« What's Good for the Goosed Should Be Good for the Goose | Main | The Wages of Wal-Mart» Don Boudreaux
December 02, 2005
Sexy Plan
Don Boudreaux
The political appeal of The Plan is equivalent to the sex appeal of Salma Hayek. The political appeal of the market is equivalent to the sex appeal of Kermit the Frog.
Exhibit One: this column in today’s Washington Post by David Ignatius.
Ignatius is alarmed by General Motors’ current problems. He’s alarmed also by Americans’ "dependence" on foreign oil, Americans’ high living, and the decline of manufacturing in America.
And he wants us to solve these problems by embarking on a "fundamental national mission, equivalent to President John F. Kennedy’s call to put a man on the moon." Ignatius knows a book, too, to light the way: Amory Lovins’s Winning the Oil Endgame: Innovation for Profits, Jobs and Security.
Lovins has Ignatius convinced:
Lovins's plan is precisely the sort of thing a great nation should explore as its biggest manufacturer is skidding off the road. The details are complicated, but the essence is pretty simple: Lovins argues that by radically transforming the materials used in cars, trucks, airplanes, office buildings and factories -- substituting carbon-fiber composites and other lightweight products -- the United States could cut its oil use by 29 percent in 2025 and an additional 23 percent soon thereafter.
This "national mission," of course, involves taxes as well as government loan guarantees and other subsidies aimed at fundamentally changing the materials out of which automobiles and buildings are built – a change that, because it requires new technologies, will also energize U.S. innovativeness.
I’m tempted to do a long riff here on all the details that Ignatius misses – such as, for example, the fact that it’s simply not true that as goes GM so goes America; such as the fact that there is nothing at all special or inherently better about manufacturing and manufacturing jobs over service-sector production; such as the fact that infecting decisions about investment and production with politics will reward political appeal at the expense of genuinely economically sound uses of resources.
But it’s late, so I’ll just point you to Ignatius’s closing paragraph:
I'm no technologist, so I can't evaluate the technical details of Lovins's proposal. What I like is that it's big, bold and visionary. It would shake an America that is sitting on its duff as foreign competitors clobber our industrial giants, and it would send a new message: Get moving, start innovating, turn this ship around before it really hits the rocks.
This paragraph reflects an attitude that is rich soil for totalitarianism to take root. It ignores individual freedom; it ignores the possibility that the admired Big Plan might be flawed, either technologically or economically or both. Ignatius is all orgasmic simply because The Plan is centralized and Big and (allegedly) will compel or inspire the masses once again to behave in ways that promote national greatness.
Heaven help us.
Posted by Don Boudreaux in Complexity and Emergence | Permalink
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Comments
Any post mentioning Salma Hayek on Café Hayek should, I think, reference Glen Whitman's Hayek vs. Hayek page: http://www.csun.edu/~dgw61315/dgwhayek.html
Posted by: Gregory Rehmke | Dec 3, 2005 5:47:37 AM
From the viewpoint of an engineer this sounds like a step back into the past, when most of our automobiles were built with steel plates instead of carbon fibres.
Of course, the dream of every fascist is a self-sufficient country and so they would rather built rapeseed farms and refineries than ship in cheap oil.
Posted by: Max | Dec 3, 2005 1:52:57 PM
Very good points here. I actually read the article and felt there was something pretty shaky about it, but couldn't lay it out quite as nicely as you, Don. Do the world a favor and translate this post into letter to the editor-form?
Posted by: Cris Sullivan | Dec 3, 2005 6:03:04 PM
Now, look, there's no reason to be so pessimistic.
One thing we all have to admit is that our oil resources are finite. Maybe it'll take 100 years to use it all up, maybe 20, but either way, the end will come. And we have to prepare.
Obviously your laissez-faire capitalism answer is, "market forces will react", and that is true. However, if we wait for that to occur, it will be far, far more painful and expensive, because oil drives our economy: Our rate of economic activity (and, concurrently, innovation) is inversely proportional to the price of oil. So by the time the market decides it's time to make these changes, we risk that oil might be too expensive for them to be feasable- Disaster.
"It ignores individual freedom; it ignores the possibility that the admired Big Plan might be flawed, either technologically or economically or both."
That's awfully unfair of you. Certainly there are flaws. For example, we don't have all the technology necessary to switch to a reduced-oil economy; but in 1960 did they have all the technology to build a mission to the moon?
All that "the plan" really is is identifying all the ways oil and oil products are used, and finding equivalent substitutes. Carbon Fiber and Corn-derived plastic and Ethanol/Biodiesel fuel could solve 2/3 of our oil use right there! From an engineering standpoint, finding substitutes for oil is extremely possible.
How the government may intend to make this transition can obviously vary wildly. There is, however, no reason to think "It ignores individual freedom". Suppose it's just funding for research and tax incentives (at which point market forces would react to the reduced price of supply of oil-substitute goods). I certainly wouldn't call that totalitarianism.
One way or another, we're going to live in a world without cheap oil. We had better get started on figuring out how.
Posted by: RanDomino | Dec 3, 2005 11:52:51 PM
However, if we wait for [market forces] to occur, it will be far, far more painful and expensive,
You're neglecting something, RanDomino. Speculators will ensure that we won't have to wait for the actual unavailiability of oil. Oil will remain available for many many decades after it's no longer used for fuel.
The fact that oil *isn't* getting vastly more expensive is proof that "Peak Oil" is really "Peak Ignorance of Economics".
-russ
Posted by: Russell Nelson | Dec 4, 2005 2:46:33 AM
One more reason to ignore such arguments is that reduction of oil demand would not actually reduce our dependence on foreign oil. (I assume most mean Middle East oil when they say "foreign oil") Since a reduction in demand would decrease the price of oil, suppliers would naturally revert to gathering oil that is cheap and easy to produce. The easiest oil to get is in the Middle East since it is closer to the surface and sometimes requres no artificial lift. I believe that reducing our demand for oil would actually increase the percent of oil we obtain from the Middle East.
Posted by: Jeff Anderson | Dec 4, 2005 5:28:08 PM
"The fact that oil *isn't* getting vastly more expensive..."
It isn't? Sorry, we've observed prices double in just a few years.
"Oil will remain available for many many decades after it's no longer used for fuel."
Okay, and then after that what will we do?
Of course, we'll likely all be dead, but it would be inhumanly selfish of us to not start looking for solutions now.
"I believe that reducing our demand for oil would actually increase the percent of oil we obtain from the Middle East."
Maybe, but that still doesn't take into account the fact that oil is finite.
Posted by: RanDomino | Dec 4, 2005 5:58:01 PM
The claim that oil is finite is based on a rather narrow viewpoint. What needs to be taken into account is what the mind can create literally out of thin air. A natural resource isn't valuable until innovative and enterprising minds see the potential. Therefore, if I manage to invent a chemical process that doubles the efficiency of every single combustion engine in the world, have I not essentially doubled the amount of oil in the world? Likewise, if I manage to invent a new building procedure that uses half the wood without any sacrifice in strength, have I not essentially doubled the amount of lumber in the world?
This is why simply looking at oil as a finite physical resource is narrow. One needs to also take into account how usage is changed as a result of prices. Increases in price encourage better frugality.
Posted by: Nacim Bouchtia | Dec 4, 2005 9:51:53 PM
I nominate Nacim Bouchtia for the cafehayek post of the month. What a wonderfuly short and insightful post.
Posted by: John Pertz | Dec 4, 2005 10:36:19 PM
Oil is finite huh? heh wanna make a bet?
http://www.goodbyemag.com/jan98/simon.html
Commodities go down in price over time, markets work.
hey another question, if oil reserves were calculated at todays market price, which country would have the most oil in the world? Anywhere from 5 - 10X's the known oil in Saudi Arabia - I'll give you a hint, it has 50 states.
Posted by: J-Deal | Dec 4, 2005 10:41:09 PM
Decent read on the subject
http://www.wtrg.com/prices.htm
Posted by: J-Deal | Dec 4, 2005 10:51:24 PM
You mentioned Salma Hayek and my brain shut down from that point on. What did you say?
Posted by: Neal Phenes | Dec 5, 2005 9:06:23 AM
But seriously, what will be the value of oil when all cars are converted to some other fuel? Then, after it sits somewhere, valueless, a genius will decide that trillions of gallons of the black liquid can do something new. Then it will increase its value.
My SUV has lost its value during this "energy crisis". But when it snowed yesterday in NJ, I was out before the plows hit the streets. I saw cars swerve in the snow while my beast travelled true. Its value increased dramatically.
Posted by: Neal Phenes | Dec 5, 2005 9:12:42 AM
What Ignatius is missing is how woefully ignorant is 'The Plan'. It relies on the knowledge of a mere handful of people.
The market on the other hand uses the knowledge of the millions of participants. Which is why decentralized decision making systems outperform central planning, and always will.
Posted by: Patrick R. Sullivan | Dec 5, 2005 11:18:35 AM
I'm with RanDomino here, we're running out of oil pretty soon.
But hey, we've managed pretty well since we ran out of copper a few decades ago. And aerable land 150 years ago. I'm sure we'll figure out a way to survive without oil too.
But seriously, folks. Why does no one ever take into account the fact that moral suasion affects markets? As we talk about alternative sources of oil, incentives are increased for people to divert some of their resources to R&D towards such ends. The automobile wasn't born because someone guessed people might like it. The work is already begun on alternative fuels and such, which is why within 100 years we'll likely be less reliant on oil or whatever.
But then RanDomino will just be complaining about how thats running out.
Posted by: Cris Sullivan | Dec 5, 2005 1:34:54 PM
joooooooooooooon
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