In Jon Ronson’s book “Men Who Stare at Goats,” one member of a wacky new Age, unconventional warfare unit explains, “we are trying to make the world a better place by having people jump around, screaming ‘Hoo-ah!’”
The book (and later hilarious movie) came to mind this week as various Biden Administration efforts to shape the market (and consumer choices) have collided with economic reality. President Biden looks more and more like the President who stares at goats trying to prove the power of mind over markets.
This month, the Administration has doubled down on grants for electric vehicles while pushing manufacturers to go electric. However, Ford is cutting production and laying off workers because of the lack of demand. Dealers are revolting as their lots are filling up with electric vehicles that no one wants.
This week, the Administration was embarrassed when energy developer Orsted withdrew from agreements with the State of Maryland to develop two offshore wind projects. The reason? The wind projects are simply not profitable despite the pushSkipjack Wind 1 and Skipjack Wind 2 projects.
Federal and state pushes for all electric mass transportation fleets have also lead to problems. Cities like Asheville, North Carolina spent millions to buy more expensive electric buses only to find that they have to be recharged every 70 miles. Three out of five buses are now broken and cannot be repaired because the company that makes the buses has filed for bankruptcy.
Politicians have long sought to shape consumer demands or markets by sheer will . . . and billions of dollars. It has largely failed on a spectacular scale. However, they are rarely blamed when these bills come due years later without results. For example, the Obama Administration touted its investment in solar panels with a massive half billion dollar subsidy for Solyndra. After the photo ops with President Barack Obama, Solyndra would later collapse as did another government-subsidized company.
In his 1960 paper, Ronald Coase wrote his famous work “The Problem of Social Cost.” The work, associated with what became known as the Coase Theorem, argued, among other things, that, in a perfect market, it does not matter which party has an “entitlement” or legal advantage. The more valuable resource or product will prevail. For example, in his famous hypothetical involving a conflict between a rancher and a farmer, it did not matter (absent “transaction costs”) whether a state favor farmers or ranchers. The entitlement of the state only impacted the distribution of wealth, not the ultimate allocation of resources. The market would determine what is more valuable: cattle or crops.
There are many elements at work in these non-perfect markets. However, the general thrust of Coase is still relevant. Consumers drive market choices, not entitlements or subsidies. Federal subsidy programs are often as effective as yelling at a storm to stop it. President Biden is yelling at the market to go green, but the supply and demand elements are not yet present to make that a reality.
Nevertheless, the Biden Administration continues to try to manipulate the markets. Take the decision this week by Biden to halt natural gas export facilities on climate change grounds. Allies in Europe need increased natural gas exports to reduce their dependency on Russia. They are effectively funding the Ukrainian war on both sides by aiding Ukraine while buying Russian gas. The problem is that Europe, which has embraced green energy, has found that it cannot sustain their populations or industry. The question is whether reducing exports will change that equation. Europe wants to go green, but it is likely to simply turn to Russia for the cheaper energy source.
None of this computes with those gluing themselves to rare paintings. The fact is that most of us are concerned with climate change and support efforts to reduce carbon pollutants. Moreover, consumers have no yen for fossil fuels. If the cost and convenience of electric cars improves, the market will likely shift. However, politicians trying to pick winners among technology rivals has rarely worked economically. Yet, it has worked politically. No one, including Obama, faced repercussions for disasters like Solyndra and other companies. Photo ops were held, billions spent, and virtues signaled . . . and the public was left holding the bag
Despite the recent denial of Energy Secretary Jennifer Granholm, President Biden once promised “I want you to look at my eyes. I guarantee you. I guarantee you. We’re going to end fossil fuel.” It is just a matter of focus of mind over markets.
As you look into his eyes, just remember, as Ronson wrote, “we are not just soldiers, we are men who stare at goats.”
