Greenspan is no polymath, to go by the discussions of energy and climate in his instant bestseller, The Age of Turbulence: Adventures in a New World. During his nuclear power love-fest, he writes (p. 453):
Nuclear power is not safe without a significant protective infrastructure. But then, neither is drinking water.
Wow! That's an analogy I bet you never heard before. Greenspan is actually comparing drinking water infrastructure -- which is needed mainly to protect the water from us (i.e. from human pollution) -- with nuclear power's infrastructure; which is needed to protect us from nuclear material, which (unlike water) is inherently dangerous. I guess this economic guru is the only person in the country who would rather live next to a nuclear power plant than a reservoir.
Even more annoying (p. 446):
For example, after the initial surge in the fuel efficiencies of our light motor vehicles during the 1980s, reflecting the earlier run-up in oil prices, improvements slowed to a trickle.
Seriously? This statement sums up everything that is wrong with conservative economists. Greenspan hates government mandates like fuel economy standards, so they can't be the reason why fuel efficiency surged (as the law required) and then stopped (since we haven't toughened the law in two decades).
Greenspan's thoughts on global warming are equally annoying and confused, but that will have to wait until Part II. The reason I interrupted my multipart thrashing of Lomborg is that Greenspan's book is perhaps more damaging, since he is far, far more respected and this book will be read by many more people -- it has already leaped to no.1 on Amazon.
Greenspan does have more to say on the issue of oil and fuel economy a few paragraphs later. He notes parenthetically (pp. 446-447):
(In the United States, of course, mandated fuel-efficiency standards for cars and light trucks induced the slower growth of gasoline demand. I, and a number of my colleagues at the Council of Economic Advisers, believed, however, that even without government-enforced standards, market forces would have led to increased fuel efficiency.)
Well, of course that is what you believed. You dislike regulations so much you could only force yourself to talk about them in parentheses!
But relying on oil price has two problems. First, oil prices go up and down. If Greenspan were right that market forces were the most important thing, then when oil prices collapsed in the 1980s and then again in the 1990s, fuel economy would have collapsed too. Thankfully, fuel economy regulations stopped such a collapse from happening.
Second, gasoline has a relatively low price elasticity of demand (as this post by Shannon explains). Even big price changes only have a small effect on demand, as we have seen in recent years. And Greenspan knows this! In a footnote he writes, "Having observed that rapid gains in US consumption before 1973 seemed insensitive to price change, I feared the oil price rise required to bring demand down to the level of output implied by a long embargo would not be politically acceptable."
The intellectually honest conclusion is that fuel economy standards are in fact a viable and valuable strategy for reducing oil consumption. But Greenspan can't accept that. He acknowledges that (p. 460):
To achieve the twin goals of enhanced national security and curtailed global warming, the growth rate of US petroleum consumption must flatten, and eventually consumption must decline outright. The big opportunity for displacement is on America's highways ...
So what is his answer? He has "come very reluctantly to taxes as an alternative way to accomplish what competitive markets could do." He proposes "a gasoline tax of, say, $3 or more per gallon, phased in over five or 10 years with the resulting revenue used to lower income or other taxes" (p. 460).
Well, it has a certain intellectual consistency, if we ignore the political impossibility -- which Greenspan does (p. 462):
I consider the argument that gasoline tax hikes are politically infeasible irrelevant. Sometimes the duty of political leadership is to convince constituencies that they are just plain wrong. Leaders who do not do that are followers.
I never heard Greenspan speak up for doubling the price of gasoline when he was in a position of power, let alone when he was trying to get reappointed. But it just shows you how much he hates government mandates.
Personally, I think oil prices will take care of themselves, as supply is going to have a harder and harder time meeting demand in the coming years. But we need higher fuel economy now, and standards are clearly the best strategy from a practical, political perspective.
Bizarrely, while Greenspan proposes the U.S. unilaterally raise gasoline prices $3 to solve our oil problem, he opposes any such increase in carbon prices to deal with global warming, as we'll see in Part II.
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
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Comments
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Delay And Deny Posted 4:07 am
22 Sep 2007
Grist and I have finally found common ground: a mutual distaste for Alan Greenspan.
I have argued that Greenspan was the single biggest blight on America during his reign -- which had a span more akin to a Politburo insider than an American bureaucrat. His draconian and odious financial reign brought unneeded hardship on the middle classes and poor for more than two decades.
Forget energy policy, how about claiming to "fight inflation" and allowing housing prices to roller coaster out of reach of all but the richest Americans unless the rest of us turned into renters with zero-equity subprime mortgages?!
The list goes on and on. In Russia when a guy got the oust for his "crimes" he would "get sick" and dissappear. Here in America, Greenspan gets to keep on ticking and write a book!
Please, somebody, find a gated Assisted Living Community for Alan and lock the gate!
John Bailo
Sutext:
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Biodiversivist Posted 4:36 am
22 Sep 2007
I have not read many books lately. All you need to have one published is celebrity status. Profits are guaranteed for the publisher, content is irrelevant.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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thebrowze Posted 6:50 am
22 Sep 2007
"If Greenspan were right that market forces were the most important thing, then when oil prices collapsed in the 1980s and then again in the 1990s, fuel economy would have collapsed too. Thankfully, fuel economy regulations stopped such a collapse from happening."
Regulations didn't stop fuel economy from collapsing, the fact that we'd figured out new technologies did. Why would manufacturers go back to using older, less efficient technologies just because the reasons for developing the new ones went away? Wouldn't we continue to use the new and better technologies?
And incidentally, fuel consumption (fuel economy is only an intermediate statistic) did increase faster when the prices dropped in the 80's and 90's. That's why we had such a surge in the number of SUVs and such an increase in the number of people living farther and farther from their jobs. When the price went down we used more petroleum. When the prices go up we find ways to use less, and increased efficiency is only one of the ways we do it.
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GreyFlcn Posted 7:43 am
22 Sep 2007
We got engines which predominantly focused on horsepower, rather than fuel economy.
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Sam Wells Posted 11:28 am
22 Sep 2007
As to Alan Greenspan, I like him because he pissed all over George Bush's pant legs and actually praised Clinton for good economic policies. His book seems to say Bush didn't have any economic policy at all, aside for tax breaks for the rich, which is probably a fair assessment. One could argue that if anything, Greenspan should have anticipated that these free-for-all economic policies were a direct cause of the housing and credit market slumps.
Which leads to my third point, that a continued and inflationary / recessionary "bad" cycle could impact how we deal with global warming. Now this is something way beyond Greenspan's expertise as was mentioned in this blog.
My predictions? Growth could slow (as well as CO2 emissions) and we'll muddle along. A complete melt-down could happen but I doubt it. What will be difficult is to raise money on the credit markets ... such as for investments in wind farms and such. That's a complex subject for a different thread, though...
sammie
Onward through the fog
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trock Posted 1:03 pm
23 Sep 2007
what greenspan did was discount rate of 7 percent in year 2000 and 1 percent in 2003. He missed that completely, way to tight, then he had to go so low to make up for it. He over played his discount rate hand against the future and we were in for a ride.
But at least he gets global warming a little bit.
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davedenali Posted 4:02 am
24 Sep 2007
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Lloyd Wright Posted 4:24 am
24 Sep 2007
There are many problems relying only on fuel economy standards. First, the market movement to heavier SUV-like vehicles has meant that a portion of the market has left the light-duty vehicle category, and thus has circumvented LDV fuel economy standards.
Second, even in the car-saturated US, there is an annual trend to driving more distance. Thus, savings from better fuel economy simply are being overwhelmed by the increasing number of kilometres driven.
While I am not necessarily a fan of Greenspan, his proposal for a US$ 3 per gallon gas tax is very much welcome. Such a tax would have a significant impact on usage (probably more than a fuel economy increase). We would be wise to use Greenspan's tax recommendation for political gain (and conveniently ignore most of the rest of his recommendations).
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