the government should intervene more in transition to alternative fuels
Government intervention is the way to break the catch 22 sooner when it'll make a difference for the economy, than later when we'll look back and see all that wealth that has been squandered.
As to the argument the government should not be 'picking winners'. This is mostly based on the idea that who knows what technology will prevail. biodiesel, electric cars, etc. But, we can act as a hedge, and catalyst. Making the companies get a head start to start sorting out the direction the economy should go.
I personally would be opposed to a 'Manhattan project' type situation, cause we'd put so much resources into a certain technology that might not even be the best. But we can act as catalysts.
Switch grass is close to being viable in terms of per barrel costs, if it had a bigger infrastructure and economy of scale operation going on
Algae fuel which uses our current infrastructure needs to expand more to keep operation costs down with economy of size operation, and would be competitive with current crude oil costs if it was
Electric vehicles are expanding, and need infrastructure
I'll start by listing instigators main points, provide a general conceptual introduction and then provide counter-arguments.
Main arguments for:
1) there is a catch-22 because fueling stations, vehicles and fuel must all exist together in order for alternative fuel commerce to take place. This requires a jump-start from government to get it started.
2) the poor would benefit because alternative fuels are cheaper than petroleum based fuels. These poor would save money, spend it on other products, which would be a boon to the economy.
3) money spent on petroleum based fuels goes mainly to foreigners, which is a problem
4) the government can invest in biofuel infrastructure which would produce the benefits of biofuels sooner than waiting for the rich to do it.
Fundamentally, this is a question of economics, which is the study of the allocation of scarce resources. Mans wants and desires are infinite, while resources are finite. Much of history has been centered around this problem. Instigator did not provide a framework by which to judge whether government intervention in this case would be considered a success or not. However, since this is a question of economics, I would suggest that such intervention is only warranted if it increases the overall wealth of the population. Instigator seems to be concerned for the poor, but does it make sense to subsidize biofuels in order to create a wealth-transfer from rich to poor? I would suggest not. With that background, I'll go through the Pro arguments one by one:
1) Clearly there is not a catch-22 problem since this same scenario was true in the 1890's when the first automobiles were produced in the United States. This concern can be addressed easily by starting in localized areas, having biofuel manufacturers partner with automobile manufacturers, etc.
2) I partially addressed this in my opening statement. I don't believe intervention is justified as a form of wealth transfer, but only if overall wealth is improved. In order to address this concern, some background in economics is necessary. I'll start by defining the meaning of profit. In a free and open market, individuals exchange goods in order by improve their lives. After the completion of an exchange, both parties feel they have improved their situation, they would not take the time to make the exchange. I don't think we take enough time to dwell on the magic of this simple act, which occurs through-out the world millions of times a day. But what does it mean when a business facilitates these interactions and also has a profit left over? Not only did that business improve the lives of it's customers, but they did it efficiently enough that there were resources (ie profit) left over. So profit represents the conservation of resources AND the satisfaction of consumers.
Instigator claims that biofuels are cheaper than petroleum based fuels. However, if you followed my points in the paragraph above, we know that this cannot be true. If entrepreneurs could create a biofuel that was cheaper than petroleum (for the same power output), then they would be doing that now. Instigator may claim that government could fill the gap of a biofuel company that would otherwise make a loss on it's own. In this case, the government subsidy is nothing more than a transfer of wealth from those taxed to those who participate in biofuels, either producer or consumer. Or instigator could argue that government is necessary to jump-start the industry until economies of scale can be reached. However, I can just as easily claim the assertion is false, since the question involves highly complex economic calculations which are routinely done by entrepreneurs and those entrepreneurs have largely chosen to ignore this opportunity. Why would we think that, for example, a Washington think-tank could achieve better results in these calculations? Also, business have shown that they are willing to invest huge sums in infrastructure in order to achieve future profits. A recent example of this occurred with cable companies, Verizon FiOS and most recently Google Fiber.
Lastly, even if instigators assertion of saved fuel costs were true, I fail to see how this would be a boon to the economy. Jobs created in biofuels would simply pull resources from other areas. If consumers spend money on other goods, that simply means those businesses's will see increases sales while the petroleum industry sees a reduction.
3) Instigator's claims that money spent on foreign goods is bad is simply false. In economics, we have the law of comparative advantage:
In an economic model, an agent has a comparative advantage over another in producing a particular good if he can produce that good at a lower cost
Lower production costs result in lower consumer costs and higher profits, which improves the lives of everyone involved in those transactions. For example, at present time Asian markets have become extremely efficient at producing consumer goods. This efficiency means more Americans can afford, as an example, a home washer and dryer. It also means the Chinese can produce these goods while conserving resources better than other countries. While it is true that businesses in the United States may struggle to compete in that industry, the law of comparative advantage shows that there is always some other industry where we will be able to compete more efficiently. Entrepreneurs and workers who retool to match these efficiency changes do so in order to improve the lives of society in general.
4) Instigator may concede all my points above, but yet claim that Government intervention can create all this improved happiness sooner than the free market. This simply cannot be the case. Government has no resources of it's own. It must, by nature of being government, take some resources and apply those resources elsewhere. Can instigator show that there has been a net improvement in this case? That is, the lost opportunity X is of less value than the opportunity gained in biofuels? I would argue that this calculation is not even possible. It is only through free market exchange that we can see whether individuals value one good over another. Participating in a poll or voting cannot tell us this. The government may subsidize biofuels, but there is no way to determine what the lost opportunity cost is or whether lives have been improved in general. This is because taxation is not voluntary, and even if it was, the direct connection a consumer normally sees in an exchange is lost. In this case, instigator can only argue something like: "I don't care what others want. I know this is what is best for society". However, with this kind of thinking, economics has left the building, and decisions are no longer based on the ideal allocation of resources.
con talks about getting that partnership in the passive voice. should the government be the initiator or the private sector? i argue, the government can catalyze change, causing change to occur sooner than later.
it's not so much cause it helps the poor, it's cause it helps everyone. they spend money on an array of things helping the economy at large, instead of just fuel. the would cause overall wealth to be improved. to use con's measure of profit, saving money on fuel gives profit to teh ocnsumer, and to businesses at large when they make a sale.
"since the question involves highly complex economic calculations which are routinely done by entrepreneurs and those entrepreneurs have largely chosen to ignore this opportunity. Why would we think that, for example, a Washington think-tank could achieve better results in these calculations"
we can think washington can do better because they are just acting as stimulants to change, causing the change that must occur, to occur faster. the private sector doesn't want to take the risks of choosing a technology which might not prove the most successful and perhaps before its time. but that doesn't mean we can't stimulate change to occur faster.
"Lastly, even if instigators assertion of saved fuel costs were true, I fail to see how this would be a boon to the economy. Jobs created in biofuels would simply pull resources from other areas. If consumers spend money on other goods, that simply means those businesses's will see increases sales while the petroleum industry sees a reduction."
it's a boon to the economy because of the profit metric as discussed. there are savings to consumers, which is given to other segments. plus, the number one stimulant in an economy, is change, not necessarily more of the same. change means people are spending and companies are making money and everyone is getting ahead to their best ability.
when i was saying it is bad to spend where the foreigners profit, i was mainly referrencing terrorism and economic dependence. if we sit on our hands, and do nothing to change, a trigger event could exacerbate this dependence and they could charge us whatever we want. plus, it is better to have the jobs and benefit here rather than elsewhere if possible.
"the direct connection a consumer normally sees in an exchange is lost. In this case, instigator can only argue something like: "I don't care what others want. I know this is what is best for society". However, with this kind of thinking, economics has left the building, and decisions are no longer based on the ideal allocation of resources."
that is what policy is, decision making for the populace at large. the free market left to its own devices is not necessarily the best indicator of what is "ideal". if the government is exacerbating changes that are going to occur anyway, there is savings and profit to be had. that's the whole point of what the free market wants anyways. the government is just helping the market along on its way.
also, when the private sector is researching this stuff, they could find a magic bullet. it's unheard of how many times government involvement in pharmaceuticals, for example, or space flight, or watever, has cause change to occur sooner than later, or perhaps cause change where none would have occurred.
i conceded that perhaps the private sector can't make fuel at a dollar a gallon, otehrwise investors would be taking it, but that doesn't mean alternative fuels couldn't save people money. if change happens sooner than later, or at all, they save money, leading to all around betterment.
risks. the private sector takes a risk it wouldnt have taken without the government. instead of a 30 percent chance of success, with the government involvement lowering costs, it could be a 70 percent chance of success.
"This contention is simply false. All change must undergo the test of profit. As I've described above, profit is a sign of efficiency and consumer satisfaction."
this is simply false. increased economic change yields increased economic profits and increased wealth for all, for those at the reaping end of change.
the government can help the market along. the only reason con doesnt see this is because he thinks there's nothign the goverment can do to help it along. but as ive shown many times, this is simply not true. the government can help along the free market to reach its goals.
I concede the government may make change happen faster than the free market. So what? If it is simply change we want, can we look to Lenin, Stalin, Moa or Pol Pot to set examples? Of course not. It is a positive change over all that we want. The 19th century french economist Frederic Bastiat wrote of the "Seen and the Unseen" in regards to economics:
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen"
The burden of proof for my opponent is to show that there is a policy that can be undertaken that will result in a net benefit to those governed by that policy. My opponent makes the following assumptions:
#1) biofuels can be made that are more efficient than petroleum fuels
No proof has been provided to show this to be true and the lack of activity in the industry indicates the opportunity is limited. My opponent has failed to explain why such a huge profit opportunity is largely being ignored. In fact, if the opportunity is there, why does it need government assistance? Are capitalists and entrepreneurs generally good at what they do, but for some unknown reason, ignoring this opportunity? My own experience is that the presence of a government subsidy is proof that an industry cannot survive on it's own. My opponent could have chosen to taken the position that there is more to consider than profit, perhaps some other social benefit, but has not. My conclusion from this is that biofuels would be a net financial drain on us all.
#2) the private sector is too slow in undertaking the task of tapping into this market. The government can speed this up, with the result being a net benefit to us all
The first problem with this statement is in determining what "too slow" even means. In fact, there actually IS a biofuel industry now. Developing such an industry takes time. How do we know it's developing too slowly?
But more importantly, my opponent seems to make a blind assumption that governments impact will be positive. We are simply to assume that it will speed things along in some positive way. But how and why would this be true? If the intent is to take resources via taxation and apply that toward biofuels, consider that government cannot CREATE any resources of it's own. It can only DIVERT existing resources. If an opportunity exists for profits larger than existing opportunities (where those resources are currently being employed) why would those re-allocations not occur naturally? The economy is not static. I have personally seen this in my home state of Pennsylvania where those I worked with, friends and neighbors diverted their talents toward natural gas exploration in the state in the last ten years. Funds and machinery were also obviously diverted. As Bastiat says, we have to consider the unseen. What about the opportunity cost of this diversion? How do we know that manpower, funds and machinery could not have been used elsewhere to improve our lives even more? The answer comes from two important considerations: one, the diversion occurred because of a higher profit opportunity, and as I've shown, profit represents an efficient use of resources and the satisfaction of consumers desires.
Let's contrast that with an industry where government subsidies have played a significant part: electric cars. Not only have car companies been subsidized with billions of dollars, but our tax dollars also help fund the purchase of each car for those who buy them. Because of this, we do not have a true test of profit. We also cannot tell whether consumers wants are truly met since the consumer is not paying for the full, true cost of an electric car. Electric car sales have lagged despite being subsidized up to $7500 per car. If electric cars are really a net benefit to us, why are consumers unwilling to pay the full price for them? If car manufacturers need subsidies, isn't this lack of profit proof that resources are not being used efficiently?
In the case of Pennsylvania natural gas exploration, the profit opportunity presented itself and the industry developed very quickly. We know this diversion was a net benefit because voluntary actions of those involved resulted in net profits and satisfied consumers of natural gas.
My opponent states that government has shown many times that it can "help the free market along". The problem is that there is simply no way to know this. It cannot simply be assumed that the diversion of resources will be a net benefit. Politicians will make choices based on popular opinions, not economics or science. Their intent is obvious: to improve their own political power. I would suggest that we deny politicians yet another opportunity to use such opportunities to gain power in this way while at the same time reducing our standard of living.
Vote no to biofuel subsidies.