There are two main constraints causing the electric car problems. One is range - how far can you go before you need to be back at home recharging? Until there are electrical fill-up stations, this is an issue for anyone wanting a car for more than running around town.
The other, and less talked-about problem is the capacity of the power grid. If everyone could, today, switch to electric, and all gas stations could become quick-charge outlets, we'd still be no further. That's because charging up all those cars will be a considerable drain on the power grid - a grid with so little spare capacity that everyone using A/C in the summer can cause rolling blackouts to conserve power. Electric vehicles will need a LOT of power, especially in aggregate. And if we're not building that capacity now, we won't have it when the technology otherwise exists to have electric substitutes for gas cars.
Wednesday, March 05, 2008
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9 comments:
That's an interesting point.
Shouldn't market forces basically balance all of this out?
Market forces will generally find the lowest-cost/highest-profit way of doing things.
But there's a lot of non-market activity, especially when it comes to utilities (see Harry Reid's strong and repeated opposition to a new coal power plant in East Nevada).
The market solution would be "the price of power goes up until those who can afford to purchase the sharply limited supply can, and those who can't afford power go without it." This increase in price should eventually encourage new investment and production of power plants, driving the price back down. There's a market solution, but it's politically unviable. You don't just shut off power for the poor... though the prospect of not having electricity might help overcome a lot of NIMBY resistance.
But perfect-market analysis is pretty tough in the power market because the barriers to entry are very high - there is a huge capital investment required, and nobody wants you to build anywhere near them, nor in "pristine wilderness" areas.
Further, my big fear is that government mandates will drive plug-in electric produstion into a power grid that can't sustain it. For other politically-driven energy policy that fails to consider all the ramifications, see ethanol (corn, driving up food prices by subsidizing an inefficient means of producing ethanol when imported sugar is much better suited for it; biomass, for requiring more energy to create the ethanol than you have available to use in the finished product... meaning it's worse for the envoronment than going pure-gasoline as long as your power is coming from fossil fuels).
Question, and this is more broad than your post, but why do you consider political activity (such as Reid's opposition to coal plant) non-market activity?
To me, it seems like Reid's opposition is proxy for his constituents' opposition, and their political opposition is one form of placing value on an object similar to the way in which straight forward buying and selling does. So, in other words, Nevadans could boycott a coal plant, which would be "negative" economic activity, but in a sense by Reid opposing it, that accomplishes the same thing.
"To me, it seems like Reid's opposition is proxy for his constituents' opposition"
Because I think this is only true in politics once in a while, at best. I'll never forget when I was a young teen and heard on the radio that Senator Reid was voting to approve the Brady Bill over strong opposition to the bill in Nevada. He said, in essence, "I don't care what the people of Nevada say. I'm giving them this bill whether they like it or not."
I do think that people opposing things they don't like has a way of revealing their preferences, but politics is much better at responding to a vocal minority than aggregating the sum total of people's revealed preferences.
Politics is like a market, but its feedback loop is much, much weaker. In politics, knowing how to work the system is essential to success, not actually winning large support (something increasingly true the more corrupt a system becomes). In a market, you still need some knowledge of the system, but the product or idea has much more power.
I do, however, support people's right to oppose or not purchase things they don't like or support. I'm using OpenOffice.org as a database program because I don't want to pay for Microsoft Office. I use Firefox because I find it suits me better than Internet Explorer. I use CFLs instead of normal lightbulbs because I think they are a superior alternative.
But when people can agitate for mandated change, instead of letting that change evolve, I think we often end up leaping to to situations we didn't expect... and I expect every government change to in some way happen only if and only if those in power believe it will help them consolidate that power. I think the same sort of thing is true of people in a market - they only buy or sell if they think they will be better off for it... but in a market those individual actions each have an effect on the feedback loop, whereas it takes some monumental errors to get genuine negative feedback (losing power) in politics.
So, the short answer: feedback quality, and the monopoly on power held by government.
I think everything you've said is true, but it still seems like political activity can be understood in typical economic terms. So, with the Brady Bill example, if people valued their gun rights enough, they could have voted Reid out of office. In the way I've seen this analyzed, theoretically you assign a value to each thing in dollars, for convenience, and say that for person X having Reid in office is worth $$$ and opposing the Brady Bill is worth some other $$$, and so given the outcome, people value Reid as Senator more than the Brady Bill being opposed.
If you say that political activity does not equal economic activity, it just seems like your exempting a huge sphere of the world from economic analysis which at the same time has a pretty significant effect on subjects directly in the purview of economics (such as, the Economy), which seems like it would ultimately skew your analysis and results by leaving out lots of data.
Another way of getting at this is my understanding of economic theory is basically that everything is fungible, and therefore can be addressed and handled by markets. If political activity (all of it or even just some of it) is not economic activity, that's another way of saying everything is not fungible. I tend to agree with that actually, but I thought that was more of a liberal economic position, as opposed to a conservative one, and so far I'd thought of you as having a basicallyconservative economic theory.
I think you can use economic terms to talk about such things, but it's an imperfect comparison. For example, you can talk more directly about the dollars involved in lobbying.
If there is a small vocal group of people that are willing to put large resources into getting a project that will benefit them greatly, (say, farm subsidies) that has a real, but small cost on the whole population, then in order to get the $ to oppose the focused $ of the farmers, you'd need to collect a small amount (less than or equal to) from everyone in the population to oppose it.
Because the lobbyists are willing to spend X to make 2X, if you could collect a fractional amount from the entire adversely affected population that added up to between X and 2X, then the people would be in some sense better off.
But this can't happen, because the transaction costs for getting one two-hundred-fifty-millionth of X from the whole population would absolutely swamp the money you are trying to raise to compete with the lobbyists.
It's in this way that small interest groups are regularly able to pile straws on the back of the public. It would be in the public's interest to oppose all of this, but in each individual case that needs opposition, it's not in their interest to do so.
In this way, politics is the rule of the few over the many, and it can be downright harmful, and it's only possible because of the power invested in the politician to rule.
So, using the Brady Bill as an example, when talking about the whole population, the bill puts a burden of X on the population to grant a benefit of Y to the subset of people who favor it. The subset is willing to spend $ equal to their value of Y to see the bill get passed, the population being burdened would be willing to spend $ equal to X (which is along the lines of your example), but the problem is that the $ for the population is so spread out that the cost of putting together an organized campaign to oppose the subset is so high that it's only worthwhile if the total transaction costs are less than the difference between X and Y. It's even higher if you include the opinions of the elected politician, who may lean one way unless it will cause armed revolt.
Political activity is fungible with economic activity insofar as they both can be used to direct means towards ends. They are not fungible insofar as one is centrally controlled, another is uncontrolled; and in that one has solid feedback loops and another has much weaker feedback loops.
I think politics is influenced by, and could be analyzed within an economic framework. But the mandate power of government is something unseen in the market, and in that sense it's non-market.
That all makes sense, but it seems like the upshot is that elementary economics can explain less than I've often heard suggested.
My context has really been studying the legal theory known as "law and economics." In it, the boldest proponents truly suggest that economic principles can explain all aspects of life, and further, should shape law and policy.
For example, one proponent, Richard Poser, claims that things like torture and abridgement of free speech would certainly become legal if the economics, very broadly defined, justified it.
So, to me, what you're saying fits with a common critique of Posner, which is that there are things (in this case certain political activity), which do not appear to be fungible.
That very well may be... but it's also adviseable to consider the words of someone who has studied the matter extensively than the half-formed opinions of a guy with a Bachelor's degree in Economics from UNR on the subject.
I think a better approach than fungible/not fungible is "how fungible?" Most things in life are not a digital 1/0 dichotomy, but an analog (0,1) (exclusive range of possibilities). Perhaps he means economic analysis is a very effective replacement for other (legal/ethical) analysis, but you are arguing that it is less effective. It still might be worth substituting if the quality of the result makes up for the lack of direct exchangability. (Note: most of this paragraph was inserted late, so it isn't meant to logically flow into anything that follows.)
I think the best question an economist can ask a political actor (or agent, or whichever term suits you) is "What do you really want to accomplish?"
Politicians are most skilled at obscuring the likely results of a given activity if it doesn't suit them. I'm amused when I hear Senator Reid say that green energy will bring lots of jobs to Nevada, as though dirty energy wouldn't. And, if dirty energy wouldn't... doesn't that mean that it can be produced with less labor and, in at least one dimension, more cheaply? And, along the same thought, doesn't that make Green Power more expensive?
The same thing is true of price gouging laws - it may be that it is socially desireable to prevent people from selling needed supplies in a disaster area for a higher profit, but it should be made clear that this will cause suffering by sharply limiting the supply of those needs that profit-seekers would otherwise bring in.
If we really want alternative energy, then we shouldn't be complaining about the "high" price of oil and gas - because it's exactly that high price that will encourage innovation and invention to try and provide a better, cheaper substitute. But the high price needs to be sustained to make the price pressure, and the potential reward, believable.
How much cake can you have, and how much can you eat? On broad, national policy these are questions I'd trust an economist to answer more than a politician (not that the two are mutually exclusive).
I think any debate about "Torture" is so charged and rife with differing assumptions that any meaningful discussion among diverse views is all but impossible.
I really like what you said in this post, particularly strongly agreeing with your important question: what do you want to accomplish?
Also, your point about fungibility being a spectrum rather than an either/or dichotomy is important. As for the law and economics people, all anybody really wants them to admit is that there really are something on the far end of the spectrum toward being "not very fungible."
I agree with your analysis of price gouging and green vs. dirty energy.
Anyway, basically I think your last post brought it all together nicely.
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