The Public Policy / Saving Energy, Saving Souls

...What to do...

...turning now to Barry Commoner's The Politics of Energy is like turning from well-meant confusion to single-minded clarity, For Commoner is an apocalypticist, and to him the "energy crisis" is the last act in a macrocosmic morality play...

...More likely they have just not thought about it very carefully...

...The final purpose of Energy Future is to remind us that the entire U.S...

...Yet when the same words come from luminary Paul Erlich, we are less sure...

...The answer here is unclear...

...Again, only Commoner deigns to rush in where the experts fear to tread, for he joyfully anticipates, with an ideology to match, such wholesale regulation of "private interests...

...Indeed, this last problem is now being subjected to considerable research...

...Only Commoner dares to imply that it presages the beneficent potential of future "social governance...

...And their answer is nearly always the same: Well, we cannot be sure x will help much, and besides, x is not likely to happen anyway...

...The crux of the matter really has nothing to do with this book's specific legislative agenda-which is, as such things go, rather mild...

...When they turn to domestic energy production, we might hope that Stobaugh and Yergin . become more optimistic...

...What the authors of Energy Future do not realize, however, is that-given the "real shortage" perception-ordinary economic analysis is no longer relevant and that only Commoner has the courage to take the perception to its logical conclusion...

...in their selfishness, they do not tolerate reasonable taxation...

...import less oil, so would the other OECD nations (directly contradicting common sense...

...In the familiar Harvard Business School tradition, the authors bill themselves as observers with "a managerial perspective, broadly defined," empirical cost-benefit assessors of countless productive processes...

...Where others see energy solutions, these authors see "obstacles...

...Producers have simply run out of better ideas...

...The disagreement among experts over whether to subsidize home insulation or synfuel, in other words, obscures the more basic fact that a free society will not be trusted to make the choice...

...They express from time to time a "troubled" sense of uneasiness with the idea of economic rent, an uneasiness which sometimes affects their better judgment...

...Many economists will recommend a response of this sort...

...But what about the danger of carcinogens in the insulation fiber...

...Again, we trust that they are merely experimenting with the economic hypothesis of long-term supply and demand "inelasticity...

...Un til our glorious transition to a better world, we must simply steel our selves to the Armageddon, "the clash between social justice and the structure of the economy, between the national interest and private interests This wild collage of economic data would doubtless embarrass the well-meaning energy experts...

...They speak only of quantities and of time, rarely of price...

...Coal, it seems, is hopelessly mired by EPA, OSHA, environmentalist lawyers, incompetent management, radical unions, future regulatory uncertainty, inhospitable state laws, melting of the polar ice caps, and (last but not least) the "environmental and social hazards" of long coal trains rumbling through small western towns...

...Within the context of "shortage," he rightly employs an "economics" (or a "gap-ology") that has nothing to do with efficiency and private judgment, but has everything to do with legislative control, subsidy windfalls, negative-sum redistribution, and intergroup hatred...

...Apparently, they are unaware that a sweeping gas decontrol bill narrowly missed passage in the 95th Congress, shortly before Carter's compromise was settled upon...

...Skillfully preparing the political ground for the latter, Commoner must be secretly thankful to the near-sighted experts who also insist that a shortage is "real...

...The reader must wonder whether the authors, who often protest their belief in "the market place," do not deliberately inflate the "difficulties" in order to make an efficient marketplace inconceivable...

...Simply not acceptable," they say, because the public is irretrievably beguiled by conspiracy theories against the oil companies...

...it would be-he does not hesitate to say it-"the Paradise which must somehow be reached from our present, earthly reality...

...others, tending to coerce supply up, are called "production-oriented...

...Here the authors' reasoning becomes somewhat obscure, for they assume that the costs are calculable "externalities" (which of course they are not- a typical example of economists not knowing where economic analysis should end) and that, should the U.S...

...We might, if we follow his lead through a "fifty-year transition period,'' one day be living in a world run only by "renewable" solar power...

...Stobaugh and Yergin react to it in the most politically unappealing manner possible...

...has come to rely increasingly on imported oil, from 19 percent of all oil consumed in I960 (one year after import quotas were effective), to 38 percent in 1974 (one year after the embargo and the lifting of quotas), to nearly 50 percent in 1979...

...Over the last several years, perhaps since the Club of Rome press releases of the late 1960s and certainly since the OAPEC embargo of 1973, we have seen this belief arise in strength yet again...

...Because of the linearity of the analysis we hear talk of "needs" and "requirements" rather than "wants" and "desires...

...Nature, as these authors portray her, is essentially defunct...

...Experts assume positions according to their own interests and conjectures, and the debate between them all drones on endlessly, incapable of resolution...

...It is becoming increasingly clear that the differences within this noisy debate are not nearly as important as the perception on which all sides of the debate are based...

...At each point, the authors ask themselves: What about x as a solution...

...Needs, by definition, must be satisfied, or else...

...Where these authors see energy solutions, most of us, after a bit of reflection, could easily imagine "obstacles...

...As for nuclear power, there are so many "obstacles" that they can hardly even be listed in a 28-page chapter...

...It all might seem pretty hopeless...

...Like "slaves" in the antebellum South (he finds this parallel very illuminating) we are threatened by a Leviathan, "a few huge centralized plants controlled by su-percorporations under military protection...

...What is, after all, a "real shortage...

...They may well be better than those of every other energy "gapologist...

...This conception of necessity leads to exaggerated metaphors...

...But the hour is growing late...

...Nature is friendly, all things considered, and there is enough of her bounty around to satisfy anyone able and willing to compensate for the cost of providing it...

...Only a stern regime of "social governance," inspired by "social justice," can save us...

...energy market is so hopelessly regulated and distorted that prices no longer reflect costs...

...Thus do the nearsighted "real shortage" experts such as Stobaugh and Yergin play into the hands of the far-sighted "real shortage" ideologues such as Barry Commoner...

...In short, Energy Future succumbs entirely to the weaknesses we might expect in the "managerial" approach to public policy...

...neither defending nor condemning it, they merely accept its legacy as an "unfortunate" reality...

...Inevitably, they sometimes press our patience, and few readers are likely to jump upon learning that "one firm in Tennessee installed a $2.3 million boiler capable of firing 500 tons of pellets or wood chips per day...

...It goes without saying that the "energy in dustry" is dominated by "monopoly power" and that "the need to con strain this power is the reason for government regulation of the energy industry...

...Because they cannot be reasonable, conclude Stobaugh and Yergin, they must be tricked with subsidies, hidden taxes, and regulation-thus forced to pay more inefficiently than they might have payed voluntarily all along...

...Energy Future has achieved quite a bit of favorable publicity lately and, in certain respects, for good reason...

...Who in the end do we want making the cost-benefit decisions: the consumers and producers themselves, or experts with a "managerial perspective...

...They do not...

...Gapology, he explains, often leads to hysterical and extreme policy positions...

...All writers on the "energy crisis" are constrained to mention (though they usually avoid specifics) the rich history of government intervention in the energy industry...

...This is false...

...The assumption is this: No price can coax more "nonrenewable resources" out of a corrupted Nature and no price can suppress the "greed" in our corrupted hearts...

...Even giving them this benefit of the doubt, the reader must find their optimism a bit incredible now and then...

...This attitude has an ancient philosophical heritage, at least as old as Lucretius...

...Stobaugh and Yergin, with their glum fatalism, as usual leave the basic questions unanswered...

...How much higher...

...In fact, the same argumentative pattern repeats itself time and again...

...Since ordinary economic analysis is now obsolete, we are thrust inexorably into the shadowy world of "second-best" micro theory...

...Strangely, they have nothing to add about the superior efficiencies of decontrol-plus-rent tax (already implemented by Carter) over straight price control...

...As we have seen, they choose a suspiciously high figure for the "social cost" of oil imports...

...Yet the fact that this question is widely believed to have a deeper significance raises some serious questions about the effect that "energy crisis" rhetoric has had on us over the last ten years...

...For when at last we are convinced that man and Nature are corrupt, it is not experts that we will need, but saviors...

...Hence, we hear complaints of "energy shortage," "energy gap," "energy shortfall," or whatever else one might want to call it...

...And is the social cost of imported oil really so high...

...A driver waiting in a gas line would most likely say that it was plenty "real...

...The same is essentially true of the entire U.S...

...If, two centuries ago, every technological advance which seemed ex ante "improbable" to experts had been rendered, by regulation, impossible, we might well wonder whether the industrial revolution would ever have taken place...

...lew have described so well the half-hidden relation between "energy crisis" rhetoric and the philosophy of "real shortage" as economics professor Edward J. Mitchell...

...The amount of her remaining hydrocarbons is very small and that which remains resists the costliest methods of extraction or transformation...

...For Commoner has one basic insight which the Stobaughs and Yergins hardly glimpse...

...The perception is that shortage is "real" in a sense which no natural process can correct...

...What about the danger of "internal air pollution" from stoves and heaters in a well-plugged-up home...

...Why not also tax the owners of coal and uranium and wood reserves...

...Their general argument, such as it is, begins in the second chapter...

...Js it something we need take very seriously...

...But why stop at energy...

...Leading us through the mechanics of coal gasification, of AFR storage of nuclear waste, or of cogeneration, they are at their best when spinning out detailed case studies...

...One of Energy Future's much-vaunted remedies, for instance, is home insulation...

...The oil shortage means "drastic changes in lifestyles...

...producing sector...

...While Stobaugh and Yergin tinker with technical detail, Commoner boldly charges to the truth of the matter when he declares that the future success of energy production "depends a great deal on whether it would be governed by private or social interests...

...This seems fair enough...

...Why indeed stop at energy industries ? Why not similarly tax owners of real estate whose property has enjoyed an "unanticipated" price rise as people grasp for inflation hedges...

...True, it does not offer us new findings, but it does succeed in synthesizing countless recent monographs which otherwise we never would have noticed...

...And what is uncertain must also be arbitrary...

...Ordinarily, however, Stobaugh and Yergin are quite aware of the inefficiencies of price regulation, which they accept only in the misplaced spirit of pragmatism...

...But such a tariff on oil is simply not politically acceptable, and it is unrealistic to think that a tariff high enough to reflect the true social cost of imported oil would ever be enacted...

...One reason why most of these new alternatives seem so attractive is, of course, the fact that, unlike the traditional fuels, they have never been tested on a large scale (when you only have one lab demo, even moonlight power looks pretty good...

...For domestic oil they choose the lowest guesstimates of higher production at higher prices and then throw up their hands at the issue of decontrol...

...Either because Nature herself has grown into a niggardly old lady, or because our own desires have become inflated and inflexible, she is coming up less than full-handed...

...Such a reader would be naive, however, and needs to be tutored in the doctrines of "real shortage...

...Not only does he believe that inflation is the necessary long-term result of higher energy costs, but he insists that it is only part of a much broader strategy by which monopo lists are defrauding society...

...Such a society would be perfectly decentralized, economically "democratic...

...When President Carter tells us that the end of our naive "dependence" on cheap oil should teach us to abandon "greed" and reconstruct our "spirit," we are inclined to think that he is engaging in harmless homilies...

...the fathomless "shortage" yawns before us...

...Most of us have been brought up believing that a shortage of a commodity is a relative thing, something that always tends to disappear through the adjustments of our own desires and the relative valuations of others...

...What they typically fail to understand, however, is that their "real shortage" perception leads to an agenda which is essentially arbitrary and devoid of criteria...

...And when they come from the oil ministers of Iraq and Libya, it might be time we sit up and take notice...

...even if supply is perfectly inelastic, enormous deadweight welfare losses result from price being below marginal cost...

...We are not beyond redemption, though, since Commoner can show us how to build a "bridge" across the "chasm...

...Commoner, in sum, is among the few "energy crisis" writers far-sighted enough to construct an entire Weltanschauung fit for a society that must cope with a universe fallen from grace...

...The answer, we might suppose, would depend on whom was asked...

...Already in 1974, he noticed that a new specialty seemed to have been born, "gap-ology...

...Since the only real criterion for selecting policies is that the "shortage" be filled, the possible solution set is infinite...

...This in itself, they admit, should cause us no alarm...

...Thence, Commoner is led to his fan tastic conclusion that energy prices for "consumers" everywhere should be kept forcibly lower than prices for "producers...

...More seriously, society itself has degenerated into corruption...

...Already the ubiquitous forces of evil are gathering to force nuclear power and coal power upon us, to keep "Eden" hidden from our awareness...

...The reader begins to suspect that the authors are somehow rigging the case against themselves...

...Quickly following the urgent perception, of course, comes an agenda in the form of legislative contraptions- taxes, regulations, subsidies, quotas, allocations, price controls, or what have you...

...But cheer up, they are saving the best for last, the final chapters on conservation and solar power...

...If the new fuels and devices are efficient, would not people and firms already be marketing them...

...Here, all sorts of ideas suddenly seem quite promising, and we can delight in learning how many millions of barrels of oil per day can be saved by insulation, how many millions by solar heaters, how many millions by methane, and so forth...

...in their greed, they refuse to pay for their consumption at cost...

...It is a neo-medieval vision filled with guilds and '' stable prices,'' a vision devoid of risk or imagination or change...

...And yet we wonder, are the selfish appetites of Americans really so intractable...

...In the midst of such a sordid scenario, he cries out at '' the great American taboo against even hinting that social wel fare might be a better reason for investment than private profit...

...We are told, for example-by the same experts who thought long trains an "obstacle" to coal production-that wood could save us "the oil equivalent of 10 billion barrels per day" if we could only find a way to grow it that would not require "all the commercialized forest land in the United States...

...rather,, it has to do with the underlying "real shortage" perception...

...What is wrong with this book is something more important, namely, that behind the surface of detail the authors' basic argument lacks a coherent economic perspective, evades all the significant political issues, and shows an incredible timidity in the face of anything controversial...

...By now the reader might ask whether this whole discussion is rather academic...

...Next they come to coal and nuclear power, two sectors where price controls and renewability are not at issue...

...Stobaugh and Yergin, for example, take care to defuse the insupportable ''monopoly" thesis and wisely downplay (though they do mention) the deadly myopia of the energy cost-inflation argument...

...Against the mainstream Western belief that a basic proportionality exists between man and Nature which allows her to be progressively humanized, there have always been those who believe she is a phantasm or a jokester, from whom we can count on nothing and were wicked for counting on anything in the first place...

...At any rate, they come up with a very high figure, about $35-$9O real price per barrel when the market price is $15...

...As the literature of "energy crisis" piles up around us, however, we are surrounded by an entirely new attitude...

...Keeping our attention strictly focused on the requisite mbd's, BTU's, and kw's that will fill the "shortage," they are fearful lest we ask simpler questions about how the shortage came to be or whether indeed it is much larger than they say...

...the fact remains that they are nothing but guesswork...

...In their envy, people no longer abide paying a profit to others...

...Once accepted, the perception works to the advantage of a much smaller and less expert-though much more zealous and politically astute-group,.those who have desired to remake man and Nature all along...

...Essentially the same answer: complete pessimism...

...Natural shortages are "real" and absolute...

...Our society, he teaches us, is flying headlong to the disaster of "exponentially rising energy prices" which are already oppressing the hapless masses...

...Gapologists of all persuasions constantly speak in such urgent phrases...

...They are likewise innovative at finding instances of market failure, such as their peculiar notion that the market price of a house does not reflect its use value (another justification for subsidizing household energy items...

...So we do not have any tariff, the domestic price of oil remains much lower than its true cost, and the energy shortage is suddenly "real...

...Moreover, if we allov, more efficient energy firms to devour the less efficient, we risk another "Great Depression...

...Most of the experts, of course, are decent and moderate people, and, as we can see from the recent analysis by Robert Stobaugh and Daniel Yergin, Energy Future: The Report of the Harvard Business School Energy Project," their recommendations for more legislative policy-making cannot in themselves be considered onerous...

...As opposed to "economics," which is the science of how we successfully adapt to scarcity, "gap-ology," the study of "gaps," is the science of how we fail to adjust to scarcity...

...Some policy-packages, tending to coerce demand down, are called "conservation-oriented...

...A bicyclist in Manhattan, on the other hand, would respond that it was not "real" enough...

...After all, from 1959 to 1973 we survived a stiff quota on imports and, given Carter's "no more" pledge this summer, we will within several years again have the equivalent of a high tariff...

...Perhaps they do have some coherent idea of a sort of Fabian "managed" marketplace...

...The agenda is that we bridge shortage via artifices, ranging from a few political directives to accepting strange new mores to radical preparation for an apocalypse...

...In the final chapter we learn that this necessitates a considerable list of new subsidies and regulations, market imperfections that will "compensate" for the imperfections we already have...

...What about domestic natural gas production and the prospect of gas price decontrol, which they agree would greatly increase economic efficiency...

...He knows full well that if and when most of the public comes to share the "real shortage" perception, the Stobaughs and Yergins will be cast aside and the ideologues will come to the fore...

...Driving us there is a cabal of monopolistic corporations, establishment politicians, and their toadying experts who believe in wasteful, capitalintensive "solutions...

...Indeed, his first two chapters on the way in which the Carter ad-ministration's PIES econometric model was manipulated by political interest groups, each trying to inflate its own predicted "need" for energy, offer a poignant foretaste of how the "real shortage" perception threatens to debase our future national policy-making...

...Nevertheless, their technical clarity is commendable...

...Meanwhile, energy experts inundate us with reports which show flat supply curves and exponential demand curves portending disaster...

...But when we consider that oil is monopoly priced by the OPEC cartel and that for political reasons the price may skyrocket at any moment, we must judge the "social cost'' of oil to be considerably higher than its market cost...

...For those of us who do not espouse a philosophy of "real shortage," this has been a history of disasters-highlighted by the OPEC-like pro-rationing of the Texas Rail Commission and by the eat-drink-and-be-merry regulation of interstate natural gas...

...Yet the assumption on which such calculations rest remains tacit...

...Or take the issue of oil production rent taxation (otherwise known as the "windfall profits tax...

...One possible solution is to place a tariff on imported oil, thus raising its price to something approaching $35 a barrel...

...Commoner's political acumen is superb...

...They tell the story of how the U.S...

...Discussing natural gas, for example, they state that "if gas supply really is inelastic with respect to price" then deregulation "would indeed mean a transfer of wealth from consumers to producers without any compensating economic or social benefit...

...It is highly readable, a fair introduction to the technical history of energy production in this country, and a generally even-handed presentation of some basic data...

...it is the "lifeblood of the nation...

...This nominalist tradition, in turn, has always entailed both a perception and an agenda...

...Every energy source except the rays of Sol himself is nearly exhausted...

...Yet, as we might expect by now, Stobaugh and Yergin point out all sorts of new "obstacles" and "difficulties...

...We need not linger over the question of whether Stobaugh and Yer-gin's recommendations are better or worse than anyone else's...

...By any ordinary standard, of course, Commoner is an economic il literate...

...It will be a world of photovoltaic cells and water heaters on every roof, cogenerators chugging away in every basement, and "bio-mass" methane plants (recycling our weeds and excrement) in every town...

...Oil is no longer a commodity traded in a market...