« Stolper-Samuelson for the real world | Main | I am starting to believe in miracles »

June 17, 2008



His is a sensible proposal - trouble is what happens when millions of revenue from cap and trade go through Congress's giant sausage grinder.

We'll see then what congressmen make of industrial policy - solar power in Alaska anyone?

Luis Enrique

I'm puzzled why schemes like this aren't more mainstream. If anything suffers from public good, externality, co-ordination etc. problems, then surely large scale clean energy and and transport infrastructure is it. What am I missing?

I'm a Brit, and I'd like to see the UK government doing something similar. I don't know, building large solar banks in Morocco with cables under the Med to plug into the EU grid.

Mr Punch

It's Obama's description of the proposal that makes it sound like "classic industrial policy." Infrastructure, education, and basic research don't really fit that definition.


"a lack of faith in private markets"

Says it all really!


Obama's industrial policy is not thought through very well at all. He knows from his four years in the senate that the legislature will impose substantial costs and minimize all the oportunities for real conservation.

One poster who asks, what am I missing?

What you are missing is that those who try to conserve energy still suffer from global warming regardless of how much energy they save. That is because the energy saved by conservation goes directly to the federal legislature.

The solution that will evolve is one in which conservation and efficient energy use will match up outside of the legislature.

If the legislature is involved, there will be no solution for the private sector. And I doubt that the government, which burns, indirectly, 38% of the gasoline has any motivation to make its own part more efficient, much less the remaining 62% of the economy.

All of the proposals I have seen from the legislature involve making fossil fuel use more inefficient.


This is discouraging news: for all his good intentions, Obama is heading off in the wrong direction. The right strategy would be to recycle all or nearly all of the cap revenues and look for R&D financing from the general budget.

There are many reasons for this.

1. Households will be hammered by the price increases stemming from the incidence of the cap. From a macro point of view, unless the government can spend all this income at a pace and with a continuity comparable to private consumer demand, we have a Keynesian problem.

2. The implicit tax on households will be highly regressive. Recycling allows this to be offset; the simplest solution is an equal per capita rebate.

3. We are in this for the long haul -- generations in fact -- and policy sustainability requires majority support through times thick and thin. Recycling is essential for this.

4. Financing a massive R&D program through dedicated funds from a lucrative permit auction obscures the true opportunity cost of those investments. Given the political economy of Washington, it is a foregone conclusion that there will be a lot of waste.

5. Not only are there sufficient opportunities to find the necessary financing in other parts of the budget, we have an obligation to try to shift that spending. Vast sums are now spent on programs (subsidies for un-green technologies and producers, foreign adventures that make us less secure) that ought to be redirected, even if there weren't such a positive alternative like investment in post-carbon energy options.

ivan janssens

Obama lauds the CIA. Ehm, has the CIA some special expertise concerning technologies that lack long-term capital then? Even concerning it's core business the legacy of the CIA is one of ashes. (http://www.amazon.com/Legacy-Ashes-History-Tim-Weiner/dp/038551445X). The fact that Obama points to the CIA is reason enough to be very sceptical. And very afraid.


Here are intelligent comments on the less flattering part of the article for Obama:



In essence what Obama is proposing, tax the electric utilities who will then raise rates to cover the new tax, and use the revenue from the new tax to give back to the customers.

How can anybody call this sensible, it is sheer stupidity


Peter is absolutely right unless all of the revenue is recycled there is no way this proposal can be introduced. Tax incidence will mean that low income people will suffer the most and this at a time of rising inequality will be impossible to justify unless revenues are re-inbursed on a per-capita basis, this will mean important R&D and national infrastucture investment have to come from the general budget (although the budget is in a dire situation). Overall for this area of industrial policy to succeed will require consensus. Failure to make tough decision by politicians (the private market can't handle this problem on its own, this is self-evident) will have grim consequences for the future welbeing of not just America but the world as this is a global problem.

caveat bettor

What role was Austan Goolsbee playing with his NAFTA comments?

William Perera

I agree with "student" (3 posts above). The costs will just be pushed onto the consumer and then partially rebounded back again. Despite the apparent roundabout nature of the payment system, it would lower emissions. I think the real question is whether market forces are strong enough to motivate private industry to innovate on their own, and at the moment they seem reluctant to do so. I guess it also depends on how subjectively important the environment is to the taxpayers.


I know you don't usually take requests, but I'd love to read your reaction to Tyler's piece on water privatization.

don bumpass

federal government efforts to support "energy independence" isn't new; see jimmy carter in the late 1970s with an industrial policy directed toward a synfuels program.

how did that go?


jimmy carter = b. obama ??

1970s = 2000s

Nathan Smith

"If anything suffers from public good, externality, co-ordination etc. problems, then surely large scale clean energy and and transport infrastructure is it."

A public good is *non-excludable.* Seats on a train are excludable. High-speed internet is excludable, and no clear externalities. Anyway, a typical optimal response to an externality is to tax something and leave it to the market, not to adopt a full-fledged industrial policy.

The "party hack" line is unfair. Holtz-Eakin is being a *free-market* hack, which is a much more respectable role for an economist to play. In fact the free-market hacks have often been right. About communism, for example. Rent control in big cities. Price controls on gasoline.

And probably about this too.


US arguments about industrial policy seem to omit any references to the existing structure of tax breaks, subsidies and earmarks which already affect many industries - not to mention the huge ongoing military procurement spending. And at the State level there are a raft of subsidies, planning exemptions etc. designed to attract industry to particular States. Taken together, these measures amount to a substantial de facto industrial policy. Why are they never identified as such?

rolex watches

This is clearly replica watches the job for our legal fraternity to engage the establishment to necessary breitling watches steps by filing petitions in various courts. IF one fails another should be cartier watches filed taking every one to task. It is rolex watches useless to suggest ways and means to solve tag heuer watches the day to day problem to well paid employees tissot watches of government controlled establishments. Only active omega watches judiciary will resolve this problem.

rado watches

Why is everyone just montblanc watches willing to accept power cuts? Don't you think that patek philippe watches having continious power is your right? If people aren't going to demand rado watches 24X7 power, don't expect anything zenith watches to change. The government needs to look at other sources parmigiani watches of power generation. The only solution is more power panerai watches production. Nothing less.

rolex watches

People usually say :"Seeing is believing." http://www.tt88times.com
Each attempt has a corresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://www.fashionhairfu.com

wireless sex toys

I've been using recycle bottles to refill drinking water. I've read somewhere that you cannot use the bottle after many times or recycling because of the chemicals in the bottle. So how many times exactly can i recycle it?

ghd straighteners

GHD straighteners was kmown as ghd flat iron, which was authorized online seller provides all kinds of hair straighteners,pink ghd,purple ghd,babyliss. By visiting ghd australia , you will find what you want and made yourself more beautiful.If you miss it ,you miss beauty.Buy a piece of ghd for yourself.Come and join us http://www.ghdoutlet-au.com/ to win the ghd iv styler.


Birkenstock was Made in Germany since 1774 . Check out our Birkenstock sandals and Birkenstock shoes including the Birkenstock gizeh,at the lowest regular outlet prices, free shipping and when you put on Birkenstocks. you will feel very comfortable.

generic viagra

We are trying to figure our how our school can become a greener school, we need to find ways to save energy.So far we got changing to laptops instead of dino computer,Trying to change light bulbs (what kind though),Dim lights more,Switching most of our electronics to solar power,Closing doors to save the heat,Making posters to remind students and teachers to turn off lights in classrooms after they are done.Any other ideas?


ghd hair straightener on sale now,please go on ghdstraighteners-au to find how large the discount is.



I like these articles , democratic countries formulate policies are both team and the interests of the people of power, but the undemocratic countries rarely for the interests of the people, http://www.jerseysky.com it is the sorrow of many democracy, I like the western and northern state policy.


The ultimate collection of Sex Toys. Shop The Sex Shop UK for Great Sex Toys for women and men and we'll satisfy your every need!

lv bags

otra prueba~~


jordan shoes

I am happy to find this post very useful for me, as it contains lot of information. I always prefer to read the quality content and this thing I found in you post. Thanks for sharing.

authentic jordans

Thanks a lot for sharing. You have done a brilliant job. Your article is truly relevant to my study at this moment, and I am really happy I discovered your website. However, I would like to see more details about this topic. I'm going to keep coming back here.

jordan shoes

This is a wonderful site. The things mentioned are unanimous and needs to be appreciated by everyone.

Drilling Chemicals

LLC Supplies different types of chemicals used in oil sectors in the Middle East and around the world.

Account Deleted


Thanks for article.

Account Deleted

Hermes Evelyne


Account Deleted


Account Deleted


I like it ... Thanks !!

Account Deleted


Thanks to you !!!

Account Deleted

Awesome stuff you guys got here. I really like the theme of the website and how well you organized the content. It's a marvelous job I will come back and check you out sometime.
Copenhagen hotels

Account Deleted


Thanks for comment ...

Account Deleted

Many places and centers offer business and trade promotions to both buyers and supplier

Account Deleted

Thanks for sharing your article. I really enjoyed it. I put a link to my site to here so other people can read it

Account Deleted

What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop online

Account Deleted

What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop online

Account Deleted


alongador peniano

Account Deleted

Hey great stuff, thank you for sharing this useful information and i will let know my friends as well.

organic seo service

Joni Junka

To be happy, it first takes being comfortable being in your own shoes. The rest can work up from there.


The comments to this entry are closed.