Milton Revisited

July 04, 2008

What role does the federal government have in urging a new energy order?

I dipped back into Milton Friedman's laissez faire manifesto Free to Choose to try to get at this question, to see what Milton might say. Through Adam Smith's first and third duties of government, Milton offers two bases from which the government might have a role:

1. protecting the society from the violence and invasion of other independent societies

3. erecting and maintaining certain public institutions, which it can never be for the interest of any individual, or small number of individuals to erect and maintain; because the profit could never repay the expence...though it may frequently do much more than repay it to a great society

Energy independence, energy security, and national security are a thicket of reasons that invite the government to duty.  Poor air quality creates a public health cost that is expensed outside the boundaries of the playing field of the free market.  For these and other durable reasons, the government has a purpose to be involved in shaping energy choices. The trick is to involve it without mucking things up, and to let the free market do the real work of the transformation wherever possible.   

Government should not do what the free market can do--but some things the market cannot do, some things the market should not do, and some things the market cannot do well. Still, the first choice should be to have the free market do it. Markets can deploy wind turbines and solar panels, but can't create the means for transmission and distribution (T. Boone Pickens excepted). New energy might not be cost competitive within the free market, but can provide benefits to national security that could be paid for through such mechanisms as production tax credits (thus involving the government but letting the free market do the work).

Protect society. Do things that repay a great society. Two reasons for the Feds to help make the new energy order that might have even gotten endorsements from Milton and Adam, the holiest of free marketeers.

Photo: Georg Hoermann on ipernity