Economics, Energy and the Environment

Post-Partisan Power: Problems and Praise

Recently, my friend and colleague Steve Hayward teamed up with scholars from the Brookings Institution and the Breakthrough Institute to co-author a study named “Post-Partisan Power: How a Limited and Direct Approach to Energy Innovation Can Deliver Clean, Cheap Energy, Economic Productivity and National Prosperity.” Let’s just call it P3 for simplicity.

I agree with a few of the premises in the piece, and disagree with others, but before I get into the weeds, a few clarifications are probably in order.

While some in the media and blogosphere are covering this as if it were the official position of AEI, that’s rather silly. AEI does not take official positions, for a very good reason: gather any group of AEI scholars, and you’ll find major areas of disagreement over public policy. Sure, we share a set of common values, which is what drew us to AEI, but when it comes down to how to address any given public policy problem, well, I won’t say we have food fights, but lunchtime discussions can be fairly energetic. And, politically, we’re all over the map: AEI scholars range from relative liberals such as Norm Ornstein, to obvious conservatives such as John Bolton. My own politics lean heavily (some would say very heavily) toward the libertarian. Reporters, of course, love to misrepresent the nature of nonpartisan think tanks, since depicting a study as having organizational imprimatur makes it more “newsworthy,” and lets them turn what is an otherwise normal study into a political fracas over whether Institution A has “captured” Institution B, and blah blah blah. Some will interpret the use of AEI’s logo on the cover of P3 as if it shows AEI’s institutional agreement with the content of the study. Nothing could be less true, it simply shows that AEI stands behind the rigor and usefulness of its researchers’ output.

Now, to the content of the P3 study. I agree with a major premise of the authors, that renewable energy will not substantially displace conventional energy such as electricity derived from falling water (hydro), coal, oil, and natural gas unless the renewables become cheaper than the conventionals. That’s simple economics. I also would like to see something done about energy subsidies, though where the authors seek reform, I would prefer removal.

Where I disagree with the P3 authors is in their ideas that: a) it is particularly desirable or necessary to move away from conventional forms of energy at an accelerated rate; b) that it is in any way feasible to do so in the kind of time horizon one might influence with government planning; c) that’s what’s needed is a giant expansion of government R&D; and D) that we need a huge boost in science and engineering education.

In fact, I think that only the wisdom of the masses, expressed through market forces, can best determine what energy is used, where, and at what price. I’m dubious that government R&D is likely to make advances happen with a greater frequency than random chance; I don’t think government R&D is more likely to produce positive advances than would private R&D in a competitive free market; and I’m not convinced that we have a market failure that’s bringing us up short on energy/environmental scientists (for the record, I am one).

I especially disagree with proposing a carbon tax or new taxes/fees on oil production or imports for the purpose of raising new revenues. Yes, I’ve written that revenue-neutral carbon taxes are better than cap-and-trade or regulation, just as having a side-view mirror stolen is better than having your whole car stolen. But to propose a non-revenue-neutral tax is a serious mistake. I’m sure if the government worked at it, the revenues that the P3 authors seek could be raised by redirecting existing subsidies, cutting wasteful programs at other agencies, and so forth. As my colleague Kevin Hassett recently observed, our “Postal Service lost about $6 billion this year and by its own projections it will drop a cool $238 billion over the next decade.” The P3 authors are looking for $25 billion a year for their plan. There was no need to dangle the offer of new revenues to a cash-strapped government that is already consuming far too much of the economic product of American workers.

The P3 authors took a serious stab at a complex issue, and I laud them for managing to keep a coalition of such diverse views together long enough to produce a report. Getting scholars to work together over any length of time is like herding cats. But in this case, I think the herd wandered in the wrong direction.

Comments are closed.