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Wrong Way to Go


There’s a common misconception that a federal energy strategy is either pro-development or pro-conservation. Wrong.

The real choice is between pro–free-market policies and pro-government policies. And President Bush’s new energy strategy is clearly pro-government. To be sure, the anti-growth crowd hates the Bush strategy because it is partly pro-production. But pro-production is not necessarily pro–free market.

Bush’s plan is rife with government manipulation of the economy in the name of both production and conservation. Instead of calling for a repeal of development-stifling regulations and a drastic cut in taxes (instead of his piddling 11-year decrease), Bush’s plan uses various forms of incentives to accomplish ends chosen by government officials. This is absurd coming from a man who claims to favor free markets.

A free-market policy does not consist of using market methods to achieve goals selected by politicians and bureaucrats. Rather, it lets the market — which means you and me — select goals and achieve them through production and voluntary exchange. The authors of the Bush plan are patently oblivious to this distinction. Observe:

The Bush plan would use the tax system to encourage the development of clean-coal technologies, nuclear power and biomass plants, and wind generation. It would also use the tax system to encourage the purchase of solar panels for homes and gas-electric cars, and for renewable energy and conservation projects.

These incentives would come in the form of tax credits. Although tax credits are better than cash subsidies, they are clearly intended to manipulate people’s behavior — otherwise they wouldn’t be needed. It is odd, to say the least, that believers in the free market, which Bush, Vice President Cheney, and Energy Secretary Spence Abraham claim to be, would call for such massive manipulation of the market. They even propose that cars be mandated for higher fuel efficiency. All of this betrays a deep misunderstanding of how markets work.

In a free market, where prices reflect real supply and demand conditions, people are free to go about their business, paying for what they use and abstaining from purchases when they don’t wish to pay the price. Under those conditions they continually make tradeoffs between consumption and conservation. If a someone decides he prefers the safety and expense of a low-mileage SUV to the greater fuel efficiency and economy of a smaller, lighter automobile, it is his perfect right to make that tradeoff. Government should have no power to penalize him for his choice.

When each person, paying his own way, is free to strike his own balance between consumption and conservation, the society’s overall balance will be the right one. How do we know? We know because it is the result of free individuals’ acting and choosing within the constraints of their own resources. That’s all we need to know.

If those choices push the price of energy higher, the market has a built-in mechanism to address that. Higher prices encourage entrepreneurs to find new supplies and to search for cheaper alternatives. They also encourage people to conserve in order to save money.

In other words, the free market contains all the incentives required to maximize development and conservation according to the preferences of free individuals. There is nothing for government to contribute to the process. If it tries to help it along, it will inevitably screw it up. That is the wisdom of laissez faire.

Of course, there is something the government can do: Get out of the way! The Bush plan calls for the speeding up of various licensing procedures. Better yet: let’s dump government licensing altogether. Bureaucrats are professional meddlers. The insurance industry and other private organizations would do a much better job of assuring safety. Case in point: the Bush plan calls for limiting the liability of nuclear power plants in accidents. That is a dangerous interference with the free market. Owners of nuclear plants should not get special privileges from the government. Let them buy insurance and pay its full costs. Only then will we know whether nuclear power is economical and competitive.

The free market is perfectly capable of ensuring that we have the energy we need to live comfortable lives. Government meddling is the wrong way to go.

This post was written by:

Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.