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Source link: http://archive.mises.org/3975/ethanol-and-the-calculation-issue/

Ethanol and the Calculation Issue

August 18, 2005 by

The Bush energy bill gives yet another boost to the production of ethanol, writes Peter Anderson. We are told that this is great news because ethanol helps the midwest, boosts prices for farmers, and makes America self reliant. It’s all nonsense, but the best case against such claims is Mises’s own argument concerning economic calculation. From the point of view of economic rationality, ethanol makes no sense; if it did, it wouldn’t need subsidies and central planning in order to bring it into existence and make it marketable. FULL ARTICLE

{ 105 comments }

Vince Daliessio August 31, 2005 at 11:31 am

JBP says;

“There is a huge construction boom in Iowa, Illinois etc right now for ethanol prodcution plants. Ethanol is being produced in record volumes. From the above calculations, ethanol is both profitable AND subsidized.”

This is almost solely due to subsidies and mandates. If they didn’t exist, and oil prices continue to rise, ethanol production might eventually also. But that doesn’t add legitimacy to the mandates and subsidies.

Vince Daliessio August 31, 2005 at 11:33 am

John is right about one thing – when the US economy goes bust, so will the Chinese, and both of those will depress the oil price.

John Powers August 31, 2005 at 2:39 pm

Vince,

How do you determine that ethanol production is “almost solely due to subsidies”? Don’t you think $70 oil and $3.25 Gasoline might have something to do with it?

If we had a construction boom with $20 oil and $.75 gasoline, I would tend to agree with you. But we don’t.

JBP

scott June 7, 2007 at 5:03 pm

m. massey states “We raise corn in Eastern Washington…..Why do I as a farmer need to buy $3 per gallon diesel refined from crude oil from Saudi Arabia?”

isnt your gas most likely coming from canada or alaska??

scott June 7, 2007 at 5:54 pm

y. ward states….”This requires 135 billion bushels of corn and, at 125 bushel’s/acre yield, 1.08 billion acres of land would be needed. How much land is this? It is 1.6 million square miles, or 1/2 of the land area of the United States. I seriously doubt that even 1/3 of the US is even arable.”

even if ethanol were to replace half of the gasoline fuel demands – (i guess around 500 million acres, 1/4 of the area of the u.s.) that would require a lot of land currently being used for other crops, livestock etc. would the pressure for additional corn acreage push the price up for items currently being grown in these areas? a great deal of the north central and northwest is very hilly and rocky…not suitable for large scale (combines) corn crops, at least thats how it appeared to me. and i guess the vast open areas of the southwest are to arid???

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