Monday, November 7, 2011

Krugman's overly "sunny" view of solar power

Despite the many failures of the planned socialist economy, it always seems as though the American academic elites believe that THEY can make a go of it. Thus, the Really Serious People (to take a term from Krugman) come up with scheme after scheme, including ways to put people who cannot afford to own houses into home ownership, throwing vast subsidies into corn-based ethanol, and, of course, solar energy.

Not surprisingly, Paul Krugman has weighed in on the side of the subsidized "green" economy, claiming that basically we can subsidize our way to prosperity, which logically is impossible. (Yeah, I know that at Princeton, everything is possible -- when one is spending someone else's money.)

Furthermore, if one even doubts the efficacy of replacing all so-called fossil fuels with solar panels, then one is suffering from a delusion put there by the evil oil companies. Krugman declares:
We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.

If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
Yeah, it was those oil companies that created that sticky wicket known as "Opportunity Cost" which always seems to get in the way of the Obama administration's financial schemes. However, Krugman manages to take something that very well might be true -- that the cost of making solar panels has been falling -- and then present a false argument with it, something I will cover later in this post.

First, let me briefly address the "fracking" issue he presents. I agree with Krugman that the environmental risks of using current methods to drill for natural gas in the Mid-Atlantic states (including the area where I live) in some areas might be quite risky. In fact, I recently was a featured speaker at a meeting in which I laid out the issues as I saw them, and put forth an objection that Krugman ignores: the use of eminent domain.

While private companies cannot seize another's private property, the energy companies can ask local and state governments to take land by eminent domain, and that is what some of them are doing. As I see it, if firms have to engage in such tactics in order to be profitable, then what they are doing is simply another form of receiving subsidies, and a drain on the economy.

Thus, I agree that the social costs of "fracking" may be high, although given Krugman's animus against oil, coal, and gas, I am not ready to believe whatever he says about them. Furthermore, many of the "externalities" are property rights issues, and much of what Krugman advocates is anti-private property, which means he wants the political system to decide the social costs of fossil fuels-based energy, and the political system is utterly untrustworthy.

As for solar power, Krugman claims that it will be competitive with oil and coal once the "social costs" are factored into the equation. Obviously, that is a red herring, as Krugman wants the government to pile so much regulation and red tape into the system that in the end, the energy economy of 1800 would be more "efficient" than what we have now.

Krugman continues to excoriate anyone who raises a question about Solyndra, but I believe that when we permit the political system to determine the economic winners and losers, we get not just one bankrupt company, but an entire bankrupt economy. As Ted DeHaven of the Cato Institute points out, the Solydra affair was a prime example of "crony capitalism," and Krugman claims to be against such things (except when he is for them).

Yes, it is fallacious to say that because Solydra went bankrupt, ALL solar energy is bad. That is not my point. What I AM saying is that for the past three decades, we have been propagandized with the false stories that affordable solar energy IS JUST AROUND THE CORNER.

Well, maybe it is now, but I have my doubts. At the present time, solar panels make sense for small operations and for things like calculators, but the idea that we can use it to replace entire electric grids still seems like fantasy to me. Unlike Krugman, I'm in the 99 percent and cannot afford to put huge numbers of solar panels on my house.

19 comments:

Pete said...

Krugman and his ilk are just displaying yet another example of their ignorance concerning economic calculation.

The information regarding the economic viability of solar power can only be DISCOVERED through the market process, through the valuation of marginal wants, of profit and loss. Krugman does not understand this.

For people like Krugman, when they don't understand the complexities of economic reality, they can only deny them all, which is a social singularity conception, and social singularity conceptions leads people to the state for answers.

These people want brute authorities to decide things, rather than dynamic social processes.

When the state fails in these circumstances, since the individuals in the state are making decisions based not on the market process, but their own ability to use force, Krugman then appeals to antiquated partisan politics to rescue statism from its inherent flaws and shortcomings.

People question and challenge the state, and Krugman sees them questioning his parents. This is how people like him think about the world, and it is how they should be approached.

No child-minded person will willingly go along with questions and challenges to the child-minded's parents. They perceive these challenges as a threat to their own safety and security, and that tends to lead to irrational fears, dogmas, vindictiveness, and hatred.

The only way to reach through to these people is not through logic and reason, for they have already forsaken these things. The only way to reach through to these people is by taking into account their crazy worldview of "the state is our mother/father".

They see you write "there should be choice in healthcare", and they hear "I want children's health to be ignored by their parents so that children are responsible for their own healthcare."

They see you write "there should lower government spending and lower taxes" and they hear "I want parents to spend less on their children, and I want children to do fewer chores."

They see you write "education should be run according to free market principles" and they hear "Children should be abandoned by teachers and parents to educate themselves."

They see you write "energy production should be run according to free market principles" and they hear "I want your parents to take care of me and focus on me and give attention to me as the older brother oil sibling, and not take care of you and not focus on you and not give you attention as the younger brother solar energy sibling."

They see you write "The government uses force and is evil" and they hear "I think your parents are evil and they should not protect you from the other siblings."

Etc

ekeyra said...

If krugman is so convinced that it is right around the corner, why not put his money where his mouth is and start a solar power company? Or hell just start "billy mays" ing it and produce some helpful late night infomercials about your wonderful new product.

Maybe i just want to see krugman try in earnest to actually sell someone on his ideas instead of just calling in the goon squad to make sure we do what him and his smart friends think is right.

Eric said...

First of all. Krugman specifically said solar power can not replace the entire energy infrastructure with solar power:

"even if solar power’s price per kwh matches coal-fired, it’s not going to take over the market right away, and maybe not ever. The sun doesn’t shine at night, and often doesn’t shine during the day. Intermittency is a big problem, and I probably should have made that clearer.

So what we’re actually looking at is still a partial role for solar, as a piece of a multi-source energy system. The point, however, is that it’s now looking like a much larger part than anyone imagined — and if we priced coal-fired power properly, that transformation would be happening now."

You're trying to argue the extreme to discredit the mean. Krugman is simply saying that solar power should be playing a bigger part in our energy economy but is being suppressed by the oil lobby, and you claim he wants to replace all fossil fuel power with solar power. If you want to critique Krugman, you have to represent his arguments accurately.

Secondly, I feel like your discussion on eminent domain actually demonstrates that you have common ground on krugman on this issue. You argue that fracking is bad because it requires oil companies to confiscate private property. Krugman is basically arguing that the pollution from oil and coal does the same thing, its just that we don't have a legal framework to classify te damage they do. If an oil company dumped 10 tons of toxic waste from a fracking operation your property, it violates your property rights. If an oil company dumps toxic shale in a river, or carbon into the air, it is just as harmful in the long run, but we just don't have a legal framework to view it through because we don't view the environment as a whole as a finite resource. You argue when energy companies abusing eminent domain, it is an unfair subsidy, Krugman argues the air pollution they don't have to pay for is the same thing.

Anonymous said...

risky risks are risky

William L. Anderson said...

I have no problem with solar being part of the system, but only if it can be there as part of the market, and not shoehorned in with government requirements. Subsidies always bring down an economy, period, as the government has to take from the profitable sectors to prop up the unprofitable.

Krugman, on the other hand, just sees spending, so if the government subsidizes solar and spends billions doing so, that is billions put into the economy, as he see it.

Krugman also writes as though the fossil fuel industries had absolutely no pollution standards and no regulations at all. That is utter nonsense.

Anonymous said...

Did you actually read the column? He didn't once call for subsidies nor did he even hint at it being the road to prosperity.

Eric said...

Subsidies always bring down an economy, period, as the government has to take from the profitable sectors to prop up the unprofitable.

But in this case, part of the profit of fossil fuel company's comes from the fact that they don't have to compansate their customers for the environmental damage they do.Subsidies to solar companies would be taking away these undeserved profits from fossil fuel companies and investing in companies that would be succeeding if pricing was accurate.

Krugman also writes as though the fossil fuel industries had absolutely no pollution standards and no regulations at all. That is utter nonsense.

That is another statement that uses the extreme to argue against the means. Krugman views the energy industry as being regulated, but believes it should be regulated more. He bases this belief that energy companies need more regulation on that recent article by Muller, Mendelsohn, and Nordhaus, which demonstrated that the costs of coal power exceed its benefits. If you think energy comapies should be less regulated, I'd like to see you cite research demonstrating that the benefits of coal power outweigh the costs and that less regulation would lower the environmental costs of coal power.

William L. Anderson said...

First, Krugman on many occasions has defended huge subsidies for "alternative" energy, and just because he did not say it in this column means nothing. He has said it many, many times.

Second, he has written (and you can find it yourself in my past posts where I linked him) that alternative energy production can help lead us from this depression. That is nonsense. A subsidy by definition MUST come from a profitable portion of the economy, which means one cannibalizes the healthier parts of the economy to prop up that part which is unhealthy.

As for regulation of the energy industry, I never have read anything by Krugman which acknowledges that there are ANY regulations on the oil, coal, or gas industries. There is nothing in this column that indicates that these industries (1) face environmental regulations already, (2) pay any taxes, (3) have any positive benefits.

Folks, Paul Krugman is calling for us to have what essentially would be a Third World economy -- and expecting First World results. That is utter nonsense, but I guess there are people out there who believe it.

Likewise, I see that Bill Clinton is spouting the Krugman line that the U.S. economy was doing just great until Right Wing Ideologues in the 1980s changed all of the rules. You might want to look at the history of the movement to deregulate, who started it, and you might want to remember that the major financial deregulation efforts of the 1970s and 1980 came with a Democratic Congress (with huge majorities) and Jimmy Carter, who at least said he was a Democrat.

Mike M said...

Eric said: “But in this case, part of the profit of fossil fuel company's comes from the fact that they don't have to compansate their customers for the environmental damage they do”

You can make that argument about virtually every aspect of activity in society. For example, you as an individual pay in some form for the services of trash pickup but I would argue it does not fully cover the environmental impact you do with your trash. The calculation is speculative no matter how applied and while interesting discussion over a beer, offers nothing of value.

dchamil said...

Obama would shrug off criticism of the Solyndra by saying that he expects some of the government investments to be failures. Very well, let's see the entire list of government investments. How did they work out on the average? Were they just plain vanilla loans? At what interest rate? Were there any equity kickers, such as common stock warrants?

I haven't seen any such analysis.

Eric said...

A subsidy by definition MUST come from a profitable portion of the economy, which means one cannibalizes the healthier parts of the economy to prop up that part which is unhealthy.

In this case, the subsidy is not being taken from a healthy portion of the economy because, as Krugman argues, the energy industry already receives subsidies because they don't have to pay for the damage of their carbon emissions. If you were to fund investment in solar energy with a carbon tax (as Krugman wants) you would be taking subsidies away from energy companies and giving them to solar companies. In this case, the level of these subsidies is less "speculative" (as Mike M argues) because Muller, Mendelsohn, and Nordhaus were able to estimate the value of these subsidies using medical and cleanup costs.

You are right that Krugman does not discuss existing environmental regulation, and he probably should. But that doesn't really take away from his main point; fossil fuel companies receive subsidies that would be better spent on solar companies to give them the market share they would have if they weren't being strangled by the same fossil fuel companies' corrupt political influence.

Bob Roddis said...

Speaking of those miniscule CO2 emissions, why not blame the Keynesians and “progressives” for them? Who created the inner city public schools that everyone with any money must flee? Who takes land by eminent domain and builds freeways into the surrounding forests? Who insists upon a fiat money system that makes loans out of nothing to subsidize the mad rush to the suburbs and which makes it all possible?

I forgot. Subsidized freeways built on stolen land amounts to capitalism.

American Patriot said...

Oh goodie, more Solyndras and Evergreen Solars.....

That will certainly solve our energy dilemma!!

The definition of insanity is doing the same thing over and over again and expecting different outcomes.

Bruno Carmona said...

I made a comment on this opinion of Krugman in my blog.

http://luzligada.blogspot.com/2011/11/paul-krugman-blinded-by-sun.html

Krugman ignores fundamental issues that prevents solar power from being competitive with gas, shale or conventional it doesn't matter.

Anonymous said...

And the saddest part is......

That these billions wasted in the pursuit of solar power have not only come out of the owners and debtors pockets but out of those of the tax payers as well.

As to other energy providers not paying for the full cost of their products, well that is entirely the fault of government and its monopoly of dispute resolution. The government controls the courts and more importantly issues corporate charters that protect managers and owners from the true cost of their actions.

Old Mexican said...

Re: Eric,
Krugman is simply saying that solar power should be playing a bigger part in our energy economy but is being suppressed by the oil lobby,

And you find this assertion cogent? Despite the obvious evidence that solar cannot compete in physical energy output against oil, you really believe Big Oil needs to lobby against it? It would be the same as saying that Big Car is lobbying against oxen power.

You argue that fracking is bad because it requires oil companies to confiscate private property. Krugman is basically arguing that the pollution from oil and coal does the same thing[...]

It's not nearly the same argument. What Bill argues against is something concrete - outright thievery through Eminent Domain. What Krugman argues is mere fantasy - externalities, which he only vaguely defines and provides no evidence for.

If an oil company dumped 10 tons of toxic waste from a fracking operation your property, it violates your property rights.

Depends on what you mean by "property". PROPERTY is anything we can possess (hold, transform, keep, homestead.) 2 miles below the earth is a place beyond the capability of a single human to homestead and thus own, so clearly, fracking below my house 2 miles down does NOT constitute a violation of my property rights any more than having a satelite fly over my land would constitute a violation of my property rights: I still have my house and my patch of dirt.

Krugman, like many leftists, argue against fracking in an unscientific way simply because they dislike business. That's all.

If an oil company dumps toxic shale in a river, or carbon into the air, it is just as harmful in the long run,

Carbon dioxide is not a poison, Eric - you're equivocating by conflating CO2 with toxic shale. That is called "intellectual dishonesty."

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