is here.

No, it is not Nick Clegg viciously attacking a pensioner with a walking stick (hattip James MacKintosh of the FT).  But it may explain why even cardcarrying members of the NeoClassical School of Economics may be starting to make these kinds of argument:

In general, I am opposed to state-run, nationalized industries: managing industry is without a doubt the private sector’s role, not the government’s … But the interaction of rent-seeking industry with a flawed political system has made me willing to make an exception in the case of America’s carbon-based energy industry. True, government ownership will increase inefficiency and the misallocation of resources. But it will also increase political efficiency, since the energy industry will no longer be able to purchase Members of Congress and use them to strangle the policy innovations needed to advance the national interest. So nationalize the carbon energy sector — not to expropriate wealth or to penalize shareholders, but to remove a selfish and destructive political force that threatens our future.



10 thoughts on “Disturbing picture of the day …

  1. Giles, this is totally unrelated, but I’ve just been reading some stuff at Centre Forum’s blog and it got me wondering–do you back the Lib Dem plans to cut deficit spending? Do you agree with the rationale? If so, which sector do you think is going to facilitate this and where will it leave NGDP?

  2. “But it will also increase political efficiency, since the energy industry will no longer be able to purchase Members of Congress”

    That worked so well with Fannie and Freddie, didn’t it?

    DeLong’s normally quite sane but he has his off days, like this.

    Putting aside my amateur economist status, even my reputation as screamingly free market, a point from my day job. That day job being the provision of the sorts of weird and whacky metals which various renewables technologies use.

    Absolutely the last thing anyone in the industry wants is to have to compete against government owned incumbents. Really, really, not helpful at all.

    1. But doesn’t BDL acknowledge those inefficiencies?

      I would have thought his point was that this thing is so big it is like a war. In a war you need the government to fix the prices in a major way. The arms manufacturers like the extra demand but would rather dictate the structure of the industry far more, sure. But in this case the structure of the industry may be the problem (too pro carbon).

      Cowardly caveat – I have to work like crazy for 90 minutes. TUrning off the internet.

  3. Well, my argument is possibly Panglossian but it is at least informed.

    I’m terribly unconvinced that people, opinion formers and legislators especially, understand quite how fast the various technologies are maturing.

    We can make 10% efficient solar cells at under $1 a watt now….and prices are falling at 4% a quarter. Yes, a quarter.

    We can make 35-40% efficient solar panels at a higher cost but they again are rapidly approaching grid parity (ie, you can get the energy from them at point of consumption at or about the cost of getting coal fired from the grid).

    Solid oxide fuel cells will take a little longer to mature. But I know of one company (err, I supply them with bits) which has taken a known and proven technology and which is working on the mass manufacturing side. You know, this thing which capitalism is so good at (and they’re funded by similar VC’s who have funded the solar advances above). Give it 5 years tops and they’ll be offering a $3,000 box which will power the average American house. Can use natural gas as the feed (getting very cheap now as a result of frakking) or if you really like use the solar cells to electrolyse water and store the hydrogen.

    That latter also gives you the capability of filling up your fuel cell powered car.

    There are no conceptual problems with any of this. Only cost ones. And cost are coming down extremely rapidly. At some point and as I say this sounds Panglossian but it is an informed view, that cost of setting up distributed energy generation falls below the cost of replacing the current centralised.

    At which point, as the capital stock turns over, we’ve solved the problem.

    The bit that I really don’t think people get it that industry hared off about 10 years ago to look for ways of cashing in on such technologies. And they’ve found them… short, what we needed to do we’ve pretty much already done in terms of providing the incentives for R&D.

    1. But we do need to keep the incentives in, don’t we? Higher fossil fuel prices – what would have happened to the design of cars had we never had the 1970s oil shocks. I share your optimism about what leftalone private enterprise can do, but its macro-incentives sometimes need guiding. Analogy: we developed all that extraordinary aviation during WWII because of a massive govt buyer

  4. “But we do need to keep the incentives in, don’t we?”

    Hey, I’m all in favour of an $80 a tonne carbon tax. Or cap and trade where all permits are auctioned.

    But that’s all we need…..

  5. The political inefficiency, which accounts for 75% of the price we individually & as a society, pay for electricity, is the effective banning of nuclear power. How exactly nationalising coal generation would end such banning is not readily clear. Perhaps FTE could explain. Perhaps not.

    It may well be that money from competitors is funding the eco-fascist movement, & buying them Senstors as you suggest but it would be polite to produce some evidence to go with such assertions.

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