I’ve posted the following challenge on Pet Deneen’s blog, in response to his response to my earlier response (got all that?):
First of all, I’m not a market-worshipping purist. To the contrary, I’ve publicly advocated a carbon tax (http://www.aei.org/publications/pubID.26286/pub_detail.asp). But as to your question--"would you consider that the market was working 20+ years after the oil shocks of the 1970s?"--the answer is an emphatic Yes if you know what you’re looking for. This is a large story with many parts, but ask why the oil price rise of the last few years has had much less of an impact on the economy than the comparable oil price rises of the 1970s. The short answer--the full data take a while to walk through-is that oil is a much less of a factor in the U.S. economy than it was in the 1970s. One stat: in the 1970s, oil accounted for 2/3rds of total U.S. energy consumption; today it is only 1/3rd, with electricity (and gas and coal) accounting for the other 2/3rds. Between 1949 and 1973 energy efficiency in the U.S. only improved by 12 percent; between 1974 and 1999 U.S. energy efficiency improved 40 percent (usually in advance of government mandates such as auto CAFE standards); between 1949 and 1973 per capita energy consumption increased 64 percent; between 1974 and 1999, by only 2 percent. Pretty good evidence to me that markets and prices work, and that in fact we did make big changes as a result of the new energy world of post-1973. And I suspect we’re going to make big changes in the years just ahead, with or without (almost surely better without) government mandates (see: ethanol debacle). In other words, the dynamic restraints of the marketplace will almost always (note: I said "almost") be superior to politically-imposed restraints.
Regarding McMansions: many of them (not the Gore/Edwards monster-size) use exactly the same amount of energy as the average new house in 1970; in other words, we traded energy efficiency gains (better insulation and appliances, etc) for more square feet in which to live. Is this really such a sin?
I could go on and on (I’m a maven for these stats, and I’ve practically memorized the exhaustive tables of the Energy Information Administration), but let’s make this interesting: How about a Simon-Ehrlich style wager. I say that three years from now, oil will be below $75 a barrel. Let the loser of this wager buy the winner his choice of any hardbound book in the Liberty Press catalogue. Shake?