Coal Or Wind?
Column by Jim Davies.
Exclusive to STR
On October 3rd I admit it; curious to see which was the more convincing actor, I did waste ten minutes watching the opening of the Presidential Debate Charade. I saw Obamney say twice, with slightly different words, that they loved the middle class. So they should; that's the segment of society from which government derives most of its loot.
Before yawning got the better of me, I also saw them agree that “energy independence” was a Good Thing, and that Mitt liked coal a lot (he must want votes from Pennsylvania and West Virginia) while Barry prefers wind and solar (he must want to lock in those from California). But both of them liked both of them, meaning they'll take votes from anywhere.
The point one might easily have missed is that these men wanted to preside not over an energy company but over a government. They were not auditioning for the job of CEO at Exxon, but for for the chance to dictate how to skew the energy market according to political prejudices (that is, pre-judgments, never subject to rational analysis). It's just as well; for neither of them is qualified to lead a company dependent on making profits by actually generating the kind of power that produces useful results.
That task is not at all simple. In the first century of the oil era, an amazing job has been done, to extract vast quantities of black goo from miles under the sand and ocean, for a price that has not risen in living memory – in real terms, that is – despite increasing technical difficulties. The cost of obtaining power from wind, solar, wave, hydro, etc. has been lowered, but not yet as far as that from coal and oil and nowhere close to that from nukes. So while I warmly agree that it would be nice not to burn up fuels that must run out eventually, for as long as that price differential remains, a rational free market will go on combusting carbon. And to ensure that supply meets demand at an optimal price, there must be no interference from outside the market.
But Obamney propose to apply nothing other than interference from outside the market.
It follows that whichever of them wins the most votes and in whichever way he interferes, the demand in the coming years will not be supplied at an optimal price. The whole economy – my living standards and yours – will suffer as a result.
The principle that government (a bunch of technical amateurs with no capital of their own at stake) should enforce a policy regarding energy or any other industry is rather recent. It's fundamental to Marxism, of course, and was forced into place by Lenin and by Mussolini. The former operated industries directly while the latter was smart enough to let experts do the job, under his ultimate control, and then milk their profits. That idea is being followed, here, now. Lenin's way was less successful.
The principle was implemented in both big wars by Wilson and FDR, and has now become orthodox. That's why there was no argument in Denver about whether there should be an “energy policy,” just a little about what kind.
One sinister aspect of it on which they did not disagree was, as above, that America should be “energy independent.” Why? If independence is desirable, why not promote it for Arizona, or Rhode Island? Is there some disadvantage to New Hampshire in its total lack of oil wells or even tar sands? And if every state should be energy independent, why not every county? How about every town? In fact, ought not every household have its own oil well or coal mine?
Given the monopoly prices and multiple taxes charged by the power utilities that operate under government license, perhaps that's not a bad idea. But no; in a rational, free market, division of labor works best. Producers each do what they are most skilled at doing. Coal can best be produced where there are economies of scale, for example. Wind power, too, is best placed in windy places and wave power generators don't work too well away from the sea coast. I certainly hope that in future, though, unfettered by zoning or other laws, the market will offer householders miniature nuclear and other kinds of generator so that we have a variety of ways to go off the grid.
I mentioned that nationwide energy independence is “sinister.” Why? Not in itself, but as a deliberate government policy, when the market might not produce it, yes it's sinister. There is no value to a country in producing all its own energy except in war. At all peaceful times, its people can just produce whatever they are best at producing – corn, or automobiles, or electronics or bananas – and buy some energy with the proceeds. But in war, typically international trade is curtailed. So the policy Obamney favor makes it easier for America to wage war. That's why it's sinister. The free market erects obstacles to war; government trade policies take those obstacles down. I favor all the obstacles the market can bring.
Tweeters followed the debate with some splendid humor, and I went to bed with the impression that Romney played his lines less unbelievably, and next day I learned that my opinion was in line with the polls. I must be doing something wrong.