[UPDATE: Benny Peiser sends the following note with a request for it to be posted:
RogerI'll certainly post up the video when available!]
Thanks for inviting a response to your colourful story. I would prefer to refrain from any comment until the video of the debate is up so that interested readers can compare the actual arguments of our discussion with your recollection of it. It would be nice if you could post this note.
Thanks
Benny
Last night in Mayfair, I engaged Benny Peiser, of the Global Warming Policy Foundation, and Dalibor Rohac, of the Legatum Institute in a debate over the role of government in energy innovation. The event was well attended and the Legatum Institute provided a first rate forum for discussion and a wonderful reception afterward.
In the debate I opened by making several points. One is that debates over whether governments should be involved in innovation policy miss the point -- the fact is that governments are deeply engaged in innovation policies already. The issue is thus how should governments be involved in innovation policies.
I then characterized and briefly six reasons why public investments in energy innovation makes sense:
- Containing energy costs
- Securing energy security
- Expanding energy access
- Ending damaging energy subsidies
- Reducing carbon dioxide emissions
- Addressing other environmental consequences
In response, Benny Peiser expressed some dismay that I didn't choose to focus my remarks on climate. He seems to have missed the discussion in my book about obliquity and "policy jujitsu"! His view is quite simple and principled -- government action should be minimized as much as possible. Period. He believes that everything government touches leads to waste or failure, and extends this view to the energy sector. Benny explained that nations around the world, and indeed the world as a whole, do not in fact have any sort of energy problem, as fuels are cheap and the free market is doing its job meeting demand. He reveled in citing a litany of failures of government policy, particularly as related to climate in recent years.
Dalibor Rohac joined in with some scathing criticism of my book, arguing that it failed to rise even to the standards of conventional economists who argue that climate change represents a problem of unpriced externalities. Like Peiser, Rohac expressed disdain that governments would have any role whatsoever (in anything, as far as I could tell).
Part of the disagreement is clearly ideological -- Peiser and Rohac presented standard libertarian views on the role of government. At some level, such arguments are unresolvable, as they are grounded in different worldviews and orientations. Giving them a good airing is sometimes worthwhile. While Rohac never really went beyond theoretical, on points that can be adjudicated empirically raised by Peiser, I think that he is simply wrong on a number of points according to the evidence.
While he may not think that there is an energy problem, he is very much isolated in that view, as judged by the actions of governments and businesses around the world, with respect to the six points that I raise above. And irrespective of Peiser's and Rohac's views on the proper role of government, the realpolitik is that governments are and will continue to be deeply involved in innovation policies, and there are many examples of such policies contributing to public aims. I explained in the discussion that I have no desire to debate issues of climate science with Benny, and in fact I would grant in the debate (but not agree with) every one of his points on climate science, as they are related to only one of the 6 justifications that I offered for action on energy innovation. Ultimately, you can't beat something with nothing, and ideology doesn't expand energy access, keep the lights on and sustain reasonable fuel prices.
The early evening ended with the debate spilling over to the reception, where I met many new and interesting people. I left the event agreeing to disagree with Benny and Dalibor, and promising to re-engage the debate in the future. My mind was not changed, and I doubt theirs was either, but the event was worthwhile because I learned more about their views and those of the GWPF and the Legatum Institute, and hopefully they learned something more about my views.
Note: If Benny or Dalibor wish to add their reflections I am happy to add those here.
20 comments:
Comment by email from John:
"Roger, I'm far more on your side of the debate. But we should grant Peiser a little bit of leeway. When oil prices went very high two years ago, the market worked by bringing down consumption. When natural gas prices spiked over the last decade, new drilling techniques created the natural gas shale boom, and prices came back down substantially. Natural gas will be relatively cheap for a while.
That credits his side. But he doesn't win the argument about government intervention.
To credit your side, think how much smaller our foreign debt would be if we had continually but gradually increased vehicle miles per gallon (CAFE) standards over the last 3 decades.
Instead of $ going to the Persian Gulf, with high oil prices helping Iran, the money would have stayed home. More economic growth, more taxes to the government, less of a shock to the economy when oil prices spiked, more US jobs.
The government failed to intervene by raising CAFE standards, in my view, because of PAC $ contributions from US car companies (who wanted to keep making gas guzzling SUVs) and from oil companies. The oil companies haven't suffered, but if GM had had to make its products more efficient over time, maybe it wouldn't have gone bankrupt when oil prices spiked -- maybe it would already have been making the cars that people wanted when gasoline hit $5 per gallon.
Just my two cents...."
Roger,
I would like to make the argument that nuclear energy requires heavy government involvement because it is so heavily regulated. I do not believe nuclear energy should receive production subsidies but R&D and licensing requires a very tight cooperation/subsidy from government. This development subsidy can be paid for from a production tax as is the existing waste tax.
Sorry to miss the debate, was in my diary but dinner with my daughter came first!
The problem, or the joy, of such a debate is that there are endless examples of both (govt/private) success and failure individually and in partnership with each other.
I recently heard an argument about the carbon tax. It was likened to a tax on print ribbons used in typewriters and calculators. Wasn't necessary to spur the computer revolution.
Louisiana has had two major disasters. Both point to the paralysis of govt to act effectively in urgency. Bobby Jindal has written a book about the oil spill and govt's preoccupation with minutia while the oil spread. Failures of both govt and private industry point to a lack of focus and an entanglement of institutional regulations. Sometimes it pays to start with lessons learned and a tabula rasa.
"While he may not think that there is an energy problem"
Energy problems are being created by climate policy based on climate alarmism, are they not?
Comment by email from John:
"The government failed to intervene by raising CAFE standards, in my view, because of PAC $ contributions from US car companies (who wanted to keep making gas guzzling SUVs) and from oil companies"
The biggest cost of making a car isn't glass or steel, it's Union health benefits and union pension benefits($41/hour out of total average hourly compensation of $70/hour) compared to Toyota's average total hourly compensation of $48/hour.
In order to compensate US Auto workers substantially more generously then Japanese companies compensate their workers US car companies have to build cars with higher profit margins.
Hence, an alliance between auto companies, oil companies and labor unions conspired to keep CAFE standards from rising.
I would note that Government Motors closed it's Saturn division which was 25% of Government Motors 'hybrid' production rather then Cadillac, makers of the 5,700 pound behemoth Escalade.
"...and ideology doesn't expand energy access, keep the lights on and sustain reasonable fuel prices."
Actually, free markets have indeed expanded energy access, kept the lights on, and sustained reasonable fuel prices.
1) "Expand energy access:" EU energy (gasoline and electricity) prices are much higher than in the U.S., largely because both gasoline and electricity are taxed at a much higher rate in the EU. Thus, U.S. citizens have much more access to electricity and gasoline than in the EU.
2) "Keep the lights on:" Iraq provides evidence on how free markets can keep the lights on, whereas government-provided electricity does not. In Iraq, electricity was historically provided by the government at far below free-market rates. Therefore, there was no incentive to conserve electricity, and no incentive for anyone to build new generating plants (or even repair the old ones). In fact, there was also no incentive to even monitor electicity, to determine whether people were stealing electricity from the grid. In Saddam's time, electricity was provided mainly to Baghdad, and not to the Kurdish north or Shiite south. Today, many people in Iraq rely on home generators to produce electicity when the grid breaks down. A more extreme example of free markets versus governments would be electricity in North Korea versus South Korea, or the former East Germany versus West Germany.
3) "Sustain reasonable fuel prices"--I'll bet if you looked at the cost per mile travelled of gasoline in a U.S. car today versus in 1950, it would be essentially the same or less today, adjusted for inflation. I'll bet the same would be true for the per-kilowatt-hour cost of electricity in the U.S.
Rodger,
I find your logic questionable. You say:
... is that debates over whether governments should be involved in innovation policy miss the point -- the fact is that governments are deeply engaged in innovation policies already. The issue is thus how should governments be involved in innovation policies.
I take it you hold the following viewpoint ?
... is that debates over whether the government should be involved detention of political dissidents miss the point -- the fact is that the government is deeply engaged in the detention of political dissidents. The issue is merely which political dissidents the government should be to detaining.
We can replace the subject with subsidies, genocide, slavery or any number of topics. I think the libertarian point is that rather than rationalize with silly logic, if an action violates your principles you should cease rather than rationalizing that it's already ongoing so it is OK in this case ....
Roger,
Roscoe Bartlett made many of the same arguments as you at today's Energy Subcomittee hearings. Hard to make a compelling against action when its lined up this way.
You say "Part of the disagreement is clearly ideological -- Peiser and Rohac presented standard libertarian views on the role of government. At some level, such arguments are unresolvable, as they are grounded in different worldviews and orientations. Giving them a good airing is sometimes worthwhile. "
I'm wondering if you'd care to elaborate when giving such arguments an airing isn't worthwhile? I tend to agree with the general sentiment but would be curious to hear your thoughts.
-7-markbahner
"free markets" -- in your dreams;-)
-8-Artifex
Nice! But no. I'll put innovation in a different category than genocide or slavery, and happily defend why that is so. But, I like your logic;-)
-9-Marlowe Johnson
One example would be that I would have little interest returning to Legatum tomorrow to rehash the debate ;-)
John -1-,
Your faith in the utility of CAFE to reduce oil consumption is misplaced. There is no evidence whatsoever that CAFE has been successful in this regard. See for example here: http://www.davidbarber.org/research/cafe.html
"Overall CAFE has not encouraged an efficient level of oil consumption, and does not appear destined to in the future."
Roger,
You write, "'free markets' -- in your dreams;-)"
Yes, virtually no markets are completely free. But in general, the freer the market, the better the outcome. Just look at the examples:
1) U.S. consumers have cheaper access to electricity and gasoline because the EU taxes both so heavily. (And also subsidizes non-competitive technologies, such as Germany's massive subsidies for solar electrical power.)
2) In Iraq, the government providing electricity at ridiculously low prices meant that: a) demand was infinite, b) electricity was allocated to the politically powerful, and c) the system was not kept up, because the money coming in wasn't sufficient to keep equipment running.
3) "Reasonable fuel prices"--Again, in the U.S., the cost per mile traveled has probably either stayed the same or gone down since 1960.
So your statements that free markets can't deliver "expanded energy access, keeping the lights on, and reasonable fuel prices" are all contradicted by the fact that even somewhat-less-than-free markets in the U.S. already do all those things. Whereas the more-unfree markets (EU, Iraq during Saddam, North Korea nd the former East Germany) don't do those things.
In fact, you yourself advocate for "freer markets" in the sense that you list "ending damaging energy subsidies" as a goal.
P.S. You conveniently (or hypocritically, to use your word) fail to mention that the "damaging energy subsidies" in the U.S. for ethanol. I'm sure Benny Peiser mentioned those, and I hope you acknowledged that problem.
P.S. And the synfuels program in the U.S., wherein a plant that cost multiple billions to build was later sold for something like 3 cents on the dollar.
-12-markbahner
Thanks ... just a few quick replies ...
1. I have no objections to free(er) markets, i just don't think that they are an exclusive category with respect to public investments in energy innovation.
2.I did mention several examples of damaging energy subsidies, I think wind and solar production subsidies. Ethanol certainly qualifies (search the archives), but I don't think BP or I mentioned it, we'll have to check the tape.
Thanks
"Nice! But no. I'll put innovation in a different category than genocide or slavery,..."
Whatever "different category" one puts it in, if it's something that shouldn't be done, it's not a rational argument to say, "Well, it's already being done, so we should modify how it's being done."
The fact is that the federal government forces people to pay taxes. And subsidies for energy innovation are not one of the authorized activities of the federal government according to the Constitution (the "supreme law of the land").
"2.I did mention several examples of damaging energy subsidies, I think wind and solar production subsidies."
Well, good for you. You weren't being "hypocritical," then. :-)
Which reminds me...your attack on Rand Paul makes even less sense, if you specifically singled out wind and solar production subsidies. All Rand Paul was really saying was that wind and solar have production subsidies, but Apple iPods and laptop computers do not.
Not only was that not "hypocritical," I would guess that 99 out of 100 people would say that Rand Paul was correct (wind and solar have production subsidies, but iPods and laptops do not).
I'm too lazy to check, but I'm quite confident you've objected to ethanol subsidies in the past, even if you didn't at the debate. Again, good for you. :-)
Best wishes,
Mark
P.S. I don't have a strong opinion against "public investments in energy innovation" as long as they are small (say under $10 billion a year) and tied more into early-stage research on technologies that hold great promise for being both less expensive than present coal, gas, petroleum and wind, also less polluting than coal or petroleum.
Hi Roger, I was at the debate in London (Welcome btw). I am afraid I found it a bit disappointing. Maybe it was too short..............and I would have liked more time for questions (in all fairness Maurizio's question took up almost as much time as you did :o) or you and Benny saved the best for your private discussion at the reception? Sadly I was stuck in the corner with a friend :o)I liked the 6 reasons approach though
FWIW this is my live microblogging of the event (apologies for not posting the link earlier)
It was great to meet Roger again. Only thing, when people go to hear Alice Cooper they have an expectation of a rendition of School's Out. Likewise one goes to see Peter Gabriel and one would be surprised if Solsbury Hill were not played. That's why the questioning faces about getting Roger in the room with "Climate Fix" nearby but little about climate in the presentation...
ps Hannah: please accept my apologies. I thought the Q&A was going to last longer, and was surprised when it got cut short so quickly!!
Comment by email from John:
"To Harrywr2: Yes, GM has substantially higher labor costs, I agree. The costs are higher for the reasons you mention (union rules, higher union costs), but also because Japanese auto companies design factories which require less labor per car.
GM had to make money despite these higher costs, and the way they chose was to make low gas mileage vehicles which commanded higher prices than higher gas mileage vehicles.
To prevent Congress and the White House at different times from raising CAFE standards, they used their political influence, aided largely by PAC $, to prevent that occurrence, which would have fouled up their plans to sell higher end, low mileage cars.
Then when the world changed at $140 per barrel, nobody wanted their cars. Their business plan didn't work.
That was my point about how getting politicians to not raise CAFE standards led to their downfall. If they had been forced to gradually raise their fuel economy across their product line, they might not have gone bankrupt.
To Dewitt:
Thanks for the link to the David Barber report.
I don't think the report refutes the notion that, say, a 50% higher CAFE standard over a 25 to 30 year period would have reduced US gasoline consumption, because we never got that increase in fuel efficiency. CAFE standards have hardly changed since the early 1980s. I understand his argument that at the margin some people might have chosen to live a little farther out because with the CAFÉ standards of the day, their fuel costs were a bit lower.
I don't think CAFÉ standards had much to do with suburbanization, though -- it seems to me that cheap gasoline and lower cost houses in the exurbs had more to do with it. Until about 3 or 4 years ago, gasoline was very cheap. It was rational for people to drive long distances to work, because the fuel bill for driving 20,000 miles per year weren't bad at roughly $1.50 to $2 per gallon for most of the 1980s, 1990s, and early 2000s. People even drove SUVs and trucks that much, and it didn't overly strain their budgets -- most of us know folks like that. So slightly cheaper commuting costs due to a higher miles per gallon requirement, with gasoline already cheap, would likely not have had much of an additional effect.
People are now moving back to cities, but my sense is that it has more to do with how bad traffic jams are than about gasoline prices. We have several such refugees from the suburbs near us, in the city.
With low CAFÉ standards, the ever increasing dependence on foreign oil meant that huge amounts would flow out of the country if and when oil prices rose to where they did two years ago.
This giant sucking sound of $ outflows meant that the individual drivers were creating an externality cost on the US as a whole. A personally rational decision to drive 20,000 miles a year because fuel was cheap was a harmful decision for the US economy when oil hit $140 per barrel. That is how higher CAFE standards would have helped. Much less US $ would have flowed out of the country, if we were using, say, 2 or 3 million barrels a day less oil. Probably hundreds of billions of dollars less. So we wouldn't be facing quite as bad an economic problem, if that money had staying in the US. But PAC $ prevented that outcome."
John,
"I don't think the report refutes the notion that, say, a 50% higher CAFE standard over a 25 to 30 year period would have reduced US gasoline consumption, because we never got that increase in fuel efficiency. "
"We should have tried harder" seems to be the classic response to a failed policy. You also forget about Jevon's Paradox.
"In economics, the Jevons paradox, sometimes called the Jevons effect, is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource."
The results of CAFE is a confirmation of Jevon's paradox. There is no evidence that higher CAFE standards would have caused anything other than a more rapid collapse of the US auto industry.
Hi Roger, thanks for the brief chat and for signing my copy of "The Climate Fix" - I'm afraid I asked you more questions than gave you time to answer them! It was great meeting Maurizio and Hannah as well.
The essential point I was making was that, as per your own graph on public support for climate policies, that support seems to go up according to "events" such as 1998 - the year of super El Nino and of the hockey stick - then Al Gore's movie and Katrina - all of which raised the profile of CAGW. When clashing with reality - such as blackouts in the UK due to the Climate Change Act of 2008 - that support will vanish, with that Act being either ignored or much modified. So I'm not sure if the arguments you made in Chapter 2 have as much weight as the others you made.
Peter
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