Sunday, July 20, 2008

The Invisible Hand

Al Gore recently made news saying within ten years non carbon sources should provide all electricity generation in the United States. That would be a laudable outcome. Of course it won't happen unless there is a government mandate. Mr. Gore obviously has no problem with government making these decisions. But, candidly, that isn't the way the world really works. How do we know?

We know because centralized decision making has failed over and over. The grand experiments with state control of the economy failed repeatedly, most notably in the former USSR and the People's Republic of China. In fact the Chinese ecnomic miracle was made possible by Comrade Deng's decision to embrace decentralized economic decision making a few decades ago.

Other less well known failures of centralized economic decision making abound, featuring "deciders" such as the despot de jure of various third world countries as well as World Bank, the International Monetary Fund or Fannie Mae.

But what is the alternative?

Clearly, given a chance people will make the best economic decisions they can. Eventually they do the right thing and positive unintended consequences result for all of us.

Today we have two examples of this phenomena reported in the Washington Post. One is an effort by baseball, and other pro sports to "go green." (See: "Green Becomes the Official Color of Baseball" July 19, 2008 at Another describes an economic phenomena resulting in 10% of electric power in Texas now coming from wind energy. (See: "The Aswer's In The Wind--and Sun" July 19, 2008 at

These examples required zero government intervention or interference. People and corporations are following their elightened self interest; simply doing well by doing good.

Back in 1776 at the same time as the American experiement inspired by self interest began exploring a new theory of individual sovereignty in the "Declaration of Independence," a Scottsman named Adam Smith wrote "The Wealth of Nations." In it he predicted that "the invisible hand" would motivate the exact sort of outcomes as the Washington Post reported in today's paper.

I wonder how the baseball teams and wind generation companies managed without Al Gore, Congress and whoever becomes President telling them what to do.

1 comment:

Jim Cannon said...

I have a slightly different take on the notion Al Gore presents. As one who grew up with parents in the midst of the Space Program in the 1960's and 1970's, I have first hand knowledge of government initiatives and their outcomes. The amount spent to get from here to a moon landing was far more than the 60's economy could have possibly provided for independents companies to attain such a goal. In the end, what would have been the payback?

In addition, my grandfather was a surveyor for the Corps of Engineers. His work provided the basis for the TVA projects that continue to provide hydro power to the southern states...also a project beyond the scope of commercial enterprise.

Prior to our entry into WWII, the government tried to pull us out of a crippling depression via the WPA, CCC and other mass work projects that were quite obviously beyond the ability of commercial enterprise at the time.

My point is simple, Americans rarely just do the right thing without some emergency prompting it, when the effort involves such a radical change in lifestyle or fiscal direction. Government has to use its pulpit to rally the masses, to instill a sense of unity and purpose...and, when the project at hand is overwhelming, to provide support for the project in spending or other incentives.

I view Global Warming as a reality. I do not take it on faith, I see the results in melted glaciers and ice caps, this cannot be faked. But like issues of faith, we cannot predict the timing of the great, like questions of faith would ask, "what if Al Gore is right?” We are gambling with everything we have and everything we will ever have. Someone has to step up to the task of motivating our population to do what we already know in our hearts is the right thing...we have to make a change or suffer the consequences. Maybe you simply don't like Al Gore, and that's okay. But don't confuse dislike of the messenger for dislike of the message. It has to be done; other countries are far ahead of us. This is our generation’s Space Race, but this time the cost of losing is permanent.