George Will reports news that shouldn’t be – but, sadly, is – surprising to many people: industrial policy fails. Two slices:
Today’s installment in the endless epic about the exciting surprises involved in industrial policy concerns wind. Not the vagaries of its occurrences, but the predictable problems that are startling governments and their corporate accomplices as they attempt to harness wind to wean humanity away from less pristine means of generating electricity.
Your federal government is using taxpayers’ money to bribe, with various subsidies, automakers to make more electric vehicles than taxpayers want. So, the government is bribing taxpayers with their own money to buy EVs; the bribes are substantial because EVs typically cost more than other vehicles. Simultaneously, the government is using taxpayers’ money to drive a conversion to, among other renewable energy sources, wind-generated electricity, which potentially will increase taxpayers’ electricity bills.
What (else) could go wrong? New Jersey, which is controlled by Democrats and hence is enthusiastic about wind, is disappointed. The Danish company Orsted, the world’s biggest developer of offshore “wind farms,” was planning to build two of them off portions of the state’s 130 miles of Atlantic coastline. Orsted has changed its mind. It prefers a write-off of as much as $5.6 billion rather than proceed with the projects, which have become too expensive.
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Russia, Iran and Venezuela — among other unsavory actors — might reap a windfall from green energy policies. Benjamin Zycher of the American Enterprise Institute notes that the Biden administration has proposed for the five years after 2024 just three sales in its offshore oil and gas leasing program, the smallest number in the program’s history. The plan would block additional leasing off Alaska and in the Atlantic and Pacific oceans.
The Biden administration last month began laying the groundwork for a misguided plan that threatens to misallocate vast amounts of capital, encumber natural resources, and destroy rural economies by removing land from productive use in the name of solving climate change.
On Sept. 27, the New York Stock Exchange quietly submitted a substantial and financially material proposed change to its rules. The proposal would allow the formation of a new type of company. Natural Asset Companies, or NACs, would purchase the rights to control public and private lands, such as parks, forests and farms. But a NAC wouldn’t be able to put the land to economic use. Instead, it would preserve its acquisitions to maximize the value of the land’s “ecological services.”
NACs would register to go public on the NYSE. The money raised would purchase land and effectively lock it away from human impact. Grazing, energy extraction and other economically critical activities would disappear on NAC-protected land. Farmland used to feed the nation and world would go back to natural landscape, erasing human activity. The resulting conversion of investor money into unusable wildlands has the potential to be one of the most significant misallocations of capital in history.
Normally, corporations are formed for investors to make money. But since NACs are clearly noneconomic, a rule is required to allow their formation. The land placed in a NAC, a private entity, must support only “replenishable” activities. Since no economic activity can occur, the property is assigned an arbitrary value and traded on that basis. In any other situation, this proposal would be identified as sanctioning fraud.
Matt Ridley puts into perspective the cost of net-zero.
Historian David Beito writes about Zora Neale Hurston and Eleanor Roosevelt.
Is all of this realistic? No. The lack of courage or clarity from our elected officials, and their inability or unwillingness to make the politically painful trade-offs necessary to fix fiscal problems, is why we are in this mess in the first place. The result is debt exploding, interest rates rising, inflation still chipping away at our standard of living and Treasury auctions failing to sell all the government bonds that the government is trying to sell. Special interests and egomaniac politicians are the only ones winning under the current regime.
Back in 2021, Max Gulker and Phil Magness wrote a paper to explain how “Public Choice and the marvels of modern medicine shut down the world.” Here’s the abstract:
While the global COVID-19 pandemic of 2020 was far from unprecedented in severity relative to prominent historical outbreaks, its arrival in the wake of explosive growth in scientific understanding, epidemiology, information and communications technology has led to unprecedented political, economic and social disruptions. At the heart of the disruptions were problematic political incentives well-documented in public choice theory when faced with a classic knowledge problem of costly, imperfect, and nonexistent information. Politicians demanded immediate information in order to appear proactive, favoring particularly dire predictions from experts incentivized to over-sell or be overconfident in their results. Resulting forecasts, most notably from the Imperial College London model, created public and media outcry for comprehensive and highly costly responses resulting in extensive global economic harm. While this fraught nexus of uncertainty, dispersed knowledge, and problematic political incentives has complicated government responses to many modern issues, three factors in particular magnified the resulting harm. First, the rapid spread of the virus spurred decisive government responses without the usual time for debate. Second, real-time mass and social media back-and-forth between responders, politicians, commentators, and individuals created their own ever-spiraling web of incentives and recrimination. Finally, and perhaps most importantly for future response to crises, the knowledge problem was likely worsened rather than improved by technological and scientific advances that presented a fast-moving scenario in the grey area between routine and historically catastrophic that resulted in large-scale confusion over the trade-offs at hand. In this study, we will investigate the interaction of information asymmetries, political incentives, and institutional constraints in bringing about the COVID-19 shutdown, and the implications of the same for our path forward.
