I've said it before, I'm a big fan of the free market. It has been one of the true liberating and civilizing influences in our world, and there is clearly no better way of getting the most goods in the most hands (and I use goods in its broadest economic sense).
However (and you knew a "but" or "however" was coming), it isn't perfect. There really isn't such a thing as a truly free market, and the differences do matter. More importantly, the free market is at its best in a transactional economy, not so good in the parts of an economy that represent relationships. For example, strict free market theory would suggest that we should all get up each day, ascertain where we can make the most money, and go do that. Obviously we don't, because we have a "relationship" with the kind of work we do and the kind of skills we have, so we establish a relationship with a career and an employer; if we are not truly optimizing our day-to-day return, we gladly make that tradeoff for stability and predictability.
The market tends to have trouble with long-term initiatives for a number of reasons, one of which is the difficulty of predicting value in the future - one in the hand may be worth two in the bush, but how about three in the bush?
Our current approach to alternative energy is relentlessly free market-based; the proposals on the table are mainly about tax cuts and incentives to people and companies who want to work with new energy. We hear about a "Manhattan Project," but no one is seriously contemplating any such thing. No matter which party runs our government, there is almost no possibility that we're going to create a government-run effort to replace petroleum. Instead, we're going to let the free market work its magic and produce a new future.
Except the free market is going to consider things other than, we need new energy as soon as possible. It's influenced by the price of oil, by the ability to get financing, by the difficulty of actually solving the problem. And this is all highlighted in a New York Times article from yesterday titled, "Alternative Energy Suddenly Faces Headwinds." Essentially, capital is drying up, people have fewer incentives to buy alternative energy as gas prices come down, and Washington may not be able to deliver on its meager promises:
We needed to win World War II, so we cranked up government efforts to do so. If we had waited for private industry to figure out what needed to be done and to find financing to do it, we might well be speaking some kind of German-Japanese pidgin today.
At some point, we may have to decide that we need to win the alternative fuel struggle. Clearly, we haven't made that decision yet; by the time we figure it out, we may be sending our energy dollars not to Saudi Arabia, but to China. I'll let the reader decide if that's really preferable.
However (and you knew a "but" or "however" was coming), it isn't perfect. There really isn't such a thing as a truly free market, and the differences do matter. More importantly, the free market is at its best in a transactional economy, not so good in the parts of an economy that represent relationships. For example, strict free market theory would suggest that we should all get up each day, ascertain where we can make the most money, and go do that. Obviously we don't, because we have a "relationship" with the kind of work we do and the kind of skills we have, so we establish a relationship with a career and an employer; if we are not truly optimizing our day-to-day return, we gladly make that tradeoff for stability and predictability.
The market tends to have trouble with long-term initiatives for a number of reasons, one of which is the difficulty of predicting value in the future - one in the hand may be worth two in the bush, but how about three in the bush?
Our current approach to alternative energy is relentlessly free market-based; the proposals on the table are mainly about tax cuts and incentives to people and companies who want to work with new energy. We hear about a "Manhattan Project," but no one is seriously contemplating any such thing. No matter which party runs our government, there is almost no possibility that we're going to create a government-run effort to replace petroleum. Instead, we're going to let the free market work its magic and produce a new future.
Except the free market is going to consider things other than, we need new energy as soon as possible. It's influenced by the price of oil, by the ability to get financing, by the difficulty of actually solving the problem. And this is all highlighted in a New York Times article from yesterday titled, "Alternative Energy Suddenly Faces Headwinds." Essentially, capital is drying up, people have fewer incentives to buy alternative energy as gas prices come down, and Washington may not be able to deliver on its meager promises:
But after years of rapid growth, the sudden headwinds facing renewables point to slowing momentum and greater dependence on government subsidies, mandates and research financing, at a time when Washington is overloaded with economic problems.60 Minutes just had a story on alternative-fuel automobiles, and Lesley Stahl had a fine time at Tesla Motors, the company that believes it can bring the quick and dirty ethos of Silicon Valley to the car industry (but has inconveniently found that building them is hard without knowing anything about, well, cars). But even Tesla, which contemplates making unaffordable alternative cars, is having troubles, as Citizen Carrie documents here.
We needed to win World War II, so we cranked up government efforts to do so. If we had waited for private industry to figure out what needed to be done and to find financing to do it, we might well be speaking some kind of German-Japanese pidgin today.
At some point, we may have to decide that we need to win the alternative fuel struggle. Clearly, we haven't made that decision yet; by the time we figure it out, we may be sending our energy dollars not to Saudi Arabia, but to China. I'll let the reader decide if that's really preferable.
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