Right Thinking From The Left Coast
Don't stay in bed, unless you can make money in bed. - George Burns

Sunday, April 03, 2011

The Green Bubble

I’ve made this prediction before: the next big economic bubble will be the green economy.  Part of this is the nature of capitalism—we need a burst of irrational exuberance, a surge of investment and a walloping dose of failure to create new industries.  The dot-com boom destroyed a lot of fortunes but it also created lasting success in Amazon, ebay, etc.  Our economy will move beyond fossil fuels, but it will only do so after trillions of dollars is destroyed determining which business models and technologies don’t work.  Science, technology and business only find what works after they exhaust all the other possibilities.

But the bubble is going to be made infinitely worse by continual government intervention.  Government investments in industry technology aren’t allowed to fail, even if they are complete scientific nonsense (see the Synthetic Fuels Corp).  Government does things for political reasons, in defiance of the market, economics and science.  And a series of news stories are coming out now proving, once again, what happens when you chain economics and science to the great slime engine of politics.

First, this story:

When the White House announced the federal government would loan $465 million to Tesla, a California start-up company with plans to develop an all-electric sedan, President Obama called it an “historic opportunity to ensure that the next generation of fuel-efficient cars and trucks are made in America.”

...

A joint investigation by ABC News and the Center for Public Integrity that will air on World News with Diane Sawyer tonight has found that Westly is just one of several political allies of the president who have ties to companies receiving chunks of that money through loans, grants, or loan guarantees.

Westley was one of Obama’s bundlers, having raised over half a million for the 2008 campaign. He has also visited the White House numerous times and is on an energy advisory panel.

Read the whole thing for more.  $528 milion went to Fisker Automotive, which has Algore as board member and was founded by an Obama supporter. $535 milion more went to a California company whose investors include an Obama fund-raiser. Part of this is inevitable—people who invest in start-ups usually buy politicans too so that they don’t get crushed by other companies’ political influence.  But the GAO has issued a report now documenting favoritism in awards.  It has also expressed frustration over the Administration’s lack of transparency in the award process.

This is not unusual; this is intrinsic.  The government rarely doles out money fairly and equitably.  How can it when everything our politicians hear and see is filtered by the politics?

The future of energy is a multi-trillion dollar endeavor.  Do we really expect the government to act wisely and dispassionately when it’s picking the winners and losers in such a high-stakes game?  And for those of you in the “Obama can do no wrong” camp, do you want Sarah Palin or Mike Huckabee or Herman Cain having this kind of economic power?  Do you trust them to pick the best technologies?

Tesla, in particular, is a problem.  Read Bainbridge for some details of how this company is playing the government game, getting huge loans, suing detractors and developing high-end cars that may or may not have a market.  And some are hailing it as our future “fourth auto-maker”.  Tesla might get billions in private investment—not because people want to buy their cars but because they’re in with the Feds.

Maybe Tesla will develop into a great auto-maker one day.  I hope so.  But that future is clouded by the pipe of green jobs money flowing out of Washington and distorting the market beyond recognition.

There’s another story that’s even worse.  Reason has a video about the California Air Resource Board (CARB).  It’s regulating diesel emissions because of a study showing 2000 premature deaths a year from diesel particulate matter.  The only problem?  The study supporting this is highly questionable.  So two member of the CARB responded to criticisms by ... sacking the fellow UCLA professor who pointed out its problems.

This is what happens when you merge science, technology, economics and politics.  This is intrinsic.  This is why our government needs to get out of the green jobs business.  It’s one thing to fund R&D at non-profits through peer-reviewed research grants.  These have a good track record of success and far smaller problems with influence-peddling.  Grant-based R&D is accountable—grant funds get cut off if the work isn’t done or doesn’t show results. But funding industries and businesses is a recipe for disaster.  And it’s a disaster we can no longer afford—scientifically, economically or ecologically.

(And while I’m on the subject, Tesla is not going to save the planet.  Even it works, that energy will come mostly from fossil fuels.  And even then, we’ll probably respond by driving more.  Check out this analysis of consumer energy efficiency.  Our homes and appliances are massively more energy efficient than they were three decades ago.  And we’ve responded to this by ... using more appliances.  Energy efficiency is good—it improves our lifestyles.  But the idea that we can save the Earth by weatherizing our windows or driving electric cars is ridiculous.)

Posted by Hal_10000 on 04/03/11 at 04:42 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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