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WILLIAM TUCKER: Ever Meet a Policymaker?

By William Tucker

About ten years ago in the late, lamented Insight magazine, I wrote a story about the breed of bureaucrats and would-be bureaucrats called “policymakers.”  The editors gave it a brilliant headline:  “The Butcher, the Baker, the Policymaker.”  That’s just about perfect.  The policymakers are among us.  We might not even recognize one if we met them but they know each other and form a kind of brotherhood that does its best in trying to manipulate the country.  

“Policymakers” are a pure product of the growth of government.  As anyone in nuclear knows, the nuclear industry is no longer a set of independent corporations but a giant monopoly run out of Nuclear Regulatory Commission headquarters in Rockville.  No one can choose a new set of wrenches at a nuclear plant without clearing it with the NRC.  Consequently, everything happens in slow motion and nothing much ever gets accomplished.  The banking industry is now running the same way.  Thanks to the TARP bailout, the 17 largest banks must now submit an “annual plan” to the Federal Reserve asking permission to run their business each year.   

As the government slowly but surely takes over the operation of every sector of the economy, “policymakers” become ever more important.  They are people who are either a) inside the government telling everyone what to do, or b) outside the government in non-profits and “NGOs” trying to persuade the policymakers inside the government what to tell people to do.  All highly educated, they are, in fact, the equivalent of the old Chinese mandarins who kept China in a state of stagnation for centuries.  (The Chinese first instituted civil service exams in the era of Confucius.)    

A wonderful example of all this was the blog post last week by Michael Levi of the Council on Foreign Relations.  A kind of policymaker supreme (Yale, Princeton, King’s College, Brookings Institution), Levi was responding to the proposal that we convert our abundant natural gas supplies into methanol to substitute for gasoline.  His blog was titled “The (Possible) Problems With Methanol.”

Methanol, you may not know, has been substituting for gasoline in Indianapolis 500 racecars since the 1960s.  It is already manufactured widely for industrial purposes and sells at the equivalent of $2 per gallon.  The only thing standing in the way of using it in cars is the Environmental Protection Agency, which has not written regulations giving permission.  (The EPA has written regulations for corn ethanol.)  Because the EPA hasn’t approved it, car manufacturers are reluctant to make the simple $100 adjustment that would allow 100 percent methanol to be used in any car engine.  In order to try to shake up the game, Senators Maria Cantwell (D-Wash) and Richard Lugar (R-Ind.) introduced the Open Fuel Standard Act that would mandate cars to be equipped to run on E85, natural gas, hydrogen, biodiesel and every other variety of fuel, including methanol.  

Levi, however, sees problems.  What is interesting is that he doesn’t talk about economics or the advantages and disadvantages of the technology.  Instead, he addresses the issue from a policymaker’s point of view.  Is it worth our effort, he asks his fellow policymakers, to try to push the Open Fuel Standard Act through Congress?  The answer, he concludes, is “probably not.”  

Here’s the way Levi defines the problem:  

  1. “What would the all-in cost of marginal methanol supplies be in a world that featured rapidly growing U.S. methanol production for transportation?” he asks.  Levi argues the current estimates do not consider distribution and storage.  That might require entrepreneurs to put up additional investment.  (Supporters, on the other hand, say the current gasoline distribution system could easily be redeployed.)
  2. “How much risk would investors in methanol production face?” he continues.  Methanol may look like a “good bet,” but “a real-world investor will need to consider the potential risks of lower oil prices and higher natural gas prices.”  We don’t know the future prices of oil and gas and therefore can’t promise anything to entrepreneurs.  Therefore it probably won’t work.  
  3. Finally, “What would the national benefits of an oil-to-methanol shift be?”  Levi believes the route to energy independence lies in reducing consumption.  To him methanol sounds too much like increased production.  “Increasing U.S. production lowers world prices by increasing supply relative to demand, but doesn’t protect the country from volatile oil prices (or reduce greenhouse gas emissions),” he writes.  “Reducing U.S. oil demand generally does all of these.”

In the face of these obstacles, Levi concludes, the effort to pass the Open Fuel Standard Act is not worth the effort.

Policymakers faced with these sorts of obstacles aren’t going to be swayed by the simple claim that a tri-fuel mandate would “increase competition” and possibly help displace oil. They’re going to want some stronger analysis that persuades them that the energy payoff would be worth the political price.

If you are ever asked on a College Board Exam to define the opposite of “ entrepreneur,” the answer is “ policymaker.” 

The answer to points 1 and 2 is easy.  You never know until you try.  In the immortal words of Ludwig Von Misis, Friedrich Hayek, Milton Friedman, Irwin Stelzer and all the other free-market advocates, a market price is not an abstract entity that exists somewhere in space.  It is a process of discovery.  You never know what the costs and benefits of an idea will be until you put something into practice.  The answer is embedded in reality and must be pried out by human action.  Entrepreneurs don’t know the answer.  Policymakers don’t know the answer.  All the computer algorithms in the bowels of the federal government couldn’t predict the outcome.  But entrepreneurs are people willing to risk their own money to find out.  That’s why it takes entrepreneurs to move things forward, while policymakers sit at their desks and study a problem to death.  

As for the third point is concerned – that we might not want another source of reasonably priced transportation fuel – that is a pure personal preference.  First off, methanol would reduce carbon emissions because it burns cleaner than gasoline.  Second, whatever mandates are applied to gasoline mileage – 55 miles-per-gallon, what-have-you – could easily be applied to methanol engines as well.  Mileage improvements come from reduced vehicle weight and improved drive train and ignition.  They are not particular to any one fuel.  What Levi is really expressing is the concern that converting to methanol might actually work, thereby distracting attention from efforts to lower fuel consumption.  That isn’t a problem with methanol, it’s a problem with policymaking.

H.L. Mencken, a policymaker of a different era, once wrote that the essence of American Puritanism was “the haunting fear that somewhere, someone may be happy.”  The haunting fear of policymakers is that somewhere, someone may invent a source of energy that will allow us to go on living at high levels of affluence without ruining the planet.  Nuclear power, of course, is public enemy #1 in this regard.  

A country can allow its economy to be run either by entrepreneurs or policymakers.  Which it chooses makes all the difference in the world.