Always Ask “As Compared to What?”

by Don Boudreaux on August 30, 2010

in Cleaned by Capitalism, Energy, Environment, Other People's Money

In a letter in today’s Wall Street Journal, Alexander Koukoulas objects to Roger Meiners’s demonstration that Uncle Sam’s solar-panel project in Ennis, Montana, is a huge waste of money.  One of the alleged weaknesses in Roger’s analysis that Koukoulas identifies is the fact that Roger “fails to recognize the significant improvements in green technologies that are improving capital effectiveness.”  In other words, Koukoulas accuses Roger of ignoring the fact that green technologies will likely improve in the future – an oversight that Koukoulas says misleads Roger into overestimating the cost of using green technologies over time.

But Koukoulas’s objection is unwarranted because he fails to recognize the significant improvements in conventional technologies that are improving capital effectiveness.  That is, Koukoulas illegitimately assumes that green technologies will continue to improve but that competing conventional technologies will not.  When likely improvements in both technologies are recognized, Koukoulas’s criticism of Roger’s demonstration of the wastefulness of government-sponsored green-technology loses much of its force.

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