Thursday, February 07, 2008

The Danger of Political Action

It's a point that some economists and many libertarians have been making for some time - it's impossible for politicians, or any individual for that matter, to accurately pick a winner.

This time the evidence comes in, quite persuasively, with ethanol subsidies.
The tax credit for ethanol is an example of a cost ineffective subsidy. The cost of reducing CO2 emissions through this subsidy exceeded $1,700 per ton of CO2 avoided in 2006 and the cost of reducing oil consumption over $85 per barrel.
...a growing body of scientific evidence suggests these gasoline alternatives will actually boost carbon-dioxide levels and thereby aggravate the problem of global warming.
So we have a solution that:
  • Costs a crap load of money.
  • Destroys forests.
  • Distorts the market by crowding out research for (potentially) better alternatives.
  • Increases the cost of food - disproportionally hurting the poor.
  • AND has the opposite effect as intended by hurting the environment more than the status quo.
I'm sure that I missed some other results as well. The question is whether activists and politicians will react to this evidence or fall prey to the perfect storm of environmentalists that have demanded that government "do something," rent-seeking corporations like ADM looking for hand-outs and populist pandering to farmers.

Something tells me that this will be rationalized away as the correct approach even though it clearly isn't.

HatTip: Marginal Revolution

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