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Source link: http://archive.mises.org/12149/finally-free-energy-well-sort-of/

Finally, free energy (well, sort of)

March 10, 2010 by

Thomas L. Friedman notes that, “Sridhar, Bloom’s co-founder and C.E.O., said his fuel cells, which can run on natural gas or biogas, can generate electricity at 8 to 10 cents a kilowatt hour, with today’s subsidies.” (emphasis mine)

Today’s subsidies?!? What is the price absent handouts? That’s what I want to know.

I cheer folks like Sridhar as long as they keep their hands out of my pocket and off my carbon footprint, which Friedman so desperately wants to tax.


Markus Stocker March 11, 2010 at 3:29 am


I agree on the point you are making regarding subsidies. It is sad that the article does not mention what the price is without the handouts. But I disagree, unless you prove me wrong, on your point regarding carbon taxation. I don’t like taxes but I dislike free riding on external costs even more. Thus, can you show me that there are no negative externalities in energy production and consumption, especially w.r.t to related carbon emissions? As far as I understand, as a blogger on Mises.org you are likely to agree that externalities are as wrong as subsidies, yes? So, unless you prove me wrong, my vote goes to Friedman on this.

Inquisitor March 11, 2010 at 4:55 am

Artificial pricing of ‘externalities’ is da bomb.

Mitchell Powell March 11, 2010 at 4:58 am

Wouldn’t “no externalities” be a ridiculous burden to put on the free practice of an activity? One would think the burden of proof should rest on whoever is alleging that external costs exists. There’s no justice at all in an approach that advocates government suppression of an economic activity until it can be proven that there are no negative externalities whatsoever. That’s a backwards approach to law.

Saildog March 12, 2010 at 8:12 am

Not so. That is to turn the precautionary principle on its head. The burden of proof lies with the perpetrators, otherwise they must pay. Where the commons is concerned, in this case the air, climate, environmental services etc, the government has to be involved.

Markus Stocker March 11, 2010 at 7:10 am


Probably the proof is on my side and I don’t have one (plus I’m not even an economist, so I likely won’t come up with one). This, however, also means that on the other side there is no proof there are no external costs. Given that, as far as I understand it, sound economics only works without external costs and, my assumption, that on this forum sound economics is the final goal, I suggest instead of taking one view or the other folks should work together to find out how things actually are. Advocating for sound economics and not considering the possibility of external costs without knowing there are none is, in my opinion, as useless as stating that one is able to generate electricity that is competitive on the free market but only with subsidies.

Ryan March 11, 2010 at 10:25 am

Forget the subsidies – the real story is their plan to drain the sea in order to turn air pollution into concrete to pave the world.

What continues to blow my mind is that every “environmentally friendly technology” seems to do more harm than good. In order to “clean the air,” we have to use sea water (and of course the water used to treat the exhaust is now polluted and must be dumped somewhere). Ethanol infamously causes more particulate pollution and tragically wastes land resources…

The environmental movement needs to figure out that “most efficient” is synonymous with “least environmentally destructive.” For all the harm that fossil fuels does to the environment, they are still a better option than the so-called “green” alternatives.

Joshua March 11, 2010 at 10:27 am

Markus, here’s an idea… how about learning what this website is about and what the austrian views are on these matters (it happens to be that free markets work to minimize externalities) before making assumption filled posts? I suggest browsing the literature and media sections of the site. Also, the search function is handy.

Here’s a nice place to start too: http://mises.org/daily/1360

Markus Stocker March 11, 2010 at 11:02 am


Thanks for the links. That is wonderful if free markets work to minimize externalities and I wouldn’t be surprised if free markets do a better job than taxation but my question is different, namely, (1) whether or not there *are* externalities and (2) if so how can we quantify them. I’ll read your links.

Vanmind March 11, 2010 at 6:19 pm

Ok, don’t quote me, because I’m just an amateur economist, but IMO…

Yes, externalities exist. That is why advocates of free markets don’t claim that a market-based society would be free from all pollution & poverty & bankruptcy (i.e. free from problems). It is the attempt to quantify externalities that is irrelevant to economics, because nothing could ever possibly be done via centralized planning to achieve additional reductions in market-based levels of pollution/poverty/bankruptcy (i.e. any amount of socialism exacerbates the already-minimized problems existing within a free market system).

Only socialists promise utopia. Only socialists search for ways to “figure out” how to engender utopia. Only socialists use fascist tactics to coerce others into following the plans they’ve “figured out” for engendering utopia — whether such plans involve “building the new socialist Man” or “making everyone equal by force of law” or “using Keynesianism/Monetarism to outwit the inflation-fueled business cycle.”

Zen and the art of microeconomic maintenance. Be the Human Action.

Markus Stocker March 12, 2010 at 8:51 am


You might only be an amateur economist, but you have had the best post. Thanks.

OK, let’s forget centralized planning, of which I’m not a big fan as well. Individual actions in line with their own rational self-interest lead to an optimum more effectively. I can’t prove it, but it sounds interesting (not least because I have a chance to contribute that is greater than if a board makes the decisions). The optimum is not a global minima (the perfect solution) but a local minima (a good-enough solution). Is the latter a solution that is not possible to outperform?

Some perhaps argue yes. Though, is “being informed” a necessary condition for rational action? I think, we are all only informed to a certain extent. Take myself. I would not agree for a second that my actions are informed. There is an awful lot of improvement. Does this make me irrational? If so, am I alone? If not, then I think, this is important because my irrational decision of buying X affects the price you pay of X. As such, I would argue that, would I be better informed then some of my actions would likely be different. So, how does the “extent to which we are informed” affect our rational decision making? Assuming that rational actions need to be informed actions (and I’m sure some folks disagree with me on this) and provided that we are never informed — only informed to a certain extent — how can we improve here? I believe, this is related also to environmental issues (provided there are any) and human health.

A side note. In computer science there are a set of unconstrained optimization algorithms. Some do better some do worse in convergence toward the global minima (which is what you truly want); sometimes they get stuck in local minima. Think about yourself on a hill surrounded by valleys and other hills. Your task is to find the lowest point. Are free markets algorithms that efficiently lead to the best (achievable) local minima? Are we stuck there? Remember, some algorithms do better (and I’m not saying socialism is one of them but perhaps increased informed actions? After all, if you have an altimeter and a compass you might find the optimal valley faster. Or is that valley utopia?)

Michael A. Clem March 12, 2010 at 2:51 pm

We are all “rational actors” in the sense that we take the actions that we think will best achieve our goals. The fact that one has not taken the best possible action because of ignorance doesn’t make the action less rational, merely less effective than it could be.
Part of the process of learning is learning from mistakes–you try something and find out if it works better than something else or not. Learning can of course be passed on, so it’s not like we have to reinvent the wheel every time. And given the market, people and companies that want to sell you something have an incentive to ‘educate’ you, and explain why their product or service is a better way to achieve some particular goal.
A socialized, centrally planned system isn’t about spreading education and information, but about some central committee or authority deciding what’s the best way to do things and simply telling others to do it that way. Why explain? Why allow for argument and dissent? The problem, of course, is that there is no one, right way to do things for everybody in every situation, and no central authority could possibly get the necessary information to get it right for everyone. There are too many different possibilities.

Markus Stocker March 11, 2010 at 11:34 am


Halbrook argues in [1] that “it is precisely because externalities cannot be revealed through human action that they are irrelevant to the study of economics.” OK with me, it draws a clear line on the limitations of economics. This, however, doesn’t mean externalities cannot result in any additional knowledge overall. If, then, externalities indeed results in additional knowledge and this additional knowledge affects economics, might it then be relevant to economics? But perhaps this is a question for a forum that takes an interdisciplinary view, agreed.

[1] http://mises.org/daily/1360

Joshua March 12, 2010 at 4:42 pm

You seem to both agree with Halbrook and disagree with him on the very same point. Could you be a little more clear? As it is, it seems you have misunderstood the article.

Markus Stocker March 13, 2010 at 2:30 am

As far as I understood Halbrook, externalities are to discard from economic analysis because they are not defined in terms of human action. Only effects of action, as a stated preference, can be analyzed in economics. Is see this as a consistent interpretation in a specific framework which is why I said that I’m OK with this. However, I’m not sure how the interpretation would be in another framework.

AntiNeoFascist March 11, 2010 at 12:33 pm


I disagree, unless you prove me wrong, on your point regarding carbon taxation. I don’t like negative externalities, but I dislike coercive government market manipulation even more. Thus, can you show me that there are no net costs, no net loss in productivity and no negative externalities of a government mandated carbon taxation scheme? So, unless you prove me wrong, my vote goes to the free market on this.

Saildog March 12, 2010 at 8:19 am

What if income/labour taxes were replaced by carbon taxes. ie no increase in taxes and leave it to people to decide how much carbon they are willing to pay for? Ironically isn’t this the most Austrian way of all?

Markus Stocker March 11, 2010 at 5:10 pm


You are free to vote how you like. I don’t want to suggest government mandated carbon taxation schemes are a good solution, or for that matter a solution. I started this thread because I tried to discuss something and I never claimed to know it better or to have the solution. What I had, and still have, are questions. Thanks for the answers.

I’m just reading R. Cordato “Toward an Austrian Theory of Environmental Economics” and, sorry if I’m upsetting folks again, to me it just doesn’t sound convincing. For instance, taken from R. Cordato, that a byproduct is defined as an air-pollutant based on a “divergence between marginal private benefit in the production of the associated product and marginal social costs” might be a definition w.r.t a narrow minded (environmental) economics perspective but you can’t seriously argue that all those folks who consider particulate matter to be an agent with potentially more harmful effects than water vapor w.r.t to human health have no point. Again, this might not be in the scope of economics and, thus, an economist cannot say anything about it. Though, if it is out of scope of economics, then economists should not say anything about what a pollutant is or isn’t and leave that definition to others. On p. 7 Cordato states that “humans cannot harm the environment.” Without any support there is no base for me to either agree or disagree with it. Thus, I remain skeptical. As such, the Cordato paper goes, at least on my side, onto the pile of “interesting but not convincing” stack. And I’m back to square one.

newson March 12, 2010 at 4:44 am

see rothbard on how the legal system defanged tort as a private defense against pollution. it could have been a way of internalizing many of today’s negative externalities.

also, interesting empirical observation on how well the heavily planned economies treat the environment.

as vanmind says, perfection is the enemy of good, insofar as the environment goes.

Saildog March 12, 2010 at 8:26 am

“how well the heavily planned economies treat the environment” – very poor to be sure. But the “rich” world simply exported their pollution. Buying goods that have been manufactured from places with poor environmental practices is just NIMBYism on steroids. In other words the environmental Kuznets curve is somewhat simplistic an explanation for how much better we are at doing the environment.

newson March 16, 2010 at 7:05 pm

nimbyism operates in just the same fashion in socialist/totalitarian regimes. chernobyl was not sited in moscow. of course unloveable, dirty industries get shipped out of wealthier zones to poorer, regardless of economic model. the country that receives the unlovable industry uses its tolerance for pollution as comparative advantage. reforming the monetary system would avoid wasteful consumption exposed worldwide when bubbles pop.

the way to minimize tragedy of the commons is to reduce the commons, to the extent possible. large commons are inevitable. universal regulation is a dream on a par with the tower of babel. diplomatic pressure and activistism is about as good as it gets, whaling being a case in point.

carbon tax is predicated on the belief that co2 is a problem in the first place. i would have thought that recently even true-believers in climate “science” would have paused for reflection, given the climategate revelations.

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