Wishful-thinking market magic

You know what I haven’t done lately?  Mocked some government bureaucrats for being a shower of useless, idiotic, mendacious asshats.  Okay, let’s fix that.

There’s this thing that people do when they want to borrow some of the popular credibility of economics*, and handwave away a difficult problem they have no idea how to solve.  They mandate some outcome, but rather than specifying how to achieve that outcome (difficult problem they can’t solve, remember?), they say “We’ll leave this part up to the market”.  This is how (for example) the feds could claim, with a straight face, that the ban on 100W incandescent lightbulbs wasn’t actually a ban at all: They’d merely increased efficiency standards for lightbulbs such that 100W incandescents couldn’t meet them.  “If there’s such a big demand for 100W incandescents”, they’d reply, with the exaggerated patience of the terminally smug, “the market will develop a 100W incandescent bulb that meets our efficiency standards.  It’s not our fault if the market can’t do what you want.”

Listen, Sparky: There’s a huge unmet demand for faster-than-light space travel, too, but while markets are pretty nifty institutions — especially when they’re free of asinine regulations — they aren’t quite up to toppling general relativity.  “If the markets can’t meet our bizarro-land regulatory requirements, that’s a market failure” is a breathtakingly elegant piece of passive-aggressive argumentation, but like most passive-aggressive acts it’s utterly unproductive except to reinforce tribal sentiment and make people resentful.

Back to the present: The EPA is dreadfully concerned with sustainable production of biofuels, and not only with disasters like corn ethanol that manage to shit more poison into the air — what’s the “E” stand for, again?  And the “P”? — than plain old exploding dinosaurs.  Y’see, back in 2007 Congress authorized a mandate for oil companies to use a certain amount of cellulosic ethanol, which manages to be less of a disaster than corn ethanol for a variety of reasons and hits the “recycling” happy switch in a lot of people’s heads.  Oil companies that fail to meet this mandate would pay fines for doing so.

Only one problem: Commercial-scale production of cellulosic ethanol is still mostly hypothetical.

The mandate was supposed to encourage the development of a domestic cellulosic ethanol industry.  This has not happened.  Several years after the mandate was imposed, there is still no commercial cellulosic ethanol production.  This gets the oil companies off the hook, right?  Nope.  As the New York Times reports, companies are still paying fines, totaling nearly $7 million, for failing to meet a blending quota for a substance that does not exist.


Smile, it gets worse: The EPA, having apparently no clue about what actually goes on in a market economy, has not only set a mandate for cellulosic ethanol use but also a cap on the size of the (presently imaginary) market:

Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.

I… I… I… what?

Dr. Rowe, I think we’ve found your unobtainium.


* Stop snickering!  I’m serious!


1 Response to “Wishful-thinking market magic”

  1. 1 Steve Withers
    January 12, 2012 at 19:29

    Governments have been more or less forced to seeing mandates like and others because prevailing ideology says governments aren’t allowed to attempt to meet these goals directly.

    Of they do not set any goals or provide such “leadership”, they are failing in one of their primary roles: governing.

    The long history of private businesses collaborating to undermine and subvert such mandates (the electric car mandate in California being a case study) leaves a lot of room for debate around what is possible vs impossible. “Impossible” can simply mean the cartels who rule in various markets don’t what to do what is possible.

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