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FRONT PAGE CONTRIBUTOR

Is The “Green” (Hybrid) Economy A Good Idea Or A Bad Idea?

Perhaps the most distinctive and broadly-observable change in the public-policy milieu as we enter 2009, is this: America has a new faith in the power of experts to cure whatever ails us.

It’s a season not only for big ideas (very few of them new) in public policy. It’s also a season in which we’ll try out a lot of them, in the naive hope that society will become a much better place as a result.

Why is this a naive hope? Because the most recent episodes of grand faith in technocracy (the New Deal and the Great Society) produced results that, while sometimes interesting, were always supremely costly. It takes a hubristic government, infatuated with its own capabilities, to spend the kind of dollar amounts that are simply beyond comprehension. The current debate over fiscal stimulus proves that yet again.

The other way for society to innovate, of course, is through private enterprise. This never goes out of style, although government has very effective tools at its disposal for weakening and defunding it. When allowed to work, however, it always produces results that are very interesting and economically very efficient.

We can see this dichotomy yet again in one of the most important items that we’ll all be discussing for the next few years: how to encourage a green/hybrid economy in the US.

With characteristic hubris, the New Technocrats who are coming to power in Washington refer not to encouraging green technology, but indeed of transforming the whole US economy to a green/hybrid one.

What can this mean? To judge from past statements by such as Rahm Emanuel, the objective is for the US to consume one half as much gasoline ten years from now as we do today.

That’s it in a nutshell. We’ll know we have a green/hybrid economy when we stop using gasoline. Let’s unpack this along a few dimensions.

What’s bad about gasoline? Two things: first, it comes from petroleum, which we have to buy from people we don’t like and who don’t like us, namely terror-sponsoring states in the Middle East. Second, burning gasoline emits fossil carbon into the atmosphere.

It’s no good to solve the first problem by producing more petroleum domestically, or moving to alternatives that are also based on fossil-carbon, like natural gas or gasified coal, because they run afoul of the second problem.

And it’s no good to solve the second problem by pointing out that anthropogenic global warming may in fact be a much smaller effect than global cooling produced by variations in solar radiation. This causes people to suspect that you’re a bad person at heart, which disqualifies you from participating in the debate.

So we know we have to find something that we can use instead of gasoline. What do we actually use gasoline for? Primarily to run our automobiles. There are many important secondary uses for petroleum products, but proportionally the big problem to solve is motor transport.

Well, I can imagine how private enterprise would react if the cost of motor transport were suddenly made prohibitively expensive (say, by increasing the Federal gasoline tax to the point that gasoline costs as much as it does in Europe, about $8/gallon, as incoming Energy Secretary Steven Chu has advocated): people would find ways to run our economy without driving as much. Over the course of a generation, this would result in comprehensive changes in land use and in the structure of employment.

Among other things, it means that the coming enormous “investments” in “infrastructure” are going to be a total waste of time and money. An economy that seeks to minimize the use of motor transport will derive minimal benefit from new roads and bridges.

But that’s not really what people are thinking. They’re thinking about how to electrify cars and trucks.

Soon enough, the thinking goes, all of the new vehicles we produce and drive will run on electric motors fed by batteries that are recharged from household electric power. (The alternative dream, hydrogen-based fuel cells, is too many grand leaps away from reality.)

The big problem we need to solve here, is batteries. The whole dream of a green/hybrid economy rests on whether or not we can store electricity much more safely and cost-effectively than we can today. (Forget about the safe-disposal problem, as new battery materials aren’t likely to be environmentally benign: that’s a problem we won’t confront at least until after the next Presidential election.)

There’s also a big problem with generating the electricity that will be used to power vehicles. As a practical matter, it’s going to be produced by burning coal because we know we don’t like nuclear power. Wind and solar will continue to attract massive investment, but they’re far less efficient than coal today for a variety of reasons.

Another big thing we’re talking about doing is a “national grid,” or a new generation of electric-power transmission infrastructure. Why would that be useful? Because, the thinking goes, we can install solar and wind-power collection capacity where the sun shines brightest and the wind blows strongest, and then transport it over new, improved power lines to everywhere in America.

So in sum, these are the three components of a new green/hybrid economy: new battery technology; new solar/wind technology; and new ways of moving electrical power.

It’s a considerable understatement to say that all of these objectives are incremental refinements of ideas that have been around for decades. None of them represents revolutionary thinking, and none of them is truly innovative. As I said upfront, when you place your faith in established experts, you get inefficient, conventional thinking.

To be sure, there are many people in the technocracy who have observed the near-magical power of the profit motive to produce truly radical innovation. That’s why such people are constantly on the lookout for “market solutions” and “public-private partnerships” to solve problems that are framed in conventional, non-radical ways.

One of those people is John McCain, who during the campaign proposed the ridiculous idea of offering a $300 million bounty to whoever produced a much better battery for automobiles. Why ridiculous? Because that sum of money pales in comparison to the riches that such an achievement will garner. We don’t need economic incentives to solve this problem. The incentives are already there. The problem is just hard. A real solution to the problem may be totally different from anything that John McCain or anyone like him even imagines.

Here’s the real nut of the problem: since we’ve chosen as a nation to hurtle down the path of seeking solutions to technically hard problems by brute force, we face a grave danger of wasting a whole generation’s worth of economic resources.

Far, far worse, we also face the biggest danger of technocratic, government-driven solutions to hard problems: because of the political stakes involved, such programs are too big to fail. Whatever they produce will be deemed a success, and its use will be mandated.

Why is that a danger? Here’s why:

Because we may produce a motor-transport solution that is economically less efficient than the current petroleum-based one.

That’s a very simple but profound statement. Don’t gloss over it too quickly.

If we come up with solid (and unforeseen) technological breakthroughs in battery, solar and wind technology, they will only be worth implementing on a grand scale if they make the total economic cost of driving vehicles far less than it is today. Not the same or a little better or a little worse. They will need to be much better.

If we can achieve that, then the dream of a green/hybrid economy actually will rise up to the claims being made for it, which amount to nothing less than an economic renaissance for American industry. But if we don’t produce those grand breakthroughs, then the green/hybrid economy will impoverish America for a generation.

The naive faith of experts is that, by simply spending enough money and giving enough fancy speeches (and perhaps by passing out a green/hybrid version of Gerald Ford’s WIN buttons), we’ll make the breakthroughs in basic science and technology that decades of private effort have so far failed to produce.

But research activity that is driven by private enterprise either has to pay off or it doesn’t get pursued. This is a powerful mechanism which prevents waste.

Research activity that’s driven by government and politics doesn’t have that automatic waste-prevention system built into it. We face the danger of building a green/hybrid economy that will bankrupt us even faster than trillion-dollar deficits will.

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