Saturday, May 10, 2008

Terrible Ideas

People have plenty of terrible ideas. Sometimes they seem like good ideas at the time, but they turn out to be bad. Generally, when people have bad ideas, they abandon them. If I decided to turn corn into fuel for my car, I would quickly find that I was spending more on corn fuel than on petroleum fuel. After a while I would stop.

But government is not usually able to stop. Bad governmental ideas can keep going and keep getting bigger and bigger. Ethanol is a great case in point.

Make fuel from corn!

People like me are skeptical from the start because if it was more efficient to make fuel from corn, people would be doing it. Companies would voluntarily organize and make fuel from corn and people would buy this great, inexpensive stuff.

At this point, someone could propose that it is environmentally more sound to make fuel from corn. They can do a thousand studies to show that it is the case. So, even though it is more expensive to make fuel from corn, it's good for us, overall.

But now that we're actually making fuel from corn, people realize that ethanol is even bad for the environment. You use a lot of environmental resources to replace one of the oil pumping units that my crew used to eat their lunch near. After all, the environmentalists never liked the agricultural industry either.

Oh, so maybe we make ethanol because we can have less dependence on foreign oil. 30% of our corn crop adds 3% to our fuel supply. We are not exactly close to kicking the habit. And that dislocates a LOT of our food production. So now we have rapidly inflating food prices.

If it was more efficient to drive corn than to eat it, we would find it obvious to do so. When the government forces ethanol production and subsidizes it with my tax money, then it is obvious that eating corn is more efficient than driving it. After all, they don't have to mandate and subsidize cookie manufacturing to get people to make and buy cookies.

When government makes a bad decision, though, it can take a long time and a lot of damage to reverse the decision. A few politicians are waking up to the evidence that ethanol is a disaster. I'm not sure what got their attention--food riots or high inflation at home. But maybe there is some hope that our government will give up on their bad idea.

By the way, economists who believe in markets objected to ethanol on these grounds even before the laws were enacted.

It's not rocket science. It's common sense.

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