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We Don't Need an 'Energy Plan'

Posted By Don Boudreaux On August 22, 2005 @ 1:03 pm In The Economy | Comments Disabled

Saturday’s Boston Globe ran this letter [1] by John Heywood [2], Director of MIT’s Center for 21st Century Energy [3]. According to Dr. Heywood, whose "field is transportation,"

Our [America’s] problem is that US fuel consumption and petroleum imports are steadily rising. I, along with colleagues at MIT, have developed an integrated set of fiscal and regulatory policies that would spread the responsibility for taking action among all the stakeholders: the auto and petroleum industries, government, and especially vehicle purchasers and users.

The intention is to provide reinforcing messages at each stage in our transportation system: vehicle design and production, fuel supply, vehicle purchase, and vehicle refueling. This set of policies would include restructured and more-demanding vehicle fuel economy regulations, significant fees on high-consuming vehicles, and rebates on low-consuming vehicles at the time of purchase, substantially higher fuel taxes at the pump, and required supplements (e.g., biofuels) to our gasoline and diesel fuel supply.

It will take a combination of policies like this to slow the growth, and then decrease our transportation system’s petroleum demand.

If ever I suffer guilt from spending nearly all of my waking hours teaching and writing about basic economics – teaching and writing about insights that were familiar to Adam Smith [4], Frederic Bastiat [5], Henry Hazlitt [6], and other writers who excelled at clearly explaining fundamental economics and its relevance to reality – I need only remind myself of the Dr. Heywoods of the world. He’s obviously an intelligent man at one of the world’s finest academic institutions trying (at best) to replicate what market pricing, profits, and losses do without any need of conscious human planning or oversight.

I sent to the Boston Globe this letter in response:

To the Editor:

John Heywood reports that, to reduce Americans’ use of petroleum, he and his MIT colleagues have "developed an integrated set of fiscal and regulatory policies" (Letters, Aug. 20).

His policies are unnecessary. An integrated worldwide network of appropriate incentives and knowledge loops already is in place and working precisely as it should: it’s called the price system. Higher oil prices promote producer efforts to find economically viable substitutes while encouraging consumers to use less oil. And compared to Dr. Heywood’s top-down scheme, market pricing does not depend upon a few geniuses in authority getting millions of important details just right.

Sincerely,

Donald J. Boudreaux

And here [7], with much more eloquence than I can ever muster, but making the same point, is Jay Hancock in yesterday’s Baltimore Sun.  I encourage Mr. Hancock to send his column to Dr. Heywood and colleagues; they are very much in need of enlightenment.

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URL to article: http://cafehayek.com/2005/08/we_dont_need_an.html

URLs in this post:

[1] this letter: http://www.boston.com/news/globe/editorial_opinion/letters/articles/2005/08/20/action_to_curb_petroleum_demand/

[2] John Heywood: http://me.mit.edu/people/personal/jheywood.htm

[3] Center for 21st Century Energy: http://web.mit.edu/c21ce/

[4] Adam Smith: http://www.econlib.org/library/Enc/bios/Smith.html

[5] Frederic Bastiat: http://www.econlib.org/library/Enc/bios/Bastiat.html

[6] Henry Hazlitt: http://en.wikipedia.org/wiki/Henry_Hazlitt

[7] here: http://www.baltimoresun.com/business/bal-bz.hancock21aug21,1,6372003.column?coll=bal-home-columnists

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