The Antiplanner

Here’s Why the Government Shouldn’t Play With Markets

6th April 2009

Here’s Why the Government Shouldn’t Play With Markets

posted in Why Planning Fails |

Back in 2005, biofuels were all the rage, so some member of Congress came up with a great idea: give huge tax breaks to anyone who starts using a combination of Diesel and biofuels. That will help save petroleum and reduce greenhouse gases!

Eventually, paper manufacturers notice the law and so they begin mixing biofuels with Diesel fuels in making paper. Pretty soon they are collecting $8 billion in tax credits a year.

The only problem? Before this law was passed, they were using 100 percent biofuels. Now, thanks to a stupid law, we are paying them to waste Diesel.

I know what you are going to say: the law could have been written to specify tax break only for people or companies substituting biofuel for petroleum fuel. But it doesn’t matter; there are always unintended consequences and they usually, if not always, end up doing more harm than the intended good.

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There are currently 14 responses to “Here’s Why the Government Shouldn’t Play With Markets”

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  1. 1 On April 6th, 2009, the highwayman said:

    Yes, there are stupid laws indeed, that’s why you’ll be defending other stupid laws with your ADC jamboree in Seattle later this month!

    posted on April 6th, 2009 at 12:30 am

  2. 2 On April 6th, 2009, mattb02 said:

    Highway: idiot.

    posted on April 6th, 2009 at 3:35 am

  3. 3 On April 6th, 2009, JimKarlock said:

    Hopefully we won’t have to put up withthe highwayman’s stupid comments.

    Thanks
    JK

    posted on April 6th, 2009 at 3:35 am

  4. 4 On April 6th, 2009, jwetmore said:

    Not only is the Law of Unintended Consequences at work when regulations are written, but there are also problems of articulation when trying to capture and transfer information through regulations. I think both Thomas Sowell and Richard Epstein have written amusing stories of how poorly centrally planned production quotas for Soviet nail and boot factories worked.

    I believe we have had subsidies for ethanol production for more than 25 years now. Can anyone tell me if the ethanol has become any more competetive with gasoline since the early 1980′s and how many more years the transportation fuels markets will be distorted by such subsidies?

    posted on April 6th, 2009 at 7:03 am

  5. 5 On April 6th, 2009, bennett said:

    Because you double standard having, libertarian wanna-bees don’t actually believe in unfettered markets (see the Antiplanner’s post on snow tires) I suppose the real question is why was the tax break was for the mixed gas and not full on bio fuel? Bio fuel works good all by itself. That is what makes the law stupid. I wonder if the petro lobby had anything to do with this… If so, maybe the problem is that the private sector needs to stop playing with policy.

    posted on April 6th, 2009 at 7:42 am

  6. 6 On April 6th, 2009, D4P said:

    Rape would probably be a lot safer if government didn’t try to regulate it. For one thing, if government didn’t prosecute rapists, rapists wouldn’t feel as compelled to murder their victims after raping them.

    Stupid government.

    posted on April 6th, 2009 at 8:01 am

  7. 7 On April 6th, 2009, prk166 said:

    “Bio fuel works good all by itself” -bennett

    Except for it’s costs, 100 years of being just around the corner from being just around the corner from being profitable, that it’s worse for the environment (those NOx + VOCs are nasty –> lung cancer, asthma, lung infections, heart disease, etc) and when it gets cold….and hurting the poor by contributing to higher food prices. Although for some of the poor in Brazil maybe it doesn’t matter since they’re essentially stuck in a form of slavery (it’s ze Germanz making that claim https://www.spiegel.de/fotostrecke/fotostrecke-39084.html#backToArticle=602951). And then there’s the possible problem of increased carbon emissions (e.g. EU found that palm-based biofuels leads to twice the carbon emissions as regular gas).

    But if you’re not worried about the world going hungry, lung cancer, increased CO2 emissions, water shortages, fuel freezing on cold days, etc. then yes, it’s good.

    “Can anyone tell me if the ethanol has become any more competetive with gasoline since the early 1980’s and how many more years the transportation fuels markets will be distorted by such subsidies?” -jwetmore

    How many more? I’d imagine quiet a few as it’s got it’s hooks into the system pretty tight. The auto manufactures love it because with E85 + the way the CAFE standards are written it skews their numbers to look better than they are. Huge ag companies like ADM are involved. And so far politicians haven’t shown they’re interested in doing anything other than what they have so far.

    posted on April 6th, 2009 at 10:11 am

  8. 8 On April 6th, 2009, Andy Stahl said:

    The merits of different fuel sources is not the point of the Antiplanner’s post. The Antiplanner uses but one egregious example of unintended consequences to criticize tax credits generally.

    But are tax credits inherently bad? They are if you believe government has no business in business. That’s because tax credits are always distortionary — they promote economic activity that otherwise would not have occurred but for the government subsidy.

    A Libertarian must reject tax credits on principle; not because they sometimes have unintended consequences, but because the political process by which tax credits are enacted is interest-based, not market-based.

    Liberals embrace tax credits for the same reason. Liberals use tax credits to promote “good” behavior. But tax credits also redistribute wealth, usually from the many to the few, often from poorer to richer, and rarely from richer to poorer.

    posted on April 6th, 2009 at 12:03 pm

  9. 9 On April 6th, 2009, Francis King said:

    jwetmore wrote:

    “I think both Thomas Sowell and Richard Epstein have written amusing stories of how poorly centrally planned production quotas for Soviet nail and boot factories worked.”

    Communism required (implicitly) that everyone in the community cared deeply about other people in the community to put themselves out, and not to leave their task to someone else. Unfortunately it didn’t work so well. Communism is still the system of economics within a family – no-one sends their children up a chimney in order to pay for their school uniforms. “From each according to their ability to each according to their needs”. But in the community as a whole, no-one can know more than about 30 people, and so care about more than a few people. So communism is an unworkable system for a country’s economy under most conditions. It just so happened that during the Great Patriotic War, people did identify with each other enough to make the system work.

    JimKarlock wrote:

    “Hopefully we won’t have to put up withthe highwayman’s stupid comments.”

    His opinions may be unexpected sometimes, but are never stupid.

    posted on April 6th, 2009 at 12:07 pm

  10. 10 On April 6th, 2009, ws said:

    To ROT:

    Sure, there were some very unintended consequences of the US Gov getting into the “energy” market regarding biofuels. What do you have to say about the US getting into the petroleum markets (and making friends with some very undemocratic “allies”) for the last 50 years?

    posted on April 6th, 2009 at 12:24 pm

  11. 11 On April 6th, 2009, the highwayman said:

    ws said: Sure, there were some very unintended consequences of the US Gov getting into the “energy” market regarding biofuels. What do you have to say about the US getting into the petroleum markets (and making friends with some very undemocratic “allies”) for the last 50 years?

    THWM: You mean stuff like the CIA with Iran in the 1950′s & later on the US government backing up Saddam Hussein against Iran?

    posted on April 6th, 2009 at 1:04 pm

  12. 12 On April 6th, 2009, ws said:

    There’s a lot more instances than just those.

    The first Gulf War had everything to do with oil, in fact the President was very pragmatic about his response to Saddam wanting to control most of the world’s oil. Unfortunately for him, the average American Joe doesn’t want to admit their cushy lives are dependent on doing business with morally corrupt countries, so the public response to Bush I’s plans were unpopular to begin with when he was upfront and honest about the reasons for going to war with Iraq – that being that it doesn’t make sense for a single dictator to control most of the world’s oil.

    It is remained to be seen what Iraq II war was for, although we can fill in the blanks.

    posted on April 6th, 2009 at 1:39 pm

  13. 13 On April 6th, 2009, the highwayman said:

    ws said:
    There’s a lot more instances than just those.

    The first Gulf War had everything to do with oil, in fact the President was very pragmatic about his response to Saddam wanting to control most of the world’s oil. Unfortunately for him, the average American Joe doesn’t want to admit their cushy lives are dependent on doing business with morally corrupt countries, so the public response to Bush I’s plans were unpopular to begin with when he was upfront and honest about the reasons for going to war with Iraq – that being that it doesn’t make sense for a single dictator to control most of the world’s oil.

    It is remained to be seen what Iraq II war was for, although we can fill in the blanks.

    THWM: Sounds like a good reason why corporations shouldn’t play with governments to play with markets, but then Mr.O’Toole would have to find a real a job.

    posted on April 6th, 2009 at 2:21 pm

  14. 14 On April 6th, 2009, the highwayman said:

    The Nation: “The origins of the credit are innocent enough. In 2005 Congress passed, and George W. Bush signed, the $244 billion transportation bill. It included a variety of tax credits for alternative fuels such as ethanol and biomass. But it also included a fifty-cent-a-gallon credit for the use of fuel mixtures that combined “alternative fuel” with a “taxable fuel” such as diesel or gasoline.”

    THWM: The irony is that this stems from having such a road oriented transport policy.

    In other words this is the unintended consequences of Mr.O’Toole’s so called “work”.

    posted on April 6th, 2009 at 10:56 pm

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