The Skeptical Optimist

US Energy policy: Who’s-on-first?

Everybody hates $4 gasoline. Everybody wants to be independent of foreign oil. Two no-brainers in a row.  Here’s the brain teaser: What’s the preferred solution?  This is where the political rhetoric gets downright laughable…

Q: Why is the oil price so high?
A: Because of those greedy speculators.

Q: To get the price down, should we drill more in our own territory?
A: No, of course not; that wouldn’t yield oil for years.

Q: But wouldn’t that new policy cause the speculators to start bidding the oil price down?
A: There’s no guarantee it would drop immediately.

Q: Is there a guarantee is wouldn’t drop immediately?
A: The only guarantee is that energy from wind and solar is cleaner than energy from oil; shifting to wind and solar power is the right energy policy.

Q: Will wind-generated electricity be available for powering our cars sooner than gasoline from increased domestic oil production?
A: If we don’t start a bigger push for wind and solar power now, we’re just prolonging our dependence on oil.

Q: But if we don’t change oil drilling policy now, won’t we just prolong higher than necessary oil prices?
A: Forget oil, we need to kick that habit.

Q: But isn’t today’s pressing problem the high price of gasoline?
A: You don’t get it, do you? We won’t NEED gasoline if we switch to wind and solar power.

Q: Gasoline is a liquid fuel that goes into my gas tank; each tank gives me 300 miles worth of driving. If I shift from gasoline to electricity from the grid, how will I store that much electricity in my car?
A: In rechargeable batteries, dummy; plug-in cars. Where have you been?

Q: But today’s best batteries take up a lot more room than my gas tank, only give me a hundred miles of driving, take hours to recharge, wear out with usage, and make the car cost thousands of dollars more. Not many of us consumers can afford all that money and hassle. Can’t we just drill for more oil here, using current technology, to give consumers a break on gasoline prices?
A: No, we need to kick the oil habit. What we need is a breakthrough in new technology--a superbattery of some kind that’s as affordable and safe as a tankful of gasoline, yields the same mileage per tankful, and recharges quickly from the power grid.

Q: Okay, okay, we need a superbattery, and we need it quickly. Could government energy policy help reduce the time it would take to get us to that breakthrough?
A: Of course it could; how long have I been trying to tell you that government should be doing a lot more to force us to kick our addiction to oil? Sheesh.

Q: How much would it be worth to our economy if a superbattery breakthrough eventually displaced our need for foreign oil?
A: Hundreds of billions per year, even trillions of dollars. And, we could become a superbattery exporter instead of an oil importer.

Q: Okay, I get it. But if we’re going to give consumers a break from high-priced gasoline, and we’re not going to allow any more drilling, we’ll need that superbattery as soon as possible, won’t we?
A: Duh.

Q: But to encourage entrepreneurs, scientists, and companies to get moving a lot faster towards that superbattery breakthrough, the government will need to set up some kind of new incentive, won’t it?
A: Of course; I’ve been trying to tell you all along that government energy policy needs to change in a big way.

Q: How about something like an “X-prize” for a new superbattery?  Maybe a few hundred million dollar prize for the first entrepreneur, or company, or group of scientists to come through with the new technology?
A: Uhhh… No, no, we couldn’t do that. Uhhh… that’s McCain’s idea… obviously just a “gimmick” (...according to these talking points they sent me...). 

Q: What’s your solution, then?
A: Don’t worry. Obama promised “change.”  He’ll figure it out, just trust him.

Q: Could you please get a little more specific?
A: Sorry, I’m out of time.  Gotta go fill up my car before gasoline goes higher.

Motherhood, Apple Pie, and Government Waste

"Wasteful government spending" is one of America's favorite whipping boys.  Wouldn't it be just dandy if we could eliminate most (or all) of it?  Then we could balance the budget, cut taxes, pay down the debt, get government off our backs, reduce unemployment, reduce oil imports, cool the globe, eliminate obesity, shore up motherhood, and enjoy a lot more apple pie.  Nirvana would be at hand, if only we could eliminate our nemesis: "wasteful government spending."   

That's what our politicians apparently think we think, anyway.  In short, they seem to think we're idiots. 

I dislike waste as much as anyone else does.  Whenever a baseball pitcher gives up a hit, every pitch thrown during that at-bat turns out to have been wasted.  No doubt about it: all baseball pitchers are wasting their arms on a high percentage of their pitches. 

Whenever a tennis player loses a game, every stroke in it was wasted; likewise, losing the set wastes every game in it, and losing the match wastes every set. Both winning and losing tennis players are wasting a large portion of their energy and talent, aren't they? 

Tiger Woods has finished out of the money in a few tournaments now and then.  Think of all those strokes he just plain wasted. Every year I've watched, the NFL team that wins the Super Bowl wastes several plays during the course of the game.  I haven't been involved in a car accident in years, yet I keep paying money every month for car insurance; what a waste. 

Think how much money and time Edison "wasted" on failed experiments during his search for a light-bulb filament.  How much did Jonas Salk and his peers waste during their search for a polio vaccine?  How much have you wasted on food you've bought that eventually got thrown out (stale bread, etc)? 

The federal government is no exception when it comes to wasting things.  Since 1944, how much federal spending on the GI Bill has been wasted on the small percentage of GIs who ended up not finishing college with the money they were allocated?  How much money and time do weather satellites waste watching calm seas and balmy weather?  How much Head Start money is wasted on the portion of kids who don't turn out to be productive citizens, let alone the next Newton, Einstein, or Mozart?  How much Homeland Security money is wasted checking inbound containers carrying harmless goods?  How much money is wasted on university research grants that don't yield an incremental step towards energy independence?

Sheesh, waste is everywhere!  If only we could eliminate all of it.  If only.  That's the way shallow thinking works, anyway.

The problem with shallow thinking is that in most cases it's impractical or impossible to eliminate the waste, and in many other cases we shouldn't want to eliminate it.  Why?  Because much "waste" is inextricably built into a process that yields overall positive results. 

Tiger Woods has wasted a lot of strokes, holes, and tournaments; so what?  Roger Clemens wasted a lot of pitches; so what?  Thomas Edison wasted a lot of materials and time on unsuccessful experiments, the NY Giants wasted several plays in the Super Bowl, Roger Federer has wasted a lot of points and games at Wimbledon, Jonas Salk wasted materials and time on unsuccessful anti-polio experiments, you and I have wasted money letting partial loaves of bread get stale or moldy, and Cheerios that don't make it into the kids' breakfast bowls get thrown into the trash every morning all over America. 

But the question remains: So what?

Why is the much ballyhooed word "waste" getting so much more more attention than the good news that typically accompanies it?  Woods, Clemens, Edison, Federer, Salk, and the NY Giants did some very good things for many of us, in spite of what they wasted.  You and I fed our families quite well, thank you, in spite of the bread we allowed to get moldy.  And kids all over America get a sufficient breakfast in spite of the Cheerios that hit the floor instead of the bowl.

And what about "government waste"?  Here's my judgment: If Head Start allows one or more Einsteins, Newtons, or Mozarts to break out of the pack, Head Start is worth it in spite of the so-called waste.  If the GI Bill continues to educate and transform generations of GIs returning to the private sector, the GI Bill is worth it in spite of the few who don't finish.  If a weather satellite eventually spots a brewing hurricane in plenty of time to save hundreds or thousands of lives, it's worth it in spite of all the time it "wasted" beforehand, watching balmy weather.  If Homeland Security detects a single dirty bomb hidden inside a shipping container, it's worth it in spite of the vast majority of benign containers it took time and money to check.  If research grants to universities somewhere yield a breakthrough in non-fossil-fuel energy technology, it is worth it, in spite of the research grants that yielded unsuccessful experiments. If we had spent sufficient extra money on intelligence gathering and coordination to prevent 911, it would have been worth it in spite of the dent it would have put in America's political golden calf, the almighty surplus. 

If (McCain's) proposed millions in government prize money offered for energy innovation someday yields a paradigm-shifting superbattery, it would be about as far from a "gimmick" as you can get – (Obama's) obligatory, election-year political rhetoric notwithstanding. 

Conclusion
Spending so much time talking about government "waste" is a waste.  We should expand government experimentation within its areas of accountability – which, according to Adam Smith, are (1) national security, (2) justice, (3) education, and (4) infrastructure, while maintaining (5) a stable currency.  Borrowing money from willing lenders to get better at any or all of the first four is what those lenders are looking for, and it would therefore not undermine our creditworthiness (i.e., our ability to maintain a stable currency). 

Don't get me wrong: waste that can be eliminated without any undesirable side effects should be eradicated without hesitation.  But I'll add this: the wasted dollars we save should be matched one-for-one by tax cuts or by reinvestment in appropriate extra experimentation.  That would leave borrowing unchanged, which would be perfectly acceptable, because eliminating waste increases the portion of spending that's productive.  And, as we all (should) know, borrowing money for good investments is sound financial practice (…ask any banker). 

Let's eliminate waste that we can isolate from productive spending.  Let's cut taxes -- or increase productive spending -- by one dollar for every dollar of waste eliminated.  And let's invest in experiments that might yield better security, more equal justice, the emergence of an extra bunch of Einsteins and Mozarts, and the incentives and technical infrastructure required to discover new paradigms in energy technology. Let's invest in the future, and trust ourselves to pull it off.

Let's give the positive, unpredictable surprise every chance to emerge.  Let's stop worrying about government borrowing for that purpose, let's stop wasting time spewing hot air about  waste (most of which would cost more to eliminate than to accept as a cost of progress), and let's stop propagating the falsehood that every wasted dollar was borrowed (instead of taxed) from the public.  Let's spend and borrow as necessary to encourage the positive Black Swans and to prevent the negative ones. As the GI Bill demonstrated, one big success will more than pay for all the borrowing it took to fund the experimentation, as well as the "waste" that goes with progress.

We need a paradigm shift, and all such progress generates some degree of "waste."  Why not focus on the former instead of the latter?  Larry Kudlow correctly keeps reminding us of what Reagan used to say:

Okay, you showed me the manure. Now show me the pony. 

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End note:
I think it was Descartes who apologized to a friend for a lengthy letter he wrote, saying that he just didn't have enough time to make it shorter.  I know what he meant; I usually spend a lot of time trimming the number of words it takes to get the point across -- but this time I don't have the time.  Maybe next time.