IS: So attempting to influence market forces in the auto industry is futile?
JT: Well, you basically subsidize people to go ahead and buy certain cars; and if you’re going to provide an economic incentive for people to do X, Y, and Z, they’re going to do it. It’s not that government subsidies can’t affect industry, nor is it that fiscal programs can’t change business; all these things they can do. If your measure for a successful governmental program is changing behavior, you can achieve success easily. But if your measure is its producing more benefit than cost and improving overall economic efficiency, there is very little evidence that we can do that in any systematic way. “Cash for Clunkers” certainly didn’t do that.
IS: You have said that “alternative energy is not economically competitive in America today [without] large-scale government intervention…. Market actors will produce alternative energy when it makes economic sense for them to do so.” What conditions are necessary to foster the economic viability of alternative energy?
JT: The only thing that government can do is to leave markets unrigged and to allow market actors to invest freely; thus, if good investment opportunities arise, capitalists will take advantage of them and rush in for profits. That’s all government policy needs to do: step out of the way and allow profit-hungry investors to take advantage of opportunities if and when they arise. If they do not arise, there is nothing government policy can do to change that.
IS: Methane is a greenhouse gas which is twenty times more potent than carbon dioxide and is organically released through various organic processes, notably the melting of polar ice caps: Greenhouse gas emissions lead to the melting of the ice caps, which cause more methane to be released, continuing in a roundabout. Why do global warming advocates focus solely on CO2 and ignore methane?
JT: They focus on carbon dioxide because that is where the political fight happens. The fight today is largely about coal-fired electricity; secondarily, it is about crude oil. It’s not just from the right or the left; they both have legislation concerning specific sectoral, not cross-sectoral, regulation of greenhouse-gas emissions. In other words, ideal policy would treat all greenhouse gas emissions equally, be it from big sources, little sources, carbon dioxide or methane; you would weight them and treat them correctly. But that’s not the way the political world works. In politics, you’re going to find regulation directed at “bad guys,” at entities that do not have as much political influence as others, and that’s why the debate is the way it is. The politicians need to mobilize people; they cannot say, “Fight these guys, lest the cost of methane emissions be reflected in some obscure way in the economy”—that’s not going to tell anybody anything. If you say, “If these Al Gore guys get their way, your power bills will go up by fifty percent,” that’s a story you can tell; that’ll mobilize votes. You can explain why people act to regulate in the manner they do based on political calculation.
IS: Do any economically feasible economic options exist for reducing greenhouse gas emissions?
JT: There are some approaches, but the low-cost options would be unlikely to have an effect. If you look at the academic literature, you’ll find that if you accept IPCC narratives on climate chance, then it makes sense to encourage mitigation projects that cost somewhere less than twenty dollars per metric ton of greenhouse gas. Not very many things meet that threshold.
IS: Is that a popular notion? The market does not have a solution for greenhouse gas mitigation?
JT: One of the great enemies to this world is Amory Lovins, from the Rocky Mountain Institute. He’s a leftist energy expert who passionately disagrees with me on the majority of issues. Yet he argues that energy efficiency is so cost-effective, so attractive to private investors, that there is no need for the Kyoto Protocol, or the Copenhagen Treaty, or anything of that nature, to regulate greenhouse emissions, since massive amounts of greenhouse-gas-emission reductions will occur through the endogenous promotion of energy efficiency in the market—which is occurring today. That’s the story he tells, and he’s the very left-and-center Jerry Taylor! I would love that story: the market solving your problems without any government intervention. Yet I think that’s complete bullshit. I don’t know where these energy savings are; we could find some, and there have been minimal endogenous improvements, but nothing dramatic or noteworthy has occurred. He is over-optimistic. I wish I were wrong, and it would be very convenient for me to tell a different story. I’m sure there are cost-effective operations like switching fully to different types of light bulbs, but nothing that could be implemented by Washington.
IS: Thank you for your time.
JT: Thank you for yours, and for keeping up with my research. I didn’t think anyone actually read it.
