Green economic illiteracy and alternative energy
Gerard Jackson
Eventually every green attacks the free market. But this is understandable considering that free market economics presents a major obstacle to green ideology. Now sometime ago a certain Peter North tackled Dr Aaron Oakley's criticism of green propaganda and so-called global warming.
Dr Oakley's point that trying to rely on 'renewable energy' sources would be like returning to the Dark Ages elicited the absurd response that "[e]ntering the 21st century would be a more appropriate description of moving to alternative energy. The economy of Denmark didn't 'collapse' when they switched to 20% wind energy." This is a damned silly statement. I have before why such a policy would literally be an unmitigated economic and social disaster, pointing out that these technologies employe massive diseconomies of scale.
(In fact, Julian Cribb [Director, CSIRO National Awareness and former science writer for Rupert Murdoch's Australian] once complained about one of my exposés of what I call the great solar con. I told him that if anyone at the CSIRO had found a means to extract a quart from a pint pot would be glad to hear of it. I'm still waiting).
Of course Denmark's economy did not collapse when it built electricity-generating windmills . This is because they only supply a small portion of the country's electrical energy needs. See what would happen if they tried to run the entire economy on these wasteful monstrosities. The main reason is the third power.
Like economics, nature too has its laws. The maximum power one can get from a windmill is proportional to the third power of the wind speed. This means that even the best designed windmill with, for example, 2.5 metre diameter blades and a wind velocity of 16 kilometres will produce about 110 watts. Theoretically 59.3 is the per cent, known as a Betz, is the maximum amount of energy that can be extracted from the blade area, meaning that given a wind velocity of 16 kilometres our theoretical windmill can produce a maximum of 110 watts of energy. Engineers to date have only managed to produce 70 per cent of a Betz.
In English so plain that even any pompous self-righteous green can understand it — wind power is dilute and that's where it diseconomies of scale come from. And diseconomies of scale mean rising costs, not falling costs.
These facts have been confirmed by a number of studies. One by Westinghouse Power Systems found that to supply 20 per of America's cent of the country's electricity supply the nation would have to build rows of windmills from Canada to Mexico and from coast to coast, with each row being 30 miles apart, each windmill being spaced at 500 feet and requiring 500 foot blades. Moreover the wind would have to blow at a constant 24 mph for every windmill.
A 1978 British study calculated that it would take 20 million windmills with 100 foot diameter blades to meet the country's electricity needs. For America, it would have something like 250,000 windmills with 300 foot blades. How many windmills would it take today?
It’s because these alternative energy sources are destructively expensive that the green leadership advocate them. It was, after all, Amory Lovins who said: "It would be little short of disastrous for us to discover a source of clean, cheap, abundant energy because of what we might do with it". And Lovins is far from being alone. The notorious Professor Paul Ehrlich stated: "Giving society cheap, abundant energy . . . would be the equivalent of giving an idiot child a machine gun".
No wonder Drs Arden and Marjorie Meinel, pioneers in solar energy, said of Lovins and his ecotopian ilk: "Should this siren philosophy be heard and believed we can perceive the onset of a New Dark age". No, It is the greens that are wrong, not Dr Oakley.
North argues that there needs to be a "balance of regulations between the absurd levels of regulation of communism and the complete absence regulations of anarchy". This is just plain economic ignorance. Communism's problem was not excessive regulations but central planning which tries to eliminate market processes. In the absence of markets there is only economic anarchy which eventually brings about economic collapse. Professor Ludwig von Mises was the first to successfully explain why centrally planned states will always fail. (See Economic Calculation in a Socialist Commonwealth, 1920).
Then we came to cars, the thing greenies love to hate. North claimed that by "tax[ing] the hell out of petrol" European governments have encouraged sensible sized cars. What is a sensible-sized car? And what makes Mr North and his fellow greenies the arbiters of what is sensible transport for the rest of us? Why not sensible-sized houses, flats, television sets, furniture, stoves , ranges, fridges, dishwashers, gardens, towns, aeroplanes, etc? After all, Mr North, they too use resources.
In any case, the "tax-the-hell-out-of-petrol" policy of European governments was motivated by greed and nothing else. I think the grim fact that the smaller the cars the more fatalities from car accidents, not to mention severe injuries, should be impressed upon people. Ah well, it's not as if they're whales — so why worry?
We then get the greenie canard about wasting oil economic growth cannot roll on forever. There is no indication whatever that the world is running out of oil. Jude Wanniski calculated that if a hole 50 miles by 50 miles was dug and all the oil that has been extracted in the last 145 years was poured into it the oil lake would only be 63.3 feet deep, making it much smaller than quite few other lakes.
This suggests that there is an abundance of oil. In any case, estimates of reserves of any resource do not represent estimates of the total amount of that resource in existence. Known estimates of a resource only represent reserves that are worth finding at a certain price, including price expectations, and the state of technology. This is why estimates of resources change with prices.
Furthermore, in a free market one does not run out of resources. The price merely rises until it becomes uneconomic to use. We do not need taxes to do the job. In fact, these taxes lower economic welfare because they send false signals to invest in alternative resources. if the tax on oil were raised high enough demand would fall, directing investment into substitutes of one kind or another. But this would be wasting resources, what the Austrians call creating a malinvestments.
The reason is that if these alternative economic activities were profitable under free-market conditions companies would have already invested in them. That they did not is a clear demonstration that the necessary resources are more valued elsewhere. In simple terms, these investment would not cover their costs and so forcing them into existence lowers total output and raises costs.
The idea that the world's resources put a limit on economic growth is ludicrous. As I have said several times before, from any human perspective resources they are clearly infinite. At the present rate of consumption there is still enough copper in the top kilometre of the earth's crust to last over 240 million years, 38 million years for aluminium, 57 million years for gold, 1.8 billion years for iron, 1,855,000,000 years for uranium, 400 thousand years for molybdenum, and so on.
Now the average thickness of the earth's crust under the continents is 31 kilometres and 5 kilometres meaning that there would even more resources to be had. Calculations by the Commodities Research Unit, London, estimated that the top mile of the earth's crust holds a million times more than the estimated reserves of most metals. There also exists vast untapped quantities of methane hydrate and free methane gases, of which known reserves are virtually in inexhaustible.
What North does not understand is that genuine economic growth is a resource generating process anyway. Did he honestly think oil was always a resource, and what of bauxite and silicon? More importantly, economic growth consists of adding longer and more productive stages of production to the capital structure, as the Austrians put it, not the simple multiplication of existing goods and services.
Despite economic analysis and scientific facts the Victoria's Labor Government is planning to throwaway vast amounts of taxpayers' money on wasteful alternative energy projects. Unfortunately, the conservative opposition, under the vapid leadership of Robert Doyle, is just as unprincipled as Labor on this issue.
Gerard Jackson is Brookes' Economics Editor
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