Wednesday, February 29, 2012

National Energy Policy -or- National Energy Politico Policy with Price Distortion Benefiting the Politico?

Each and every time energy prices increase to the point that consumers are upset about the price of energy (generally gasoline prices) the mantra is repeated of “why don’t we have a national energy policy!”. As the argument goes, we have had 40 some years to come up with policy yet we have no policy. Nay, nay! The US does have a national energy policy. Better stated, the US does have a national energy politico policy.

The US energy politico policy is based upon the vision of do-gooders combined with artificial pricing that purposefully, through politicos through the mechanism of government, suffers from just about every phenomena pointed out by public choice theory. Or more succinctly:

I think the government solution to a problem is usually as bad as the problem and very often makes the problem worse. - Milton Friedman

US energy policy is foremost driven by go-gooders also known as environmentalists. Their intentions are worthy but they suffer from the idea that categorical risk management trumps real world, real-time, real flesh and blood people that face trade-offs resulting in real world incremental risk management.

The next part of the US energy policy is artificial pricing. Alternative energy programs are uncompetitive at price point (P) hence taxpayer subsidy (s) is introduced to make the make prices  more competitive resulting in price P(s) which is artificial. Artificial to the tune of billions of taxpayer dollars every year, year in and year out.

The combination of unrealistic categorical risk management advocated by the do-gooders and P(s) then becomes the multi-billion dollar conduit for:

(1) dependent political consistency building exercises by politicos of a group of go-gooders through taxpayer dollars,

(2) the do-gooders worthy intentions, as always, are hijacked by a set of crony capitalists in search of taxpayer dollars as a substitute for competition [rent seeking],

(3) the rent seeking causing taxpayer dollars to be funneled into a myriad of uncompetitive items represented by P(s). These uncompetitive items act as a mirage for the do-gooders and mainly as dependent political consistency building exercises by politicos of the crony capitalist.

Meanwhile, back in the real world economy of real flesh and blood people, price (P) regarding energy escalates. James and Jane Goodfellow then complain about price (P). The complaint surrounding price (P) is that price should not be so high and hence where is the energy policy that would have stopped such as escalation in price?

The basic problem with the Goodfellow’s complaint is that price (P) is not functioning. In a world of scarce resources with alternate uses, the rationing agent is price. Price, in other words, functions in a world of trade-offs none of which are related to categorical risk management. Hence the result is that price is distorted and we arrive at the Goodfellow’s complaint about price.

One might say that energy prices, specifically gasoline, is not a price phenomena as much as a distorted price phenomena due to national energy politico policy with distortions in price benefiting the policy purveyors, that being the politico.


  1. So you say US energy policy now is driven by environmentalists. OK. What was the US energy policy driven by when Bush and Cheney were in power? Certainly that administration was not a friend of environmentalists, I think you would agree?
    If so, how come the prices of gas rose sharply under Bush and Co. as well; we were above $3 under Bush, remember? If you agree, then the point here is that the presidents do not have much control over prices of gas as it is being sold on the global market, unless they set caps on prices.
    Either way, there is no much the current or former president could do, other than maybe do NOT start a new war in the middle east. Under Obama the drilling and exploration has increased steadily since 2009, so that does not help. Keystone Pipeline is a gimmick, since the pipe willrun to the gulf where oil companies will be able to use ports to easily export it to the highes bidder, e.g. no domestic oil unlike republicans want you to believe. So, not much can be done by the current prez or anybody...just explore all sources of energy, conserve, don't start unnecessary wars...or maybe if you want to be a communist, set price caps. That's it.

    P.S. You should not have inserted Milton Friedman's quote in your post. When I got to that, I easily understood which camp you belong to. Supply side economics failed miserably already. thank you

  2. Anonymous states:

    “So you say US energy policy…..”.

    The point of the post is to explain the phenomena of politicos hijacking the notions of do-gooders and the result being all those wonderful negative externalities discussed in public choice theory. You might consider reading The Calculus of Consent, Logical Foundations of Constitutional Democracy by James M. Buchanan and Gordon Tullock for more information regarding public choice theory