Arnold Kling  

Ethanol Mandate

Drug Price Discrimination?... Bond Market Bubble?...

Lynne Kiesling points to this article by Joel Schwartz on the ethanol mandate.

what if our elected officials ... forced you to pay $180 more each year for gasoline that contains an antiquated additive you don't need, and that could actually worsen air quality?

Schwartz argues that the focus on ethanol is driven by rent-seeking from agricultural interests rather than sound environmental or energy policy.

For Discussion. Schwartz argues that on environmental policy Congress should set goals rather than mandate means. How would that impact rent-seeking?

COMMENTS (3 to date)
Mcwop writes:

Goals will not impact rent-seeking. In fact, when solutions to achieve goals are presented rent-seeking appears in unexpected ways. A good example is the offshore wind farm proposed for Nantucket Sound*. Many environmentalists oppose the plan, or are oddly taking a “no position” policy regardless of this being the type of energy alternative hyped by environmentalists.

Here is an interesting quote:
"I definitely support alternative energy," Robert Kennedy told a local public radio program. But he insisted that the wind farm plan "makes no sense for the public because the costs it's going to impose on the people of these regions are so huge . . . probably larger than coal."

If only the same level of analysis/reasoning factored into the ethanol decision.

*I have no position on the proposed wind-farm.

Eric Krieg writes:

I'm not convinced that the ethanol mandate is entirely rent seeking. Sure ADM and the corn growing states are rent seeking. But how do you explain the environmentalists? The oil companies? The car manufacturers?

For whatever reason, the powers that be have decided that we need reformulated (oxygenated)gasoline. In the past, this has resulted in a fragmented market, with some areas using MTBE and others ethanol. But with MTBE being "asbestosed" out of the marketplace, lawmakers are simply unifying the market behind ethanol.

In my mind, de-balkanizing the market behind one oxygenate and creating economies of scale is a good way to go. ADM is a monopoly, of course, but not for long. Ethanol isn't that hard to produce! And the market is so wide open now that any company could get in there and make money.

And ethanol could get much, much easier to produce. Work is being done to bioengineer microbes to more efficiently produce the stuff. In the near future, ethanol may be a net energy gain.

David Thomson writes:

I concede that the political support of ethanol may produce splendid results. There is also the possibility that Shaq O’Neal may slip on some moisture on the floor and I will be able to score on him. Just about anything is hypothetically possible. Still, the odds suggest that the private sector is our best chance to solve our energy problems. Our politicians are essentially acting like gamblers betting on a long shot---and they are playing with our money, and not their own!

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