The E-Prize
Q1) Do you think that the Constitution is a good thing or bad thing?
Q2) Are you for or against corporate welfare?
Q3) If people aren't doing something that you think they should - replacing appliances and vehicles with more energy efficient devices, for example - what should the government do about it?
Q4) If people were doing those things that you think they should, what should the government do about it?
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A1) Most people think that the Constitution is a good thing. All the bits about free speech, not establishing a religion, equal protection, freedom from search and seizure, no slavery, and women get the vote. Oh, yeah, and the other stuff.
A2) Most people are against corporate welfare. The obvious exceptions are corporations. And politicians who rely on them for campaign contributions. And people who work for them. Okay, most people are against welfare for other corporations.
A3) If you were the average enviro-policy wonk, you would subsidize the activity. Nevermind the fact that there isn't any authorization in the Constitution. So, maybe relax on 1 if you answered subsidize on this. And so what if corporations get a little extra money - it's worth it for my pet issue, and besides, this is a capitalist country isn't it? I mean, so what if it isn't really capitalism when we use the tax code todistort fix the economy? So, um, yeah, subsidies are good. And free, too, right?
A4) Oh, people are already doing it? And corporations would capture most of the surplus? And there isn't really a Constitutional authorization for it? In that case, nah, let's not have subsidies. What's the point?
Well, unless you're the US Congress and President George W. Bush. In that case, nevermind these facts:
Also, experts think that there may be a markup for the energy efficient appliances - just wait until you see the markup after this Energy Bill becomes the Energy Act of 2005! The intent of the subsidy is to make the appliances more affordable to consumers, but the effect of the bill will be to transfer more money from taxpayers to the manufacturers. Why? Because they know that consumers - who were already willing to buy these items - will have more money to spend on them. They will try to capture the consumer surplus for themselves. I've written about this somewhat more extensively here (more extensively, though not necessarily any more clearly). I've also written more sarcastically about Energy Bills here.
My two things about economics:
1) Incentives and outcomes matter more than intentions.
2) The second thing doesn't matter (I actually think TANSTAAFL is a restatement of (1)).
If there was a government idea I could almost accept in this subject area, it is the idea of an X-prize for energy (hence, E-prize). Another term for it is the Golden Carrot. The federal government actually used to use incentive prizes like that for their defense procurements (back when the Constitution meant something, and the Department of Defense actually defended the homeland so that we didn't also need a Homeland Defense department). Fort McHenry and several others like it were built with money granted to states and earmarked for use on a design which was selected as the best for port defense. I recall a story about cargo ships in WWI that were built with a grant given to the best design (I think the story was in Burton Folsom's Myth of the Robber Barons). There's still a Constitutional issue, though, so lacking an amendment authorizing Congress to spend money on renewable energy, the privately funded X-Prize precedent is more instructive. If you had to have government involvement, 8 gallons of fuel are required to transport every gallon used for warfighting capability, according to Winning the Oil Endgame. The Army and Air Force have a lot to gain from an efficient transportation system.
In any case, the idea would be to reward a large sum of money to the first entrepreneur who could demonstrate a transportation system that ran on renewable energy and could be purchased, operated, and maintained for a lifetime cost within, say, 10% of the average vehicle today. Or that ran on clean energy (e.g. hydrogen). Or an electrical generation system instead of a transportation system. In any case, because of the political as well as the environmental externalities of oil trade, I believe more good would be accomplished by jump starting the transition to renewables than by making non-renewables less expensive by decreasing the demand for them.
Q2) Are you for or against corporate welfare?
Q3) If people aren't doing something that you think they should - replacing appliances and vehicles with more energy efficient devices, for example - what should the government do about it?
Q4) If people were doing those things that you think they should, what should the government do about it?
------------------------------------------------------------------------------------
A1) Most people think that the Constitution is a good thing. All the bits about free speech, not establishing a religion, equal protection, freedom from search and seizure, no slavery, and women get the vote. Oh, yeah, and the other stuff.
A2) Most people are against corporate welfare. The obvious exceptions are corporations. And politicians who rely on them for campaign contributions. And people who work for them. Okay, most people are against welfare for other corporations.
A3) If you were the average enviro-policy wonk, you would subsidize the activity. Nevermind the fact that there isn't any authorization in the Constitution. So, maybe relax on 1 if you answered subsidize on this. And so what if corporations get a little extra money - it's worth it for my pet issue, and besides, this is a capitalist country isn't it? I mean, so what if it isn't really capitalism when we use the tax code to
A4) Oh, people are already doing it? And corporations would capture most of the surplus? And there isn't really a Constitutional authorization for it? In that case, nah, let's not have subsidies. What's the point?
Well, unless you're the US Congress and President George W. Bush. In that case, nevermind these facts:
- Carrier Corp is getting ready to release new heat exchanger systems which cost $250 million to develop - money they spent without needing to be subsidized
- High end appliance maker Viking Range is shipping a new energy efficient refrigerator at about $5000 a pop
- Growth rates in appliance sales have been between 2.8% and 5.8% for the past 3 years
- 25% of all clothes washers were Energy Star compliant, vs 1% in 1997
- 33% of all refrigerators were Energy Star compliant, vs 0% in 1997
- 86% of all clothes washers were Energy Star compliant, vs 6% in 1997
- Honda has two hybrid models (Insight and Civic HX), Toyota's Prius is all the rage, and even Ford is getting in on the act. Sales are booming, Toyota can't keep up with demand, the cars are presold for months, used Prii from rental fleets are selling for more than the new price, etc., etc., etc.
Also, experts think that there may be a markup for the energy efficient appliances - just wait until you see the markup after this Energy Bill becomes the Energy Act of 2005! The intent of the subsidy is to make the appliances more affordable to consumers, but the effect of the bill will be to transfer more money from taxpayers to the manufacturers. Why? Because they know that consumers - who were already willing to buy these items - will have more money to spend on them. They will try to capture the consumer surplus for themselves. I've written about this somewhat more extensively here (more extensively, though not necessarily any more clearly). I've also written more sarcastically about Energy Bills here.
My two things about economics:
1) Incentives and outcomes matter more than intentions.
2) The second thing doesn't matter (I actually think TANSTAAFL is a restatement of (1)).
If there was a government idea I could almost accept in this subject area, it is the idea of an X-prize for energy (hence, E-prize). Another term for it is the Golden Carrot. The federal government actually used to use incentive prizes like that for their defense procurements (back when the Constitution meant something, and the Department of Defense actually defended the homeland so that we didn't also need a Homeland Defense department). Fort McHenry and several others like it were built with money granted to states and earmarked for use on a design which was selected as the best for port defense. I recall a story about cargo ships in WWI that were built with a grant given to the best design (I think the story was in Burton Folsom's Myth of the Robber Barons). There's still a Constitutional issue, though, so lacking an amendment authorizing Congress to spend money on renewable energy, the privately funded X-Prize precedent is more instructive. If you had to have government involvement, 8 gallons of fuel are required to transport every gallon used for warfighting capability, according to Winning the Oil Endgame. The Army and Air Force have a lot to gain from an efficient transportation system.
In any case, the idea would be to reward a large sum of money to the first entrepreneur who could demonstrate a transportation system that ran on renewable energy and could be purchased, operated, and maintained for a lifetime cost within, say, 10% of the average vehicle today. Or that ran on clean energy (e.g. hydrogen). Or an electrical generation system instead of a transportation system. In any case, because of the political as well as the environmental externalities of oil trade, I believe more good would be accomplished by jump starting the transition to renewables than by making non-renewables less expensive by decreasing the demand for them.
Labels: philosophy
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