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Energy Bills and Central Planning / Artikel mises.org

verfasst von - Elli -, 16.12.2003, 20:29

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Energy Bills and Central Planning
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by William L. Anderson

[December 16, 2003]

<img alt src="http://www.mises.org/images3/energy.gif" align="right" border="0" width="241" height="167">In
the aftermath of the U.S. Senate's failure to pass an"energy bill"
for the coming year, the usual punditry has befallen us. From the demands that
the bill goes in the"wrong direction" because it does not emphasize
"alternative" energy sources, as well as increase the subsidies for
mass transit to the Washington
Post's demands that Congress impose a tax in order to pay the"true
costs" of fossil fuels, the"experts" insist that the
government must direct the production and use of energy.

While the United States does not
have a central planning agency like the former U.S.S.R.'s Gosplan, in effect,
we still have central planning all the same, at least when it comes to the
energy industry—not to mention most other areas of business as well. Whether
or not it comes in the form of a central agency, like in the U.S.S.R., or a
combination of the three branches of the U.S. Government, centralized economic
planning always creates chaos, inefficiency, and, ultimately, economic
hardship. One would like to think that the policymakers of this country
learned something from the energy debacles of the 1970s, but from the latest
monstrosity of an energy bill, it is obvious that Washington's political
classes have learned nothing except how to manipulate the economy in order to
wield power over others. (And that is something they have learned very
well.)

The Post labeled the recent
"energy" bill"as a piece of legislation stuffed with more
goodies than a Thanksgiving turkey." The assessment, while true, does not
address the real issue of why there should be any"energy"
legislation at all. (The Post editorialists justify energy legislation
because of U.S."dependence" upon"foreign oil," a subject
with which I dealt in an earlier article on
this page. Furthermore, they call for a series of laws to deal with energy
issues, not just one"comprehensive" bill.) Nevertheless, one needs
to deal with the particulars of legislation, not to hope for an"improved"
version in the future, but rather to point out why such legislation always is
going to be an exercise in absurdity.

In its earlier and heady days,
socialism was supposed to substitute"rational policies" for the
supposed chaos of the market. Instead of having individuals competing with
each other to produce and sell goods in the market, socialism instead would
create a process by which planners could rationally determine the needs of
individuals in society, then direct production and distribution toward those
ends. Moreover, because planning was to be placed in the hands of economic
"experts," there would be no need to deal with the interference from
politicians and the special interests that they represent.

On the other hand, the modern
legislative process when applied to energy matters means that members of
Congress (or any legislative body, for that matter) are going to favor their
most important constituents, which supposedly is the polar opposite of
"rational" socialist planning. To think otherwise would be naïve.
This means that one should not be shocked, for example, when a member of
Congress from Iowa or Kansas demands subsidies for corn-based ethanol, or when
a Congressman from Texas wants new tax breaks for oil companies. (Former Sen.
Bob Dole of Kansas often referred to himself proudly as"Senator
Ethanol.")

Such obvious pandering to"special
interests" is easy to condemn, yet such attempts to benefit the business
constituents of certain members of Congress is no less outrageous than what
the"public interest" groups are demanding. For the most part, what
we hear from such groups as Public Citizen (Ralph Nader) and the various
environmental organizations is that the government must force automakers to
build fleets of vehicles that meet higher mileage standards.

Despite the rhetoric that the
pundits repeat ad nauseum, economically speaking there is no
difference between Nader's demands for increasing mileage standards versus
Sen. Tom Harkin's call for subsidies for corn growers in his state of Iowa.
While Nader's words are treated as high-minded and far-sighted on the
editorial pages of the Washington Post and the New York Times
(and Harkin's demands are regarded as political pandering), in truth both are
nothing more than a call for central economic planning, and both ultimately
create more problems than they supposedly"solve."

As noted earlier, socialist
central planning supposedly involves rational individuals who do not have
vested interests in their decisions determining what is best for an economy.
Special interest based legislation, on the other hand, panders to moneyed
interests or those groups that can"get out the vote." Moreover, it
is easy to see that the latter is going to create many problems, something
that numerous writers have handled in these pages over the past few years.

Yet, both socialist planning and
"special interest" legislation are simply two sides of the same coin,
as they are attempts to turn the economy in a different direction than what
would be the case if individuals were freely permitted to make economic
choices unencumbered by governmental authorities. Let us look first at the
effects of ethanol legislation.

The government has required that
in some localities, ethanol, a corn-based alcohol, must be mixed with gasoline.
The official rationale behind this policy is that alcohol burns more cleanly
than pure gasoline, which supposedly means less air pollution. The follow-up
rationale is that the use of homegrown ethanol requires the purchase of less
oil from overseas—and supports the economy at home. Both are dubious at
best.

As Ronald
Bailey recently wrote, the alleged
environmental benefits from ethanol are about nil, and when one factors in a
number of other factors, it is clear that the subsidy for this product is not
about saving the earth (or even saving Americans from the supposedly-rapacious
OPEC cartel). When it comes to easing pressure to purchase oil from abroad,
Bailey notes that the energy used to distill a gallon of ethanol is greater
than the energy ethanol creates. That mean Americans must run an energy deficit
in order to make ethanol, and that fuel must come from somewhere, including
OPEC nations. (Again, let me emphasize that I am not agreeing with the
argument that there needs to be less oil imported in this country. I am just
saying that ethanol clearly does not help us to achieve that particular policy
directive.)

No doubt, the farmers who are paid
higher-than-market prices for their corn believe that the ethanol program is
worthwhile. Furthermore, executives at Archer-Daniels-Midland, which is a
major producer of ethanol (and a major advertiser on the Sunday morning news
shows), are always willing to justify this program to critics.

Yet, the real economic issue here
is not what the ethanol policy does or does not achieve, but rather what would
be the state of affairs in the ethanol program's absence. If midwestern
farmers did not have subsidized producers of ethanol purchasing their corn (which
is also subsidized), they would have to find other markets. As Bailey notes in
his article, one of the outcomes of the ethanol program is that cattle
ranchers must pay more for corn, which ultimately has an effect upon beef
prices that consumers pay.

Keep in mind that no one is
prohibited from producing free market ethanol. However, without the
directives of the Environmental Protection Agency forcing fuel producers to
mix ethanol with gasoline to achieve alleged clean air effects, no oil company
would want to deal with the stuff. (Because ethanol easily separates from
gasoline, the mixture cannot be transported by pipeline, which means that it
must be blended with gasoline as close to the final use as possible. Thus, the
blending process is expensive and troublesome.)

When clean air laws demanded major
changes in gasoline reformulation in the spring of 2000, there was chaos in
many cities, as disruption in the distribution of gasoline caused prices to
spike above $2 a gallon. While consumers and politicians (naturally) blamed
oil companies, the real story was much more insidious. Taxpayers (and
consumers) paid taxes (and higher prices) to subsidize the corn which, in
turn, was made into ethanol (also subsidized). The process of adding
tax-funded ethanol in huge quantities disrupted the smooth flow of fuel, which
meant price spikes—and most likely did not clear the air one whit. In other
words, Congress forced American taxpayers and consumers to pay large sums of
money for a product that in a free market they would not purchase.

Whenever the government has tried
to control the oil markets, whether in the 1970s or in recent years, the
result has always been chaos. From the gas lines almost 30 years ago to the
wild price spikes in the spring of 2000 and 2001, the government has turned
the orderly setting of the free market to the free-for-all that characterized
the gasoline markets during those crisis periods.

The early supporters of outright
central planning believed that economic planners would replace what they saw
as the disorderly free market with a"rational" plan that would
coordinate producers, sellers and consumers. And as anyone familiar with the
results of central planning knows, what emerged was not the picture of order,
but rather the poster child of disorder. From individuals standing in long
lines just to purchase basic items to the horrendous quality of goods, the
economies of the communist countries were the best empirical refutation of
socialism.

While price and allocation
controls in the United States turned oil markets here into Soviet-style
disorder that imposed huge costs upon motorists, one should remember that the
other government policies on energy also are very costly and ultimately lower
our standard of living. The ethanol subsidy and the gasoline mileage standards
by themselves do not force people to wait in long lines, but they do limit
consumer choices. They force producers of goods—in this case, automobile
manufacturers—to make cars that people really do not want to purchase, and
they make individuals purchase lower-performance fuel that they would reject
otherwise.

(Keep in mind that if car buyers
in this country wanted the highest-mileage vehicles, there would be no demand
for sport utility vehicles and other low-gas-mileage automobiles. Thus, the
demands by some for Congress to order an increase in automobile gas mileage
standards is nothing more than an attempt to circumvent the desires of
consumers. The irony here is that Ralph Nader, one of the loudest voices for
high-mileage standards, is called a"consumer advocate" by the U.S.
media.)

No, there are no economic agencies
in this country like Gosplan, but the U.S. Government, as well as many state
and local governments, engage in central economic planning all the same. While
this article deals only with some energy issues, there are many other examples
of planners at work, from those who write and enforce government rules on
medical care to the advocates of"smart growth." In the end, it is
still central economic planning and, not surprisingly, it does not work any
better here than it did in the U.S.S.R.

_____________________________

William Anderson, an adjunct
scholar of the Mises Institute, teaches economics at Frostburg State
University. Send him MAIL.
See his Mises.org Articles
Archive.

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gesamter Thread:

Energy Bills and Central Planning / Artikel mises.org - - Elli -, 16.12.2003, 20:29
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