Friday, November 09, 2007

Out of the archives

 I was perusing my blog notebook where I keep all manner of ideas for posts, and happened upon an old summary I had done when I was reading Robert Bork's Slouching Towards Gomorrah several years ago. Many of the posts I've done recently have looked at the idiocy of so-called conservative policies in an attempt to demonstrate that while the Democrats are no friends of Objectivism, neither are the Republicans. And they may actually be more dangerous to the cause than the Democrats.

What struck me about this essay was that it was all before the last elections, before Leonard Peikoff has convinced me that the Republicans and more importantly, their social/religious conservative base were as dangerous if not more dangerous than today's liberals. And yet, here was the same fundamental analysis which I'd put down on paper long before I understood the consequences of it enough to take action with conviction. The second thing that drew me to it was that here in Bork's thinking, published more than 10 years ago were the basic philosophic ideas clearly articulated that if perpetuated by the Republican party will make it a dangerous threat to liberty. So I transcribed it just out of sense of discovery...

2/7/04 - One of the things that has bothered me about most thought labeled as "conservative" is that while it has a tendency toward advocating more (though not consistent) free market policy and less socialistic policy, it seems to want to replace social policy with a more paternalistic, moralistic use of government. Interestingly enough, Robert Bork in his book Slouching Towards Gomorrah espouses just such a philosophical view on more philosophical grounds. I can clearly see the influence of his ideas and those like him on today's conservative thought...

Bork's thesis is that modern liberalism has "over-extended" two ideas: individualism and egalitarianism into mutated forms which he calls "radical". That the founders never intended and which are incompatible with a free society. He then claims that today's conservative thought represents "true" classical liberalism and that we must return to a more moderate form of these in order to survive as a culture. He then goes on to give examples of today's social and cultural decline and ascribes them to the two trends above.

In English, he claims that today's liberals use government (and change culture) to a) force equality, and b) not morality. Borks solution then is to a) stop forcing equality and b) start forcing morality [sic!]. It is Bork's second action that I have a significant problem with.

I believe that the big issue is in the intrinsic-subjective dichotomy, and that Bork's thesis is a crystal-clear example of intrinsicism run amok to the liberals subjectivism run amok. Today's liberals claim no morality is correct and want society to dictate equality in it's absence. Today's conservatives see one morality from God, but because it is arbitrary and absolute, (and divorced from reality) necessitates the force of it on society.  Both views result in unnecessary force on society. The liberal's claim to it is bankrupt (and Bork rightly exposes it) but Bork's claim is equally wrong.

Which is more dangerous, a bankrupt ideology, or one that is gaining strength in the wake of today's religious fundamentalist movement?

Wednesday, November 07, 2007

The Biofuel Boondoggle

A great article in yesterday's Wall Street Journal highlighting more aspects of the idiocy of biofuels (e.g. biodiesel, and ethanol). From "Biofuel Costs Hurt Effort to Curb Oil Price" it seems that the costs of biofuel feedstocks, namely corn and oils such as palm oil are increasing with the increased demand for these products, preventing them from achieving cost-effectiveness in the face of rising crude oil prices.

A few years ago, many energy economists predicted that higher oil prices would ensure the success of alternative energies such as biodiesel or wind power by making them more financially attractive. In many cases, though, the opposite has occurred: Even as crude-oil prices approach $100 a barrel, some alternatives look less attractive than in the past.

One reason: Energy demand is now so intense that supplies of just about every kind of fuel are in short supply, driving up prices of the raw materials involved in making many alternative energies. Some biofuels also rely on agricultural commodities that already are facing higher demand as foodstuffs, a situation which drives up prices further.

Hmm, who'd have though that the price of corn would go up. Oh, wait, we forgot about a little thing called supply and demand. Not only that, but these feedstocks are commodities, meaning small changes in demand past the total industry supply capacity result in big changes upward in pricing (known as it's price elasticity). Biodiesel accounts for less than 1% of transportation-based fuel supply and already it's causing supply demand and pricing upset in the agricultural sector. Which also means the price of foodstuffs containing corn is going up as well.

What does this mean? Simple, the biofuels sector will stall. It will do so before it ever gets the levels of contribution predicted. Already, plants that were on the drawing boards are not getting built and government subsidies which are what made the entire sector even marginally attractive in the first place will dry up.

In Malaysia, an important center for palm-oil biodiesel production, the government has held back on plans to require biodiesel blends at petrol stations because of a fear it could drive palm-oil prices too high, imperiling the country's nascent biodiesel industry.

Malaysia issued roughly 90 permits for biodiesel refineries in the past three years, but only about five are in operation. It appears that most of the others will remain on hold until palm-oil prices come back down.

In Europe, officials are still committed to a plan to meet 10% of the region's transportation needs with biofuels by 2020. But Germany has cut back on some tax incentives for biofuels, and some EU officials have questioned whether subsidies for biofuel crops are necessary in the future. Spanish energy company Abengoa SA recently suspended production at one of its biofuel facilities in Spain because of high grain prices. Similar projects have stalled elsewhere, including Hungary.

The U.S. has its own alternative-fuel woes. The price of corn, a key raw ingredient, has increased even as the market price for ethanol has been held down by oversupply. That has squeezed the profitability of ethanol producers and forced new players to cancel or delay construction of more facilities.

Oh, and the final tidbit that folks haven't yet understood. Biofuels are energy neutral at best. This means that the total energy required to produce a unit of energy of biofuels is a similar unit of energy. And the energy used to produce it is: you guessed it, fossil fuels.

There is a raging debate on the exact level of energy neutrality, with many environmental types applauding studies that show that fuels such as biodiesel have reached the threshold of being energy positive. However, this threshold is useless. Why? because at energy neutrality, biofuels are still tied directly to the price of fossil fuels. If it takes 1 unit of fossil fuel to produce 1 unit of biofuel, then as the price of fossil fuel goes up, so too will the price of the biofuel produced from it, and by a commensurate amount. Again, this economic fact will contribute to the stall in share of biofuel. This doesn't account for the supply-demand driven increase in the feedstock which adds to the problem. Even a slightly energy positive profile for biofuels will not change the fact then that they are useless as a hedge against rising fossil fuel costs.

When biofuels are an economical alternative to fossil fuels, the market will not need cajoling or prodding to accept them, it will do so. Until then the only effect that mandated biofuel usage, such as California's recent law requiring 5% of the states needs to come from biofuels, will have one effect. It will drive up your costs of fuel, and it will do so as much if not more than the rising costs of fossil fuels. Government policy is not helping in this matter. It is only hurting.

When it comes to biofuel policy (and any other economic policy for that matter) you should advocate one and only one policy: laissez faire!