Arnold Kling  

The Next Bubble?

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Nick Schulz and I write,


If Congress and the president want to push the country in a greener direction, there are easier -- and safer -- ways of doing it. Put a price, in the form of a tax, on the pollution or emissions you don't want (such as carbon). And subsidize early-stage, basic research at the university and lab levels.

Beyond that, let the unique power of the market to experiment through trial and error and to sort and filter innovations proceed without meddling. And let entrepreneurs compete vigorously to pump those innovations into the marketplace without government's attempting to pick winners and losers. Otherwise we are setting the stage for another bubble. It likely won't be as large as the housing bubble, but it will be costly and wasteful all the same.

I have to admit that I was expecting better from the Obama Administration, given that it has many highly-regarded economists who know better than to get into the business of picking winners and losers among energy-related firms. Larry Summers in the past expressed contempt for the public-private hybrid of Freddie Mac and Fannie Mae. Someone should ask him what makes Fisker automotive a better government project.

UPDATE: The head of the IPCC runs a company with Kleiner-perkins investing? And I've read that Al Gore is an investor in Fisker. Crony capitalism? It doesn't get much cronier.


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COMMENTS (5 to date)
rpl writes:

I think you answer your own question right here:


Using our money as venture capital, he has provided the electric-car maker Fisker with $500 million in loan guarantees. This, even though Fisker already had substantial investments from the venture-capital firm Kleiner Perkins (the firm of which Al Gore is a partner; another partner, John Doerr, is a member of Obama’s Economic Recovery Advisory Board).

So, we funnel tax money to a company that is partly owned by policy makers and former policy makers. This is just plain cronyism, that's all.

Mike writes:

Beyond that, let the unique power of the market to experiment through trial and error and to sort and filter innovations proceed without meddling. And let entrepreneurs compete vigorously to pump those innovations into the marketplace without government's attempting to pick winners and losers.

I have to admit that I was expecting better from the Obama Administration

I agree completely with your point of view but am a little bit surprised that you missed a simple observation about what motivates politicians. Your solution is to "not" be pro-active but stand aside and let the market do its thing. No politician would do that because they have trouble justifying taking credit for the outcome. Haven't you noticed that the economy seems to be healing itself in spite of the flailing around by the Administration spending $700 billion on TARP, $787 billion on stimulus, and untold hidden costs on the economy of the uncertainty due to their activist interventions and concerns about unknown future regulations and taxes to pay for their activism.

The performance of the economy is a testimonial to its inherent strength not some brilliant intervention by the elites filled with fatal conceit.

This whole thing is an excuse to spend money and take credit for the unrelated outcomes (jobs created or saved, oh please!). They feel like kids who are temporarily invisible and turned loose in the candy store.

Marty writes:

Well, silly you for thinking a few high-status economists would make a difference.

Obama's understanding of economics as it relates to business and the economy is best understood by remembering that as a community organizer he planned to organize the poor residents of the Altgeld Gardens public housing project into a politically potent force, and that would somehow get the nearby, closed Wisconsin Steel works reopened.

Those economists work for Obama, not the other way around. Anyway, I don't recall where many of them were strong on the economics of the firm or had any real business experience.

You believed because you wanted to believe, not on the basis of any real evidence. Admit it!

Matt writes:

The you know what certainly rolled down hill (literally) when our infinitly wise politicians decided that corn ethanol was worthy of American taxpayer contributions. You're welcome Mexico...

Not!

It's true that government subsidies don't have to be as anti-market as they are, but I think it's time we all ask ourselves how realistic a change in that behavior really is.

Arnold, do you think that it's politically realistic that Washington takes a more pro-market approach to the green subsidies (or any subsidy for that matter), if not a lesser one?

Mike Rulle writes:

When the house bill passed (last May?)you said something like; "it was the worst of all worlds, it maximized rent seeking and minimized restrictions on greenhouse gas emission". I have used that theme in my own writings. 1997's Kyoto is another example of noise masking wealth transference.

The reason this happened, always has happened, and always will happen re: "climate change laws", is the political core of this movement is all about wealth transference (from US taxpayers to foreign economies, large corporations, researchers, and most of all, the political class).

Imagine a true environmental catastrophe on the horizon, like an asteroid arcing toward earth with scheduled impact of 2035. Is your guess that the nature of funding for dealing with this problem would be different? My guess is it would be. The reason is we would believe the evidence and the consequences of a collision. No one really believes the climate junk.

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