Force Change

The concept of unintended consequences is one that we look at frequently on this blog, with ethanol, of course, being one of our biggest discussion topics.  Sen. McCain throughout his career and on the campaign trail has claimed that he is opposed to government mandating specific solutions, opting instead for market based answers.  He has directed much of this criticism towards Sen. Obama for his support for ethanol subsidies.  However, it is not clear that McCain is completely consistent in this approach, since he has recently been advocating subsidies for cleaner coal and nuclear power. 

Of course the most obvious criticism of McCain here is for hypocrisy.  However, the more interesting question is what role should our government play in promoting alternative energy and clean technology?  We generally believe that market based solutions like the proposed cap-and-trade system are most likely to produce the best result.  However, tax breaks and subsidies may also play an important role, as they have with solar and wind energy development.  The problem is when the government’s directives result in a “solution” that may not be the most efficient or practical (as may be the case with ethanol), and we then are faced with a series of undesirable and unintended consequences.  Of course it is easy to judge, in retrospect, which solution was good and which was bad. The hard, if not impossible, part is to do this prospectively, which probably cuts in favor of market based, instead of government mandated, solutions.

Photo credit.