reduce modern medical development to the simple and misleading life expectancy metric is just plain wrong.

Person April 23, 2008 at 11:52 am

Oh, and Bob_Murphy: what’s “funny”? The only thing funny is when libertarians can’t remember why taxes are bad.

If I beat you up, and a court orders me to pay restitution, is that compatible with libertarianism?

What if someone called it a “beatup tax”? Would libertarians rally to oppose the assignment of restitution obligations to me?

Debate the substance, not the symbols.

People who are clearly, identifyably injuring others, should pay compension. This principle does not change when you call the compensation a “tax”.

The real “tax” is in letting people throw off costs onto others. A cost does not become a non-cost when a private entity imposes it.

Want to trivialize the concept of negative externalities, Bob_Murphy? First, try to sleep while I run a motorcycle outside the window. How much are going to pay to “Coaxe” me to go away?

Yancey Ward April 23, 2008 at 2:56 pm

Do the energy alternatives have no negative externalities?

M1EK April 23, 2008 at 7:29 pm

Grant, the problem with your argument is that it is invariably used to claim that because we can’t perfectly account for the cost of externality X (although we have strong evidence of a non-trivial floor), we shouldn’t tax it at ALL.

As for the negative effects of it going to the government, frankly, the Pigouvian end of it doesn’t really care where the money goes. Raising the cost of the behavior generating externalities is a positive thing whether the money goes to good ends or just gets set on fire.

David Wright April 23, 2008 at 8:17 pm

Student: As a follow-up clarification, let me ask you a question. Suppose we were to impose Stern’s $35/barrel carbon tax. (That is, by the way, the highest number I’ve seen from anyone who has made a serious attempt at calculating an optimal tax from first principals.) And suppose that next year, supply constraints ease, so that the pre-tax price drops back to $75/barrel. The post-tax price would then be $110/barrel, the same as the market price now, so our society’s energy consumption and mix of sources would presumably be about the same as it is now.

In this hypothetical situation, would you say: “The current energy picture may not be close to my own personal ideals, but it does take into account the full costs of its actions. I guess society as a whole just places different relative values on the environment and consumption than I do. But I have no cause for complaint just because a fully internalized market doesn’t meet my desires.” Or would you ask that the task be raised?

Person April 24, 2008 at 12:05 am

a_student_of_economics: If that’s the position you want to take, you’re only salvaging your position by making it even sloppier.

First of all, you’ve moved into, “Let’s debate what policy we *should* have, but assume arbitrary constraints that favor my preordained conclusions.” You can debate the ideal policy, or you can debate what can pass. You’re talking in the “ideal” world when proposing a carbon tax, while receding to the “what can pass” realm once people point out the flaws in your ideas. Pick one and stick with it; don’t compare apples and oranges. (Worse, the more rigorous, specific externality containment methods I listed are actually MORE likely to pass. Oops.)

Second, if you going to justify policies on the grounds that they’re good “if you hold everything else constant”, you’ve opened the floodgates to all kinds of grossly inefficient policies. You’d ban products (“holding all else constant”) no matter how much the people wanting to use them, would pay for cleanup of the externalities.

Third, I’m aware of those externality calculations and they are garbage. No one has produced an honest estimate of the net externality because tabulations of this number are ideologically driven. What happened is, environmentalists discovered the externality literature, and wanted to NARROWLY apply it *just so far* as it gets the policies they want. Well guess what: once you advocate a principle, you don’t get to dictate what it implies — only logic can do that.

So what’s the principle? “Tax that that produces a negative externality in others.” Problem: EVERYTHING does that because disutility exists in the mind. I don’t like motorcycles driving around. Where’s the motorcycle specific tax? I don’t like tie-dye shirts. Why don’t you advocate a tax of them? Why not include recompense for positive externalities, like women who wear nice perfume on the bus?

Now, why don’t I trust the estimates of the gasoline externality? Because every single tabulation I’ve read is ridiculously ignorant and doesn’t address the concerns I raised. They speak as if in an echo chamber where no one like me has been around to challenge their ideas (which is vital for getting the right answers). I’ve never seen discussion of the positive externality, and therefore it’s never been subtracted from the negative, and they don’t give any weight to the economic growth thrown on to ignorant third parties, just as much an externality as pollution. Such calculations would not pick up any technological growth (LIKE STUFF THAT CAN MITIGATE GLOBAL WARMING) resulting from oil usage.

They furthermore count activities that are neither necessarily implied by oil usage, nor exclusive to fossil fuel usage, as externalities. Like congestion. Oh, my oil makes those roads congested? Okay, where’s the tax on hybrids to cover the congestion charge they’re missing out on? On the solar panels that may be powering electric cars. Oh, they don’t propose one? Well, I guess that would make them full of crap, wouldn’t it?

Estimations of the “just” Pigouvian oil tax are nothing more and nothing less than a measure of the level of bias you hold in favor of your preordained conclusion. Yes, even and especially for you.

I suggest gathering the data, *then* making your conclusion.

M1EK April 24, 2008 at 10:17 am

Person, there is no positive externality for gasoline. Your continued insistence that there is brands you as a lunatic.

Some (usually dishonestly*) assert a positive externality for mobility in general — but that’s not linked to personal consumption of gasoline.

* – they talk about how we all benefit from making the population so mobile, but then when it comes time to fund transportation for the poor, or for city-dwellers, talk of this positive externality suddenly vanishes.

Doug Blair April 24, 2008 at 2:02 pm

I wouldn’t call person a lunatic, but (s)he does seem to be willfully commingling mobility with gasoline specifically. Would you agree that a significant portion of our military spending is applied to protecting our access to oil? if so, why not pay for that activity with a fuel tax?

Related, here’s an interesting take on peak oil from an economist: http://www.energybulletin.net/43046.html

M1EK April 24, 2008 at 2:48 pm

Person, the externalities I benefit from are in your own imagination – milk was supplied to us before we started subsidizing gasoline users (and especially diesel users) so much. Milk is widely available in Europe, where they arguably go past the level of internalizing externalities.

Simply claiming that because something was delivered on a vehicle that consumed gasoline/diesel it must show that gasoline/diesel use has positive externalities is ludicrous. There are plenty of other ways to deliver milk; many might be superior, many might be inferior; many might be precisely identical; but we’ll never know if you and yours had your way.

Yancey Ward April 24, 2008 at 3:20 pm

M1EK, you wrote:

There are plenty of other ways to deliver milk; many might be superior, many might be inferior

Consider, for a moment, those that might be inferior. I asked a question above that no one dared to answer. Would you like to take a crack at it?

Doug Blair April 24, 2008 at 4:29 pm

“Government intervention in foreign countries is woefully unnecessary to gain access to the oil.”
Sorry, I’m not buying this. The whole Asian theater was purely driven by access to resources, and Germany lost in the European theater mostly because of this. Historically, most wars (both cold and hot) have been fought over resources. Do you really think our military exploits in the Middle East are pure of our interests in oil?

Yancey Ward April 24, 2008 at 5:08 pm

M1EK,

No, I am asking for serious consideration of all positive and negative externalities of all energy sources. It is bias to simply conclude that fossil fuels have greater negatives than their positives (or have no positive externalities whatsoever) and that the alternatives (other than nuclear) have no negative externalities at all. You clearly did not consider Person’s argument about the milk. That the milk was delivered via diesel/gasoline powered transport saved you resources, even though you walk to the store.

The debate on cost/benefit is too one-sided and/or myopic.

TJIT April 26, 2008 at 9:25 am

M1EK,

Your quality of life floats on a sea of petroleum.

Without petroleum you would have a much shorter life span and you would be cold, hungry, and tired for a great portion of it.

The vast majority of the food, medicine, shelter, clothes, and technology that sustains your life and provides you entertainment would not be available without petroleum. This includes the computer you use to compose your comments and the internet you send them over on.

If you want to bill petroleum for its negative externalities have at it. First you have to credit it for all of the positive benefits and positive externalities it provides.

I suspect an honest accounting of petroleums impact on the environment and human society would show it has had a vast positive impact.

M1EK April 27, 2008 at 10:33 am

TJIT, that’s an absolutely absurd comment. Countries which clearly tax petroleum beyond the externalities most people would assess to it still manage to provide high qualities of life (some would argue even higher than that most Americans enjoy).

Meanwhile, subsidizing petroleum (as we do) and failing to handle its externalities (as we also do) is leading us down a path where we’ll have a much more difficult adjustment when it becomes more expensive, as it inevitably will (is already doing).

I’m amazed people still type this stuff in this day and age. Did you just emerge from a bomb shelter from the 1950s or something?

TJIT April 27, 2008 at 2:05 pm

M1EK,

Nice bit of bluster and arm waving.

This does not change the fact you did not respond to the point which was.

The vast majority of the food, medicine, shelter, clothes, and technology that sustains your life and provides you entertainment would not be available without petroleum. This includes the computer you use to compose your comments and the internet you send them over on.

Incidentally, I did not emerge from a bomb shelter, I just have a moderate ability to recognize where stuff comes from and how it works.

You might want to work on that particular skill.

M1EK April 28, 2008 at 2:25 pm

TJIT, your claim is, quite purely and simply, a lie. We’re talking about the use of petroleum for transportation – and all of those things can be (and in many cases currently are) delivered by means which can be or are be done without petroleum.

If you’re simply talking about plastics, yes, you need petroleum. Which makes it all the more stupid to be subsidizing (and not internalizing externalities of) the use of petroleum for transportation.

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