Broken Windiow Fallacy

Fred Krupp, "president of Environmental Defense Fund and co-author of 'Earth: The Sequel – The Race to Reinvent Energy and Stop Global Warming' (W.W. Norton, 2008)" has a guest editorial in the Wall Street Journal today. Goody-goody, lawd almighty, we all gonna get rich solving global warming!

Global warming skeptics notwithstanding, fixing global warming won't be a drain on the economy. On the contrary, it will unleash one of the greatest floods of new wealth in history. When Congress finally acts, America's entrepreneurs and inventors will find the capital they need to solve global warming – and a lot of people will make a killing.

Senator Obama preaches a similar message: "millions of green-collar jobs."

And I agree, up to a point. I think innovation is headed toward us in energy and that some investors will get very rich and many will find good employment. Where I differ with Krupp and Obama, is that I want to reward innovators and they want to reward rent-seekers. Krupp's article (and I pulled the worst quote out) says that the market is just waiting for government to "set the rules." When cap-and-trade is introduced, everything will take off.

I'd suggest the rules have been set already. Petroleum products provide a certain number of KCalories per Mole, and the cost to extract, refine, and transport it is pretty well known. I think Einstein laid down "the rules" for mass and energy -- no need to wait to implement Broussard fusion. Develop away!

Sadly, the rules people are waiting for will come from Senator Grassley "how many dollars of subsidies do I get for developing?" and these rules will stifle real innovation and real wealth creation.

UPDATE: Even Paul Krugman has come out against Ethanol, but Michael Goldfarb catches him misrepresenting Senator McCain, who has it right:

Yes, I oppose subsidies. Not just ethanol subsidies. Subsidies. And not just in Iowa either. I oppose them in my own state of Arizona. ... [I]t also means no rifle-shot tax breaks for big oil. It means no line items for hydrogen, no mandates for other renewable fuels, and no big-government debacles like the Dakotas Synfuels plant. It means ethanol entrepreneurs get a level playing field to make their case -- and earn their profits.

Deleterious Anthropogenic Warming of the Globe Posted by jk at April 8, 2008 11:39 AM