Energy: The Master Resource

What Role Should Government Play in Energy?

The economic and historical ignorance of the American public is frequently exploited by politicians and special-interest groups. The hotter the issue, the greater the exploitation, and no issue is hotter today than energy. Myths and misconceptions abound, leading people to embrace harmful interventionist policies. Ask a hundred typical Americans what role government should play in the production, pricing, and use of energy, and you’ll probably be able to count on one hand the number who say “nothing.”

In an effort to combat this widespread ignorance, Robert Bradley and Richard Fulmer, both of the Institute for Energy Research, have written a superb primer, Energy: The Master Resource. It is an attractive, colorful volume written to be accessible to a general readership. High-school teachers and college professors could easily incorporate the book into appropriate classes. If they do, they had better be prepared for a lot of student interruptions beginning, “Yeah, but I’ve heard that. . . .”

Bradley and Fulmer take on all the key energy issues. A good example is their discussion of climate change, where they employ facts to counter the relentless drumbeat of alarmism and demagoguery. The hysteria-mongers don’t mention climate changes before the industrial era, but Bradley and Fulmer place our scientific knowledge squarely before the reader.

All right, but shouldn’t we follow the “precautionary principle” and try to reduce greenhouse-gas emissions just in case the planet is in danger? Many people have been conditioned to accept that argument, but the authors refute it. They point out that reducing pollution isn’t free. It consumes resources and has opportunity costs. “If those resources were used instead to create real wealth, countries that are now poor would be able to adapt to a changing climate. They could also be invested to develop technology capable of solving the problem far more cheaply and effectively,” the authors write. The “green” approach would do little to affect the climate, but would have a drastic impact on the world’s poor. Most Americans haven’t considered that tradeoff, but the book makes it perfectly clear.

Speaking of tradeoffs, Bradley and Fulmer repeatedly observe that all energy sources have their costs. Many Americans are prone to become enraptured with “alternative” energy that seems able miraculously to solve our problems.“We should just switch to solar power (or wind power, geothermal power, ethanol, hydrogen power, and so on),” many people say after hearing a report extolling some particular source. The authors curb such enthusiasm by pointing out the inevitable tradeoffs. Regarding solar power, for example, the authors note that we would need hundreds of square miles of solar panels to replace the generating capacity of one nuclear power plant. And on that perennial favorite of vote-hungry politicians campaigning in the Midwest, they write, “Creating ethanol may consume more energy than is contained in the ethanol.This point is controversial, but probably cannot be resolved as long as the government subsidizes the production of the fuel. If producing ethanol on the free market yields a monetary profit, then it will likely yield a net energy profit as well.”

Another crucial issue the authors discuss is energy sustainability. Widely publicized “We’re running out!” scenarios have convinced many that we need immediate government action to promote “renewable energy sources.” Bradley and Fulmer demonstrate that the only sensible policy is for the government to keep out of the energy market and allow capitalism to work. Rather than looking to politics, where decision-makers don’t have their own money at risk and won’t bear the cost of being wrong, we can and should rely on profit-seeking businesses to find the best ways of producing and distributing energy.

One of the problems that noninterventionists confront is that the opposition usually seems to hold the moral high ground. The various “green” organizations never stop posturing as altruistic defenders of Mother Earth against the onslaught of heartless, shortsighted free marketeers. Bradley and Fulmer do a considerable service in noting that the “green” organizations have their own fundraising interests at heart in promoting their doomsday outlook. Once people start to doubt that there’s nothing but altruism behind those organizations, the moral high ground starts crumbling away.

The late Julian Simon called energy “the master resource” because it is crucial to our ability to do almost everything. Bradley and Fulmer have done a superb job of explaining the field. In the likely event that you know someone who is misinformed about energy issues, I recommend a gift of this book.