Search This Blog

Thursday, December 08, 2005

The Big Plan

All or most progress is of course the result of a rational plan conceived and executed by a superior mind... in some alternate universe, just not this one.

Over at Cafe Hayek Don Boudreaux holds forth on journalist David Ignatius' fascination with Amory Lovins idea for a grand plan to solve our problems, energy related and otherwise.

The political appeal of The Plan is equivalent to the sex appeal of Salma Hayek. The political appeal of the market is equivalent to the sex appeal of Kermit the Frog.

Lovins has Ignatius convinced:

Lovins's plan is precisely the sort of thing a great nation should explore as its biggest manufacturer is skidding off the road. The details are complicated, but the essence is pretty simple: Lovins argues that by radically transforming the materials used in cars, trucks, airplanes, office buildings and factories -- substituting carbon-fiber composites and other lightweight products -- the United States could cut its oil use by 29 percent in 2025 and an additional 23 percent soon thereafter.

This "national mission," of course, involves taxes as well as government loan guarantees and other subsidies aimed at fundamentally changing the materials out of which automobiles and buildings are built – a change that, because it requires new technologies, will also energize U.S. innovativeness.

But it’s late, so I’ll just point you to Ignatius’s closing paragraph:

I'm no technologist, so I can't evaluate the technical details of Lovins's proposal. What I like is that it's big, bold and visionary. It would shake an America that is sitting on its duff as foreign competitors clobber our industrial giants, and it would send a new message: Get moving, start innovating, turn this ship around before it really hits the rocks.

This paragraph reflects an attitude that is rich soil for totalitarianism to take root. It ignores individual freedom; it ignores the possibility that the admired Big Plan might be flawed, either technologically or economically or both. Ignatius is all orgasmic simply because The Plan is centralized and Big and (allegedly) will compel or inspire the masses once again to behave in ways that promote national greatness.

Heaven help us.

The real gems in rebuttal are these two comments to the post:

The claim that oil is finite is based on a rather narrow viewpoint. What needs to be taken into account is what the mind can create literally out of thin air. A natural resource isn't valuable until innovative and enterprising minds see the potential. Therefore, if I manage to invent a chemical process that doubles the efficiency of every single combustion engine in the world, have I not essentially doubled the amount of oil in the world? Likewise, if I manage to invent a new building procedure that uses half the wood without any sacrifice in strength, have I not essentially doubled the amount of lumber in the world?

This is why simply looking at oil as a finite physical resource is narrow. One needs to also take into account how usage is changed as a result of prices. Increases in price encourage better frugality.

What Ignatius is missing is how woefully ignorant is 'The Plan'. It relies on the knowledge of a mere handful of people.

The market on the other hand uses the knowledge of the millions of participants. Which is why decentralized decision making systems outperform central planning, and always will.

Statism, opiate of the elites!!


Bret said...

Oh. My. God.

I can't believe people still fall for things like Lovin's "Big Plan". Very scary.

What I keep forgetting is that while communism has been discredited in most circles, statism still hasn't - even though statism is the primary reason why communism failed (by having to rely on centralized decision making).

Going to the moon (and also the Manhattan Project) are identified as examples of government success. But both those examples were defense initiatives. So yes, under fear of complete obliteration, and with no alternative mechanism for developing defense systems (at the time), the government may be able to produce something fairly impressive. There are fewer examples of non-defense related successes. Even the Internet (certainly another success) was funded by the DARPA because of the possibility of using such technology for defense communication.

If the results of this "Big Plan" are really important from a strategic point of view, there's a much simpler, much less damaging, and much less dangerous (from a totalitarian/Road to Serfdom point of view) approach: tax oil and use the additional tax revenues to reduce capital gains and perhaps income taxes. Then the incentives are put in place to reduce oil consumption and human ingenuity will do the rest. Whether that means "substituting carbon-fiber composites and other lightweight products" or something else even better that nobody's even thought of yet remains to be seen.

The last point is that the market is not just millions of participants - it's really billions of participants. Billions!!!

Oroborous said...

Also, it should be noted, (well noted), that THERE IS NO SHORTAGE of oil.

There is a shortage of cheap oil, but if you're willing to pay $ 100/bbl for oil, I can produce THREE TRILLION barrels of oil for you over the next twenty years.

That's 1,000 years' worth of crude oil, at the current rate of consumption.

Even at $ 40/bbl, there's no reason to believe that Hubbert's Peak is anywhere near.

For instance, Canadian tar-sand deposits are the world's second largest producing* deposits of petroleum, they can produce crude oil for $ 25/bbl - and they have tens of billions of barrels available to extract.

If we are to switch to alternative fuels, or to consume less, it will be for pollution reduction, not because the oil runs out.

*the world's largest known non-producing deposit of petroleum is the estimated TRILLION barrels of oil locked into American Rocky Mountain oil shale - which we know that we can extract at a cost of $ 50/bbl or less, and there may well be bigger unknown deposits.