“Edison to Enron … [is] the second part of a three-volume series on the history of American energy, told through the distinction between productive and predatory capitalism.  Bradley is a very much underrated economic historian, largely because of his ‘amateur’ [nonacadmic] status, but there is a remarkable amount of learning in his books.”

- Tyler Cowen, ‘What I’ve Been Reading,’ Marginal Revolution, November 15, 2011.

Last Friday afternoon in our nation’s capital, Robert L. Bradley, Jr., a prominent figure in the esoterica of energy markets, unveiled the Project on which he has labored for a decade before a full room at the American Enterprise Institute. Kenneth Green moderated, and comments were provided by Stephen Hayward and yours truly. My formal remarks follow.

The Project

Enter stage right, our protagonist with The Bradley Project. He has three arrows in his quiver, a trilogy of books that will be the authoritative commentary on American political capitalism and energy policy inspired by the rise and fall of Enron (where Bradley worked for 16 years).

He artfully aims his first arrow, (Capitalism at Work: Business, Government, and Energy) a political economy text that forges a path for his second onslaught (Edison to Enron: Energy Markets and Political Strategies), a history text that applies the economic principles of Book 1 to the natural gas and electric industries from their 19^thcentury inception to about 1985.

Both books are dense and lengthy–but very readable. Bradley tackles the vast literature behind subjects and provides hundreds of pages of documentation. For the most serious scholars (are there many anymore?), he provides Internet appendices per chapter, no less than 52 for Book 1 and 74 for Book 2. The extra mile seems to have been run in virtually all instances.

His actions set the economic, political, and historical stage for his yet unleashed third arrow, a text that will mine the Enron debacle and its aftermath for trenchant insights that will help both academics and energy professionals better understand what happened but more importantly, develop insight for the future regarding the nexus of politics and the market economy.

· Act I (today): the Bradley Project is brilliantly conceived, brilliantly executed, and will stand the test of time.

· Act II (tomorrow): his perspective pierces the veil that hides the excrescence that passes as the current sorry state of energy policy.

· Act III (Saturday): dare we venture that there is such a thing as sound government intervention, heretical as that may be in this crowd.

· Act IV (Sunday): the future or, who is John Galt?

Best, Worst of Times

After almost 30 years as a market advocate in energy policy, I thought I knew something about economics, but now I know more thanks to Book 1. I thought I knew something about the gas and electric industries, but now I know more thanks to Book 2.

Bradley has done something truly historical and extraordinary. His most compelling pronouncement – and historical contribution — is the inaccuracy of much of the criticism blaming deregulation or competition on dysfunctions in energy markets.

The real culprit is political capitalism, by which he means the use of the political process to gain competitive advantage. He is thus quite critical of the policies implemented and the corporations that advocate on behalf of the public interest as camouflage for their own self-interest. Enron’s enthusiasm for global warming is a prime example. But his points could not be timelier in light of the protestations of the Occupy Movement in opposition to capitalism.

It is obvious to any serious analyst that much of the critique from the Occupy Movement is well founded in that it criticizes past policy that has protected wealth from the consequences of market outcomes. The Movement goes off the rails however in blaming capitalism rather than the clowns in Washington for adopting policies that created the risks of crisis and then bailed out the wealthy participants who fell into the government’s traps. It is in vilifying the outcomes of bad policy that the Tea Party Movement and the Occupy Movement find common ground. These Movements diverge, however, on the cure for what ails us.

Book 1, Capitalism at Work, is a comprehensive journey through the great names of market economics over several centuries. One should understand the theory of capitalism before using it as a scapegoat. All I can say is that I have never found such a readable history of economics/political economy in a single book.

Given that I run a program funded by a BB&T Grant for the Moral Foundations of Capitalism at Randolph Macon College, I especially liked his first three chapters, on Adam Smith, Samuel Smiles, and Ayn Rand respectively, where he concentrates on the moral defense for capitalism, rather than just relying on its success as a societal organizing model. His use of the Enron debacle as a continuing case study to ground many of his points is very insightful and helpful to understanding the application of these principles in the real world.

Book 2, Edison to Enron, applies the principles derived from Book 1 to the most comprehensive histories of the natural gas and electric industries that I have read. I have been a natural gas and electric expert for more than 30 years and yet I found a treasure trove of fascinating stories about these industries that I had never known. Given the criticality of two industries to our economy and our future prosperity, he has provided an indispensable compendium of insight and information. It is both academically robust yet written in a readable style that makes the history gripping.

Book 3, Enron and Ken Lay: An American Tragedy, surveying the business history of the company, the court trials of Enron executives, and the post-Enron world (Enron writ large!) is a brilliant. Wait a minute, he hasn’t written Book 3 yet! Anyway, I can’t wait to see the movie.

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Ken Malloy is founder and Executive Director of CRISIS & Energy Markets! (caem!), a pro-free market think tank; a Senior Fellow with the Ocean State Policy Research Institute (OSPRI); and adjunct professor at Randolph-Macon College. At Randolph-Macon, he teaches law and economics relating to energy and environment and directs the Capitalism Matters! program.

Ken was formerly the CEO of the Center for the Advancement of Energy Markets, which he founded in 1999 to promote competition in electricity markets. Ken was named by Public Utilities Fortnightly as one of five “Energy Innovators: Ringing in an Age of Enlightenment.”  For four years, the Center produced the nationally recognized Retail Energy Deregulation Index (RED Index), a report card on 67 international jurisdictions’ electric competition policies, as well as many other studies and reports.

Reconstructing Climate Policy: Beyond Kyoto By Richard B. Stewart and Jonathan B. Wiener 193 pp., Washington, D.C.: American Enterprise Institute Press, 2003. This review was published in Regulation magazine (Cato Institute). MasterResource revisits Mr. Singer’s book review and asks: how does it read today?

What is it about academic economists that makes them salivate like Pavlovian dogs whenever they hear the magic words “market solution”? Sure, market-based solutions are always more efficient and less liable to be politically influenced than those based on command-and-control. But before we apply solutions, should we not first ask if there is a problem that needs to be solved?

And so it is with this book. The authors confidently assert the existence of a future climate problem more or less on faith, but they also see many difficulties with the 1997 Kyoto Protocol that is supposed to reduce emissions of greenhouse gases. So they propose a clever alternative to Kyoto — yet another solution to a non-problem.

They visualize a U.S.-China bilateral deal to limit emissions (mainly of carbon dioxide from fossil-fuel burning) that would operate in parallel with the Kyoto Protocol (which neither country plans to ratify). In their plan, the United States buys emission rights from an arbitrary excess quota allotted to China. The authors call it “headroom” but I call it a subsidy. The United States pays, China gets, and the atmosphere does not benefit because emissions continue essentially unabated.

Eventually and somehow, this U.S.-China deal is supposed to merge with Kyoto. Every nation in the world would then actually limit its emissions, and thereby save the climate, humanity, and Lord knows what else. What a pious hope!

Gentlemen’s Agreement

What else is wrong with the Stewart-Wiener scheme? Plenty, although it may be no worse than another dozen or so clever schemes thought up by other lawyers, economists, and policy analysts that are duly referenced in this volume but never critically discussed. Is there some kind of gentlemen’s agreement here?

All emission trading depends on having a “cap” – whether sectorial, national, regional, or global. Then, as emissions rise with population growth and economic prosperity, this kind of rationing creates a scarcity and imparts increasing value to emission permits.

The Pew Center keeps coming up with emission-trading schemes, and so do any number of academics in the United States and Europe. Resources for the Future published a cap-and-trade scheme with “soft” caps: whenever the price of permits becomes too high, the cap is relaxed and — Presto! — the price moderates.

In other words, the regulatory body can arbitrarily limit the value of the permits. And with political price control in place, why would anyone buy such permits?

Solution Without a Problem?

But enough of belittling esoteric schemes cooked up by would-be energy planners. Do we need to limit the emission of greenhouse gases at all?

First, there may not be a global warming problem. The climate history of the past century does not seem to be consistent with the greenhouse theory, throwing doubt on the predictions of appreciable future warming. And even if the climate were to warm, the consequences are more likely to be beneficial.

With the estimated cost of the Kyoto Protocol ranging from high to huge to ruinous (depending on the analyst), the cost-benefit analysis becomes pretty simple.

In any case, it is agreed by all that the Kyoto Protocol — even if punctiliously obeyed by all adherent (industrialized) nations — would have a negligible effect on reducing future warming. The reduction in calculated temperature by 2050 is only 0.02 C. If the United States were to participate, the reduction would rise to 0.05 C, which is also essentially unmeasurable. And of course, if adhering nations buy emission rights instead of reducing emissions, there would be no effect at all on the atmosphere and temperatures. Zilch.

Even supporters agree that the Kyoto Protocol is only a “first step” and that much more drastic reductions are required by all nations, developed and developing, to keep greenhouse gas levels from rising much further. A 60 to 80 percent cut is required instead of the five percent called for by Kyoto. (I could not find any reference to those facts in the book.)

Finally, it is not even clear that we should be reducing the accumulation of carbon dioxide in the atmosphere. It is not a pollutant and does not produce any adverse physiological effects. On the contrary, it is basic plant food and makes crops and forests grow faster with less water. (The American Enterprise Institute, publisher of the Stewart-Wiener book, earlier issued a study by Yale economist Robert Mendelsohn that documents the benefits of a warmer climate.)

So why reduce carbon dioxide levels? What does the Climate Treaty itself have to say? The 1992 Framework Convention on Climate Change (FCCC) is strangely uninformed about this question. Article 2 of the FCCC states only that “the ultimate objective is to achieve stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”

The concern here seems to be with the stability of the climate against sudden and possibly irreversible changes. But the FCCC gives no indication what the greenhouse gas level should be, or even whether it should be lower or higher than the present level. Empirically, we do know that the climate underwent many abrupt changes during the recent ice age and has been relatively stable during the Holocene (the warm interglacial period of the last 10,000 years). I have argued, in a Hoover Institution essay and elsewhere, that the FCCC (properly interpreted) actually favors a warmer climate and therefore higher carbon dioxide levels.

All of the foregoing suggests that the Kyoto Protocol is not only ineffective but also counterproductive. Nevertheless, diplomats and technical experts from 180 nations have been meeting endlessly for the past decade to argue about minutiae like the specifications of “sinks” for carbon dioxide and, of course, about the desirability and procedures of “emission trading.”

Convergence

A historical footnote is in order here. We need to remember the mind-set of the Clinton/Gore White House that engineered adoption of the Kyoto Protocol in 1997. Recall, for example, Under Secretary of State Timothy Wirth repeating Gore’s claim that “the science is settled” on global warming. And former Secretary of State Warren Christopher, in a speech at Stanford University in 1996, announcing that global warming was the single most important threat facing the United States in the 21^stcentury.

Clinton/Gore never submitted the Kyoto Protocol to the Senate for ratification. (They were well aware that the Senate’s Byrd-Hagel resolution against any Kyoto-like protocol had just passed unanimously in July 1997.) But they tried to make ratification more palatable by proposing unlimited emission trading that would have allowed the United States to continue more or less in a business-as-usual fashion while buying surplus emission permits from Russia. This fudge was, of course, opposed by Greens and by many Europeans who wanted to see the United States undertake actual emission cuts and feel the consequent economic pain.

The whole matter came to a head at the sixth Conference of the Parties (to the Kyoto Protocol) in The Hague in November of 2000. But as the U.S. position softened and the United Kingdom, true believers in the Kyoto process, tried to broker a deal, the position of “Old Europe” hardened. French President Jacques Chirac, in particular, took a radical stance, telling delegates, “France proposes that we set as our ultimate objective the convergence of per-capita emissions.”

Convergence is based on the idea that everyone in the world should have the right to emit carbon in equal amounts — so requiring a vast decrease in the amount emitted by industrialized nations and a massive increase in the amount emitted by the Third World. Chirac admitted that Kyoto therefore represented “the first component of an authentic global governance.”

French intransigence killed the UK-brokered deal to allow progress on Kyoto. British Deputy Prime Minister John Prescott blamed continental European politicians in no uncertain terms: European ministers should have taken a chance and made the change, he said. “That’s what I decided to do and everyone was with us until we got into those Euro-ministers and they split.” He was especially critical and even insulting to the French environment minister.

The irony of it all is that the Europeans made all those concessions to Russia and Japan at the 2001 Conference of the Parties in Marrakesh, hoping to induce them to ratify Kyoto. Japan did so, but Russia continued to hold out. By then it was too late to get the United States aboard; George W. Bush had been elected president on a platform that included opposition to the ratification of the Kyoto Protocol, which he pronounced as “fatally flawed.” In September of 2003, Russia refused to ratify, with President Putin terming the Protocol “scientifically flawed,” an even more accurate description. And without the US or Russia, Kyoto cannot reach the magic 55 percent threshold needed to go into effect.

Social Engineering

We have now come full circle. The Stewart-Wiener scheme is really a variant of the concept of convergence. And as is well recognized, the concept depends crucially on whether it sets a national quota or a per-capita quota for rapidly developing nations, where population policies are often enforced by their governments. The authors do not spell out the political and social consequences of the two alternatives, nor do they specify the choice of carbon-dioxide limits or the political path for making that choice. It does not require much imagination to recognize the risks inherent in giving authoritarian governments the incentive to control their populations’ fertility and access to energy. We are no longer talking about climate policy, but about international social engineering.

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S. Fred Singer is professor emeritus of environmental sciences at the University of Virginia and president of the non-profit Science & Environmental Policy Project in Arlington, Va. He is the author of Hot Talk, Cold Science: Global Warming’s Unfinished Debate (Oakland, Calif.: The Independent Institute, 1999). Singer can be contacted by e-mail at singer@sepp.org.

My newest book, my twentieth but the first in the current affairs genre, explains my passion. Energy Freedom attempts to present energy in such a way that it becomes a subject everyone is aware of, can understand, and wants to influence.

Background

I do not come from an energy, science, or public policy background. I’ve spent my life in speaking and writing either as a communicator or a trainer of communicators. When circumstances in my personal life mandated that I get a real job, I never imagined that I could be so enthusiastic about something not of my own making.

In September 2006, I accepted a position at Citizens’ Alliance for Responsible Energy (CARE) and became Executive Director on January 1, 2007.  Back then, like most people, I knew little more about energy than putting gas in my car or flipping a switch on the wall. Since then, I’ve had some great teachers and been an eager student.

In my personal energy education, I’ve read many exhaustive tomes offering a thorough treatment on the subject. Engineers or professors wrote the books. If you want to understand the difference between a watt, horsepower, and a joule, I can recommend several books for you—but not Energy Freedom. My book is for the average American energy consumer who knows that energy costs are going up, but doesn’t understand why; and for the person who is newly politically engaged out of concern for the direction America is heading.

Energy Freedom I: Environmental Utopia

Section One, Environmental Utopia, is based on original research I did in 2007, and it remains the foundation for both my passion for the subject and for Energy Freedom.

I started by looking at both well-known environmental groups and smaller, regional, and/or specifically targeted-issue groups to draft a broad view of the environmentalists’ goals as they relate to energy. There is widespread belief that oil, gas, and coal—all fossil fuels—are at the base of much of the world’s ills. Nuclear is not too popular with the green gang either.

In Environmental Utopia, I draw the green goals out to their logical conclusion.

Here’s a sampling of what could happen to four major aspects of American life if the environmentalists were in charge.

Transportation: Most Americans have the freedom to come and go in their individual cars as they choose. A 2006 survey found that 91% of Americans consider their cars to be a necessity, not a luxury. Yet environmental extremists are actively working to stop or prevent drilling for oil and gas. They also aim to shut down coal-fueled power plants and oppose nuclear energy. With a reduced capacity for electricity and transportation, our lifestyle, as we know it, ceases to exist.

Modern Conveniences: The same survey found that most Americans consider things like microwaves, air conditioning and heating, computers, and cell phones to be a necessity. However, in a limited-fuel, environmentally controlled society, these items would have to go. They all require electricity—as do electric cars. Additionally, each of these “necessities” is made from plastic and plastic is typically made from hydrocarbons.

Health: Like modern conveniences, our health is heavily dependent on both energy and plastics. If you have been in a doctor’s office or hospital lately, you know that even taking your temperature requires electricity and plastics. Today’s extreme regulations could have an adverse impact on our health.

Housing: Without abundant electricity to purify water and pump it into your home and remove and process waste matter, you couldn’t live there. You’d need to move to a location near a fresh water source. Additionally, many environmental groups want to block the cutting of trees—making the construction of new homes near a potential fresh water source virtually impossible.

Energy Freedom II: Who are the Environmentalists?

As I speak on energy, and specifically on the influence of environmentalists, I am frequently asked, “Why do they do this?” Followed by: “They are destroying America.” Unfortunately that is the goal.

These professional environmentalists—not to be confused with the nice lady in the grocery store wearing Birkenstocks and carrying a canvas grocery sack—may look green on the outside, but the real motive is much closer to red. Red like neo-communism, neo-socialism—or just plain control. Green on the outside, red on the inside. Like a watermelon.

These watermelons are well funded, many of them working with multi-million dollar budgets. They’ve been it at for a long time and have patiently made incremental changes. They mostly do not hold political office. Without violence, they have attacked minds. They have transformed society.

I had the opportunity to hear Patrick Moore, one of the founders of Greenpeace when he spoke in New Mexico in 2009, where he said that the environmental movement depends on politics of confrontation—which he defined as telling people what they should not do. Moore explained that the ’80s ushered in the age of environmental extremism. The basic issues, for which he and Greenpeace fought, had largely been accomplished, and the general public was in agreement with the primary message. In order for the environmentalists to stay counter-culture, they had to adopt ever more extreme positions. “What happened is environmental extremism,” said Moore. “They’ve abandoned science and logic altogether.”

The extremist message today is “anti”—anti-human, anti-science, anti-technology, anti-trade and globalization, anti-business and capitalism, and ultimately, anti-civilization. No wonder it seems no regulation goes far enough to appease them.

Energy Freedom III: Green Schemes

The spotted owl, DDT, and ethanol are a sampling of campaigns that have changed an industry or damaged the economy for naught. Once you understand the history, you won’t be fooled with the next green scheme—such as cutting emissions (for the sake of “public health”) to levels lower than those found in nature.

Energy Freedom IV: Act Now!

Parts One through Three are about waking up; Section Four is about showing up, standing up, and speaking up. I present an action plan and simple steps that will help you make a difference!

As I speak to groups throughout the country, I find most Americans are now awake. However, like someone who’s heard a noise in the night, we are awake, but scared—pulling the covers up around us. If the noise in the night were really something of concern, sitting in bed surrounded by comfort, would not chase away the scare. We’d need to scream to let them know we are there, call 911, and grab a weapon.

Our weapon is to show up, stand up, speak up—even if only figuratively.

Remember cap and trade? This was one of President Obama’s campaign promises. With those in support of the carbon emission limiting legislation in control of all three houses, it should have passed easily. But the American people “screamed” in the form of Tea Parties and town hall meetings. We gave Congress an earful and cap and trade never passed—and never will.

Debate Entry Points

There are dozens of hearings and meetings each week that include city, regional, state, and national issues. They need you! These are usually held during normal business hours and have minimal mention in the media—meaning that you have to be alert to the issues and track what is going on. They often slip by unnoticed until the plan they implemented is enacted and people realize another freedom has disappeared.

Your voice is needed. Your voice matters. Not just for the big rallies and town hall meetings, not just for the hearings, but through phone calls and e-mails. This is another way you can show up, stand up, and speak up—and you do not even have to go anywhere or carry a sign.

Committee and board members and elected officials at every level may want to vote against the energy-killing policies, but they need cover. They need to be able to quote volumes of responses they’ve had on the matter. Those responses can be in person, via e-mail, or by phone. Elected officials can often be heard on the news stating that their offices have been overwhelmed with calls and e-mails over a particular bill. They cite the numbers as an indication of how strongly their constituency feels about how they vote.

The easiest way to speak up is to have your representatives’ phone numbers programmed into your phone. When you are have an unexpected wait, simply dial their number and tell them how you feel on an issue. Praise for a good vote is helpful, too. Let them know they are being watched.

E-mails and faxes are also helpful. Don’t bother sending a paper letter. Just make the call or send the e-mail asking them to vote for or against the issue at hand.

How do you maintain your real life and stay abreast of when you should go to a hearing or write/call an elected official? You communicate with groups or organizations that support your views. Before an important vote or hearing, we send out e-mail alerts asking for your participation. Most groups are networked with others, and we send out announcements for one another. Begin to build an e-mail list of your friends and then forward alerts on to them.

If you already have groups you trust—such as Energy Makes America Great Inc.—be sure you sign up for their alerts. Then, act on them!

Another source is talk shows and newspapers. When a viewpoint you support is presented, respond. Contact the talk show or write a “letter” to the editor (LTE). They need to know what their audience wants; they need to keep you. If you write a letter to the editor and it doesn’t get published—especially in a major metropolitan area—do not be discouraged. The bigger papers get more than they can publish, but like contacting your elected officials, your voice still gets counted. You’ve spoken up.

These are just a few practical suggestions for showing up, standing up, and speaking up. Changing the course of public policy takes more than being aware of the problem. It takes action. I believe together we can turn back the tide.

Conclusion

Together we can keep the green movement on the defense. They’ve been trying to make us replace economical energy that works with electricity that is expensive, intermittent, and ineffective. But America noticed. We woke up. Now we need to continue to show up, stand up, and speak up.

Remember: if they take away your energy, they have taken your freedom.

“This scholarly work fills in much missing history about two of America’s most important industries, electricity and natural gas.”

   – Joseph A. Pratt, NEH-Cullen Professor of History and Business, University of Houston

“An engaging look back at the market and political development of the U.S. energy industry. Industry and policymakers will benefit from reading this book.”

   – Dr. Robert Peltier, PE, Editor-in-Chief, POWER magazine

Edison to Enron is the second book in my trilogy on political capitalism inspired by the rise and fall of Enron (order information: Amazon, Scrivener Publishing, John Wiley & Sons).

Book 1, Capitalism at Work: Business, Government, and Energy, provided a worldview of market-based versus political business, as well as an interpretation of energy sustainability. The present volume (Book 2) examines the individuals and companies that are related to Enron’s prehistory.

Book 3, Enron and Ken Lay: An American Tragedy, will chronologically describe the rise and fall of Enron and the post-Enron world.

The trilogy and other writings on the intersection of business and government are featured at my website, Political Capitalism.

A video on Book 2 in the context of my book output is here.

Dust Jacket Description

Energy is the resource of resources—the master resource. The fossil fuels in particular—and the electricity generated from them—have made human life longer and better. For many, they have made life possible. Without energy, there would not be the modern world of production and consumption.

During the last 150 years, the United States has been at the forefront of energy development. Edison to Enron chronicles important swaths of that history, focusing on the great entrepreneurs in electricity and in natural gas, who turned potential into plenty and privation into prosperity.

Author Robert L. Bradley Jr. traces individuals and companies that made America an energy nation, from Thomas Edison and Samuel Insull in electricity, to John Henry Kirby in oil, to Clint Murchison, Ray Fish, Robert Herring, and Jack Bowen in natural gas. Companies such as General Electric, Houston Oil, Southern Union, Fish Engineering, Houston Natural Gas, TransCanada, Florida Gas, and Transco Energy are integral to Bradley’s energy history, which links the country’s nineteenth-century past to its twenty-first-century present.

Much of this book describes market entrepreneurship, especially resourceship in regard to energy minerals. But there are instances and episodes of political entrepreneurship, or rent-seeking, where special government favor was extracted by business interest themselves. The perils and waste of the latter provides stark contrast to the consumer gains from principled market enterprise.

Along the way, Edison to Enron tracks the early career of Kenneth L. Lay, from a minor government bureaucrat to the wunderkind CEO of Houston Natural Gas Corporation. A shooting star of the energy business, Lay would transform Houston Natural Gas into Enron, via acquisition and merger, before meeting his unhappy fate less than two decades later—a story told in this book’s sequel.

Because there are few broad-based histories of the U.S. energy industry, Edison to Enron fills a critical gap in American historiography and takes its place as a classic account of the energy nation par excellence during its most dynamic century.

Preface: Edison to Enron (excerpts)

Ken Lay attached a note to a book he returned to me between the time of Enron’s collapse and his fateful trial. Insullby Forrest McDonald (University of Chicago Press, 1962) was a masterful account about the towering rise and stunning fall of a business titan in the first third of the twentieth century. “I apologize I’ve not been able to read the book on Insll [sic],” Lay said. “There have just been too many demands on my time.”

And no doubt Ken Lay wasworking furiously, preparing for trial and running what he excitedly described as his three new businesses. He probably wrote the note well past a normal person’s endurance point. He was always like that—almost superhuman in his work, doing the little extra to cover some base in his vast universe of possibility and ambition.

People had given Ken many books that he never opened, much less read. I know. I was his repository for such material during my sixteen years at Enron. But I told him that McDonald’s biography was very relevant to his present predicament. Like himself, Samuel Insull had been a Great Man of the energy industry, an icon of his city (Chicago), a Horatio Alger story. Insull, too, had gone from near-universal reverence to vilification, suddenly and completely. And, most important, Insull’s defense strategy seemed to be one that Lay could employ effectively.

In the twilight of his life, Insull had put his five-decade career building America’s electricity industry on trial, not just his last years with his bankrupt holding company. He spoke matter-of-factly on the stand about his intentions and failures, knowing that honesty was his rock in thick or thin. The point, partly, was to ask the jury: Why would I suddenly take up crime? And to tell the jury: You would have done about the same if you had been me. The other part of Insull’s strategy was to confess to overoptimism and an inability to heed caution. And he took full responsibility for the debacle, even apologizing to his subordinates.

In short, Insull humanized himself on the stand. The jury acquitted on the facts and in the face of such humility.

Ken Lay took a far different approach after his company’s collapse. He did not flee to another country as had Insull, who feared for his personal safety and harbored pessimism about receiving a fair trial. Instead, Lay fled to another reality. With his legal advisors and Jeff Skilling, Lay constructed an alternative universe, a strategy that was not discouraged by his inner circle, a story told in Enron and Ken Lay: An American Tragedy(Book 3 of this trilogy).

Thus came the other worldly arguments: Enron was a great company. Jeff Skilling and I were a great team. Enron would be thriving today if it were not for the criminal actions of a few employees, some short sellers, and a hostile press. And then there was Lay’s contempt at the whole proceedings, and even toward his own counsel on the stand.

The book that Lay did not find the time to read is an inspiration for this present work. The Insull saga, like the rise and fall of Lay himself, shows how unforgiving the market can be toward even the most powerful, particularly when they believe themselves to be insulated from the vicissitudes of capitalist commerce. Forsaken prudence applies to other individuals and their companies in our book, beginning with Thomas Edison, the great inventor who founded the U.S. electricity industry, and continuing with John Henry Kirby, the founder of the company that over eighty years would metamorphose into Enron.

Edison came perilously close to financial ruin amid his feats of electrical invention, saved only by the best efforts of a whiz-kid named Samuel Insull. Kirby, offering many parallels to another seemingly invincible business leader and Mr. Houston, Ken Lay, suffered bankruptcy not once but twice and died under a financial cloud.

Edison summoned Insull to America in 1881 from England where the two built the company that in 1892 became General Electric. Insull left Edison to father the modern integrated electricity industry in the next decades, achieving results as successful, orderly, and enduring as that done for petroleum by John D. Rockefeller.

Electricity, traditionally produced from either coal or white coal (hydropower), found a new primary energy source near the end of Insull’s career when long-distance pipelines linked southwest natural gas fields to major population centers around the country. Costlier, dirtier manufactured (coal) gas was displaced, and natural gas went on to become the second leading option to generate electricity next to coal.

Long-distance transmission unleashed America’s third great energy industry, natural gas. The history of gas pipelining is the prehistory of Enron, a company that began as a conglomeration of four Texas-sourced gas transmission systems. Ken Lay, Mr. Natural Gas, forged a career as a gas pipeliner before leaving Transco Energy in 1984 to head the company soon to become, through merger and acquisition, Enron. Thus the present book spans just over a century, the time from when Thomas Edison first focused on electricity (1878) to when Ken Lay became head of his own company (1984).

Countless books have been written on electricity and natural gas, but few attempt to cover the long, rich history upon which a number of today’s notable companies and company divisions emerged. This book attempts to fill that gap for industry practitioners, energy historians, Enron aficionados, and other interested readers.

———-

Previous Books by the Author:

· The Mirage of Oil Protection (Cato Institute: 1989)

· Oil, Gas, and Government: The U.S. Experience (Cato Institute: 1996)

· Julian Simon and the Triumph of Energy Sustainability (American Legislative Exchange Council: 2000)

· Climate Alarmism Reconsidered (Institute for Economic Affairs: 2004)

· Energy: The Master Resource, coauthored with Richard Fulmer (Kendall Hunt: 2004)

· Capitalism at Work: Business, Government, and Energy (Scrivener Publishing: 2009)

Then came a young Dane named Bjørn Lomborg set out to refute Simon but instead rediscovered the bogey of fixed-pie, depletionist thinking. This audacious 36-year-old also found that whether the result was of market progress or regulation, virtually all environmental indicators were trending positively, not negatively. Lomborg could agree with the title of Simon’s last major public address, “More People, Greater Wealth, Expanded Resources, Cleaner Environment.”

A Heated Debate

And then, with the debate joined, came a slew of establishment neo-Malthusians, led by John Holdren, now Obama’s science advisor, who got emotional and nit-picked.

This story is told in the introduction to an essay I wrote, The Heated Energy Debate: Assessing John Holdren’s Attack on Bjørn Lomborg’s The Skeptical Environmentalist,” published by the Competitive Enterprise Institute in 2002.

I spent months on the 160-footnote essay and even worked with Dr. Holdren’s personal secretary at Harvard University’s Kennedy School to receive the entire corpus of Holdren’s writing. But when I sent Dr. Holdren a draft of my paper for critical review and rebuttal, this is what the not-so-good Doctor wrote back to me:

… What exactly entitles you to the evidently self-applied label of ‘energy expert’?  My students can indeed benefit from the best arguments on all sides, but they will not find the best of anything in either your polemics or Lomborg’s.

You are of course entitled to (verbally) attack me in any legal way you like, but please don’t then pretend in personal notes to me that we are colleagues, each doing our best to get at the truth…. [Y]ou appear to be … lacking both discernible qualifications in the real world and the ability to tell a good argument from a bad one. I want nothing further to do with you.

No Dr. Holdren, I was just asking you for an update on your opinions about a meticulously assembled set of your quotations and positions. What do you still believe and or not believe about your prior predictions (many obviously falsified).

So much for the ideal of open debate and a challenge culture! [I further discuss Holdren's response in John Holdren and “The Argument from Authority” (Part VII in a Series on Obama’s New Science Advisor).]

CEI Summary: Bradley’s Holdren-Lomborg Essay

In September 2001, Cambridge University Press published Bjørn Lomborg’s The Skeptical Environmentalist: Measuring the True State of the World. The book’s comprehensiveness (515 pages; 2,930 footnotes), the author’s green credentials (a former Greenpeace member, Lomborg began the book’s research to debunk Julian Simon’s forecasts of continuing environmental improvement), and Lomborg’s powerful refutation of the doomsday “litany of our ever-deteriorating environment,” sparked considerable interest.

Favorable reviews followed in the New York Times, Washington Post, and The Economist. When the book became an international best seller, ideological environmentalists launched an angry counter-attack. Among the key figures to impugn Lomborg’s scholarship is the subject of this paper: Harvard Professor John P. Holdren.

Holdren, a Clinton-era leader of climate policy and energy technology task forces, is now the leading academic member of the National Commission on Energy Policy, a $10 million, two-year project tasked with formulating a “centrist” energy policy. Holdren is also one of four authors to attack Lomborg in the January 2002 issue of Scientific American, in a feature pretentiously titled, “Science Defends Itself Against The Skeptical Environmentalist.”

A more accurate title would be “Environmental Establishment Fears to Debate Bjørn Lomborg.” Scientific American refused Lomborg the right of reply in the same issue, offered no space to scientists not affiliated with environmental activist causes, and even threatened to sue Lomborg if he tried to reproduce the Scientific American articles, with his detailed responses, on his own Website. Scientific American’s one-sided presentation of evidence, while claiming to defend science from just such abuse, easily qualifies as Orwellian. The fact that the magazine, five months later, gave Lomborg one page to respond to 11 pages of criticism hardly constitutes balance.

In January 2003, a group calling itself the Danish Committees on Scientific Dishonesty issued an official denunciation of Lomborg, alleging that his book “is contrary to standards of good scientific practice” because it offers a “systematically biased representation” of environmental data. Yet, rather than conduct an independent investigation, the Committees simply rehashed the four attacks published in Scientific American.

And just as Scientific American initially tried to suppress Lomborg’s detailed rebuttal, so the Committees declined to evaluate it. A more honest name for this panel would be the Committees for Scientific Dishonesty.

The present paper, written by energy historian and policy expert, Robert L. Bradley, Jr., President of the Institute for Energy Research and senior research fellow at the University of Houston, confines itself to the task of examining Holdren’s Scientific American article and other publications on energy issues. It demonstrates that Holdren’s critique of Lomborg fails dismally. Insofar as the Danish panel relies on Holdren’s allegations, it is retailing falsehoods and exaggeration in the name of science.

Bradley finds the following flaws in Holdren’s Scientific American article:

• Holdren falsely accuses Lomborg of debunking a straw man (the notion of an impending physical or geological exhaustion of petroleum supplies). In fact, Lomborg challenges the more widely held view—shared by Holdren—that oil will become increasingly scarce as an economically recoverable resource over the medium to longer term. Would Holdren like to make a wager that real (inflation-adjusted) price of oil in 2013 will be higher than it is today?

• Holdren fails to appreciate the technological innovations that are commercializing crude oil substitutes like Alberta oil sands and Venezuelan orimulsion, sustaining the petroleum era beyond even optimistic forecasts of recoverable crude reserves.

• Holdren refuses to consider the reasons for climate optimism: enhanced CO2 fertilization and a moderate, predominantly nighttime warming under realistic climate scenarios. Instead, he naively endorses full-scale government energy planning in the quixotic quest to “stabilize climate.”

• Holdren’s charge that Lomborg’s energy analysis “careens far across the line that divides respectable (even if controversial science) from thoroughgoing and unrepentant incompetence” applies not to Lomborg but to Holdren himself.

In addition, Bradley documents shortcomings and outright errors in Holdren’s 30-year career as a physicist-turned-energy-polemicist:

• Holdren in the 1970s forecast major ecological and economic crises absent a “revolution in human behavior” and a massive political campaign to “de-develop” the United States.

• Holdren has not outgrown his 1970s opinion that, “Our limited knowledge of the details of air pollution permits little hope for early relief.” He continues today to call air pollution “acute,” belittling the tremendous gains in air quality trends in cities from Los Angeles to Houston to New York due to remarkable advances in oil, gas, and coal technologies and mostly incremental regulation.

• Holdren once predicted that as many as one billion people could perish by 2020 from man-made climate change. He now hedges: “That the impacts of global climate disruption may not become the dominant sources of environmental harm to humans for yet a few more decades cannot be a great consolation.” Yet he remains firmly in the climate alarmist camp.

Holdren’s 30-plus-year publication record exhibits a penchant for exaggeration, error, and now wholesale intolerance of reasoned dissent. Holdren’s criticisms of Lomborg should be dismissed as inadequate and troubling, and the National Commission on Energy Policy should reconsider Holdren’s leadership role in devising a “centrist” approach to U.S. energy policy.

“I wrote this book because the rising cost of energy is an increasingly important feature of the political landscape, as it massively affects the cost of living for families across Britain. Excessive green taxes make everything from driving to work to taking a well-earned holiday more expensive and make it a lot harder for manufacturers to compete and keep employing people here in Britain.

Motorists are particularly hard hit and unfairly penalized well beyond the cost of maintain the roads and the environmental harms their emissions create. The Government need to give families a better deal and cut unfair green taxes.”

- Matthew Sinclair, Press Release, Let Them Eat Carbon (London: TaxPayers Alliance: August 2011)

Matthew Sinclair, director of the TaxPayers’ Alliance, has penned an educational tract to get his fellow countrymen to reconsider what in their good graces has been accepted as sort of a public duty–to buy into climate/energy alarmism and to do their fair share.

In addition to covering all aspects of Britain’s green taxes, what they are and why they were implemented, the book (available from Amazon here) examines subsidies for renewable energy; emissions trading; windfall profits for industry; and environmentalist and corporate lobbying. The introduction (see excerpts below) is downloadable.

Press Release

The biggest threat to taxpayers right now is expensive new green taxes and subsidies. In the first ever mainstream book on this subject … Matthew Sinclair has exposed how this is the critical new threat to family finances. With rising fuel bills and petrol prices, it will be a defining feature of the political landscape over the coming year.

‘Let Them Eat Carbon’ shows how Fuel Duty is putting huge pressure on motorists. An energetic campaign against the tax is arguing for it to be frozen for the rest of this Parliament, after the cut at the last budget, and is among the most popular on the new government e-petition website.

Increases in Fuel Duty and other green taxes have frequently been justified by the need to cut greenhouse gas emissions, but estimates in the new book show that argument isn’t credible. Providing new figures and using a method pioneered in earlier studies for the TaxPayers’ Alliance and used by researchers at the Department for Transport, it finds that green taxes were excessive compared to the harms they are meant to address:

• The Office for National Statistics has reported that environmental taxes raised £41.4 billion in 2010
• After accounting for total road spending (£9.2 billion in 2010-11) and Air Passenger Duty (£2.1 billion), total domestic green taxes net of road spending were £30.1 billion in 2010
• Greenhouse gas emissions were 582.4 Mt CO2-equivalent in 2010 according to the Department of Energy and Climate Change. The social cost of those emissions, based on earlier Government estimates of the social cost per tonne adjusted for inflation, was £16.9 billion
• That implies that excess green taxes were levied of £13.2 billion, or over £500 for every family

The estimate is conservative as that Government estimate of the social cost per tonne of carbon dioxide is high relative to most estimates in the academic literature, for example as contained in a report for the Intergovernmental Panel on Climate Change. It implies motorists in particular are being singled out for excessive taxation.

From the Introduction

Who Pays?

Ordinary families are paying a heavy price for the attempts politicians are making to control greenhouse gas emissions. Climate change policies push up electricity bills, make it more expensive to drive to work or fly away on holiday, put manufacturing workers out of a job; they sometimes even make your food more expensive. They hit some people particularly hard: the industrial worker already struggling to compete with rivals in China; the poor and elderly, who feel rising energy costs particularly keenly; and anyone with a big family who needs to drive their kids around because they don’t live in a city centre.

At the other end of the scale, politicians who don’t drive because they live in city centres and are on above average incomes won’t feel the pinch in the same way and could easily underestimate the extent of the pressure on household budgets.

Where the Taxes Go To

Much of the money goes straight into the pockets of a bewildering range of special interests. Climate change has become big business. Across the world, companies are making billions out of the schemes politicians have put in place to try and stop global warming: from windfall profits for electricity generators under cap and trade schemes like the EU Emissions Trading Scheme in Europe, to huge profits for dodgy projects in the developing world under the Clean Development Mechanism. Climate change has justified entire new organisations in the public sector with hundreds of staff and big grants to fund them. Environmentalist campaigns enjoy big budgets, often including generous taxpayer funding.

Why Bad Policy Continues

It is now mostly about momentum, though. Too much political capital has been sunk into the current set of policies, particularly in those countries where all the mainstream parties have supported them, for a reversal to be possible without a lot of embarrassment. There is a sense that questioning the current approach undermines the entire effort to do anything; that whatever their merits the current measures are what we’ll have to work with. That thinking was exposed when a spokesman for the EU Environment Commissioner Barbara Helfferich rejected changes to biofuel policies as disastrous for the environment and the world’s poor.

She said: ‘There is no question for now of suspending the target fixed for biofuels… You can’t change a political objective without risking a debate on all the other objectives.’ The problem that creates is obvious. Not only are the current policies ineffective and fiercely costly, they were designed to work as part of an international negotiating process that broke down spectacularly in Copenhagen and showed no sign of a serious renaissance at Cancun. Whether or not the politicians and activists like it, the current set of policies can’t be sustained and need to change.

Why are Voters Going Along?

So why haven’t the vast majority of voters who pay for these policies stopped them? The basic answer is that they have – when they’ve been given a chance. When a mainstream party opposes it, climate change legislation rarely progresses. In Europe that hasn’t happened, as in most countries the parties have stitched things up without the voters’ involvement. But in Australia, Canada, the United States and Japan the push for emissions trading in particular has stalled.

In Australia it was remarkable how the inexorable political drive to get an emissions trading scheme in place fell to pieces as soon as the opposition Liberals got rid of their leader and got back into the business of opposing. Since then, the Prime Minister, Kevin Rudd, has put the plans on ice and been deposed by his own party. In the United States the politicians have found a way around inconvenient democracy: if the public don’t want greenhouse gas rationing pushing up energy prices, then the Environmental Protection Agency, which doesn’t have to appeal to pesky voters for support, can push the regulations instead.

It is understandable that many people prefer to ignore climate change policy as they consider other issues a higher priority, but that allows those committed to the expensive environmentalist agenda to push it forward without real opposition. Whether or not you think climate change is important, no one can afford to ignore climate change policy.

In many European countries they don’t even need to put new measures in place; the cost will ramp up without any further legislation. For example, Britain’s climate change targets are set to make energy bills rise rapidly over the next decade, as they require massive investment in expensive offshore wind power, and the mechanisms to make that happen – like the Renewables Obligation – are already in place.

Need to Reverse Course

All sorts of other objectives will be undone if we don’t change climate change policies. The fight to reduce poverty and welfare dependency is hard enough without making essential goods like electricity that are a significant part of the budgets of poorer households more expensive. For all the ridiculous hype about green jobs, they’ll be more than offset by job losses elsewhere in the economy; manufacturing firms already struggling to keep their edge against competitors in developing countries will find life a lot harder with higher energy costs.

Changed Momentum?

Fortunately, a series of knocks have recently dented the confidence of the politicians, activists and lobbyists promoting
draconian attempts to limit emissions. First, cap and trade legislation ran into trouble in the US Senate. Then the Climategate leak revealed a culture of secrecy among key climate change scientists and undermined public confidence in what they were being told about global warming.

Finally, the international negotiating process collapsed at a Copenhagen conference that had been hyped beyond belief
and could only proceed at Cancun by fudging all the most critical and controversial issues. After all the shocks recently,
more people are open to the idea that the current direction might not be the right one.

The time to stop the unfolding disaster of failing climate change policies is now. This book provides the broadest and
most complete picture yet of what is going wrong.

[Editor note: With the Atlas Shrugged movie enjoying a strong opening, MasterResource this week is examining the book (Part II–today), the philosophy behind the book (Part III–Wednesday), the moral obligation of capitalists according to Rand (Part IV–Thursday), and Atlas shrugging in the energy market (Part V–Monday).]

Ayn Rand’s first major novel, The Fountainhead, is the story of a lone architect struggling against the altruistic, collectivist norms of his profession. Atlas Shrugged describes the process by which men and women of accomplishment and honor withdraw their talent to defeat a parasitic, collectivist society.

Rand described her major plot device, an anti-Industrial Revolution:

Reverse the process of expansion that goes on in a society of producers: Henry Ford’s automobile opened the way for industries: oil, roads, glass, rubber, plastics, etc. Now, in a society of parasites, the opposite takes place: a shrinking of industries and productive activities. (1)

Originally titled The Strike, the novel revolves around John Galt, a theorist and inventor in the field of energy who leads the exodus, refuses under torture to save the bankrupt society, and then returns with the strikers to rebuild America on a rational, individualistic basis. “Who is John Galt?” has become a literary phrase that, like “Atlas Shrugged,” is still in use today.

Atlas Shrugged contains a variety of business and business-government situations that impart Rand’s views of positive and negative attributes of firms and their leaders. Although the work is fictional, a number of its insights anticipated the real-life blind spots of major business and political figures from Ken Lay to Barack Obama.

Energy in the Novel

Rand’s book about the anti-industrial revolution finds government and society working against the master resource of energy.

There is John Galt’s abandoned motor, his secret energy, that represents a foregone quantum leap for energy creation and usage.(2)

There is Ellis Wyatt’s oil, which Atlas Shrugged refers to “the black blood … because blood is supposed to feed, to give life….” (p. 9). Rand continues: “[The discovery of oil] had shocked empty slopes of ground into sudden existence, it had brought new towns, new power plants, new factories to a region nobody had ever notices on any map.”

Throughout Atlas Shrugged, energy is light and goodness and the torch to a better economic future. But there is the corrosive, wealth-destroying force of government intervention with energy. As Part V in this series will document, Atlas Shrugged goes from fact-to-fiction with oil shortages, gasoline shortages, and electricity blackouts. There is energy rationing and other conservation edicts–and even the Industrial Efficiency Award.

There is the energy planning agency: Bureau of Economic Planning and Natural Resources. There is public utility regulation and common carrier edicts.

There are crony capitalists and trade associations bringing capitalism down and gamed regulation.  There is the dynamics of government intervention as one regulation spawns another.

And there is much more that the energy scholar can document in the novel and trace to actual U.S. experience both before and after publication of the book in 1957. (3)

Business Enterprise: Good and Bad

The ideal in Atlas begins with the foundation of meaningful, inspired work and wealth creation. The rational, indeed heroic, business practices frugality, attends to detail, and strives for continual improvement, even perfection. The firm is reality-centered, forward looking, and authentic. Government favors are not sought—market solutions are.

On the other hand, there are warnings about emotions in the workplace, conflicts-of-interest where business men and women are put under obligation, cronyism and nepotism, extravagance, and a failure to take responsibility. The flash-in-the-pan company is focused on public relations and politics. It seeks and welcomes government subsidies. It appeases, rather than confronts, enemies of business.

The style-over-substance leader has “a gift” for making his business popular and receiving “good press.” He is detached from the nitty-gritty of the home office, working on what is considered bigger things in a marquee city. He has “Washington ability” where skillful actions result in legislative favor. There are “glossy” annual reports and many speeches to make. Great importance is given to the company’s slogan, symbol, and “noble plan.” Decision-making is very hierarchical. Formalities are relished and public-relation events emphasized. Diversity and “fairness” are considered alongside merit.

The flawed leader takes comfort in hiring “very promising young men, all of them guaranteed by diplomas from the very best universities.” The CEO is a Great Man creating a legacy with an autobiography in mind. He is extremely confident, believing that reality will be what he wants it to be. When things go sour, this leader is full of excuses.

The above insights about substance versus façade bring an understanding the fate of Enron and Ken Lay—and the ongoing success of the “anti-Enron” companies. Regarding the former, think of the old “beyond petroleum” BP; regarding the latter, think of Richard Kinder’s Kinder-Morgan and Charles Koch’s Koch Industries, Inc.

Conclusion

The movie captures what happens in a society when a philosophy of achievement and individualism is replaced by one of mediocrity and collectivism. Government policy hurts the productive and rewards the incompetent. The Ken Lays win and the Charles Kochs lose. The welfare state runs amok with the top burdened by the bottom until the top sinks toward the bottom.

The Obama-era resurgence of interest in Atlas Shrugged , first with the book and now with the movie, is testament of how good fiction can mimic real life.

FOOTNOTES

(1) Rand, quoted in Barbara Branden, The Passion of Ayn Rand (Garden City: NY: Doubleday, 1986), p. 222.

(2) “Like the man who discovered the use of steam or the man who discovered the use of oil, I discovered a source of energy which was available since the birth of the globe, but which men had not known how to use except as an object of worship, of terror and of legends about a thundering god. I completed the experimental model of a motor that would have made a fortune for me and for those who had hired me, a motor that would have raised the efficiency of every human installation using power and would have added the gift of higher productivity to every hour you spend at earning your living.” Speech of John Galt in Ayn Rand, Atlas Shrugged (New York: Random House, 1957), p. 1048.

(3) Robert Bradley, “The Energy of Atlas Shrugged” (forthcoming),  presentation at the Atlas Society/Free Minds 2011 Summer Seminar, Anaheim, CA, July 7–13, 2011.

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APPENDIX: ECONOMICS PROFESSOR PETER BOETTKE (GEORGE MASON UNIVERSITY) ON ATLAS SHRUGGED

I am on record as stating that Atlas Shrugged is the most economically informed novel ever written.  I teach from Dickens and Steinbeck as well, but the underlying economics in those works is confused at best.  Rand’s economic message is coherent, consistent, and follows from the classic teachings of the mainline of economic thinking from Smith through Say onward to Mises.

The narrative she spins in Atlas Shrugged captures well the consequences of public policies that stifle entrepreneurship and private enterprise, substitute state planning for market coordination, and justify fiscal irresponsibility and inflationary monetary policy.  In short, such policies destroy wealth in the name of redistributing it.  Justice is not served by such efforts, instead we get naked injustice.

As politicians of both parties (Team Obama cannot take full credit) pursue similar policies to the one’s Rand describes as responsible for destroying the economy in our world today, is it any wonder that Rand’s book is flying off the shelves? Amity Shlaes sums up  the situation with respect to Atlas as follows:

Imagine a novel of more than a thousand pages, published half a century ago. The author doesn’t have a talk-radio show and has been dead for 27 years.

As for the storyline, it is beyond dated: Humorless executives fight with humorless public officials over an industry that is, today, almost irrelevant to the U.S. economy – - railroads. The prose itself is a disconcerting mixture of philosophy, industrial policy, and bodice-ripping: “The wind blew her hair to blend with his. She knew why he had wanted to walk through the mountains tonight.”

In short, you would think “Atlas Shrugged” might be long forgotten.

Instead, Ayn Rand’s novel is remembered more than ever. This year the book is selling at a faster rate than last year. Last year, sales were about 200,000, higher than any year before that, including 1957, when the book was published.

I just returned from a conference of BB&T Professors held at Clemson University, and co-sponsored by the Clemson Institute for the Study of Capitalism, and the Ayn Rand Institute.  The conference focused on teaching the moral foundations of capitalism at both the undergraduate and graduate level, and included faculty from some forty universities and in disciplines such as philosophy, politics, history, religious studies, as well as of course economics.  I learned a lot from the different people there about how they approach the subject of the study of capitalism and what sort of programs are effective in different environments and what programs are less effective.

I will be teaching Atlas Shrugged again this coming fall term.  I teach Rand’s novel within a comparative literary analysis alongside Dickens and Steinbeck guided by the lens of the economic way of thinking.  I have fun teaching the course, the students seem to enjoy the course, and we get to explore the deepest issue of our (or any) age – the preconditions for social cooperation and human betterment….

—————–

This series at MasterResource on Rand, Objectivism, and Atlas Shrugged is in five parts:

Part I: Overview

Part II: The Book (Atlas Shrugged)

Part III: The Philosophy (Objectivism)

Part IV: Immoral Businessmen (Political Capitalists)

Part V: The Energy Crisis (Richard Nixon, Jimmy Carter)

For weeks, Siemens has been running full-page ads for wind technology. Last week Chevron and Weyerhauser, in full-page ads, agree “IT’S TIME OIL COMPANIES GET BEHIND THE DEVELOPMENT OF RENEWABLE ENERGY.”

The same slush is coming from GE, AES, BP, Shell, NRG, and a legion of corporations whose fundamental commodity is fossil fuel.

Do these multinationals really believe that wind and solar will put a dent in their fossil fuel market share? Or is something else afoot? One should note that nowhere does this renewable ballyhoo from today’s energy goliaths mention a word about saving the world from the devastation of climate change wrought by the consequences of fossil fuel use, although this was the tack Ken Lay took to steer Enron’s aggressive renewables course.

Not to be outdone—and deploying Lay’s wry rhetoric of environmental concern—organizations like The Sierra Club and Greenpeace continue to assert that an immediate switch from fossil fuels to renewables, at any cost and among other actions, is imperative to bring the planet back from the brink of global warming.

Green Timing: Here Comes Lomborg

Now they are joined at some remove by Denmark’s Bjorn Lomborg, the self-styled skeptical environmentalist, who once opined, “We need to stop our obsession with global warming” and instead target problems that can be realistically solved with limited budgets in a reasonable time frame.

Could this convergent push for renewables have anything to do with the effort to adopt national renewable energy standards, which would require the country’s utilities to use approved renewables, overwhelmingly wind, for a certain percentage of the nation’s electricity supply?

The latest RES bill is now lodged in the gizzard of the lame duck Congress. If it becomes law, its provisions would create a bonanza for Al Gore’s various “green” ventures, as well as for Danish wind companies like Vestas, which has for some time been attempting to establish a beachhead in the USA. (1) And don’t forget the multi-national energy companies such as GE and PPL that make money through the front door on fossil fuels and the back door via government-dependent renewables. (2)

The timing of Lomborg’s entry into this fray is curious, although he is promoting a new documentary, Cool It. His first book, The Skeptical Environmentalist, published in English in 2001, challenged climate alarmists by systematically examining a range of major environmental issues—biodiversity, pollution, chemical spills, and the greenhouse effect—and finding that, on the whole, the world had generally improved in these areas.

Some Background

Two years later, the Competitive Enterprise Institute gave him its prestigious Julian Simon award. Simon, a controversial economist, had portentously maintained that most negative environmental indicators were tied to poverty, violence, and corrupt government—rather than overweening consumption and economic activity, the leitmotif of mainline environmentalism. And these were the themes Lomborg has advocated for much of the last decade.

The fact that he was a former member of Greenpeace and that he eponymously associated his inquiry with skepticism gave his ideological environmental critics fits.

The Danish political scientist, who has a doctorate in statistical game theory, followed up with another book (also named Cool It) and hundreds of lectures. He reinforced his theme that climate change was so vastly complicated, so unlikely to result in general harm to the earth and its human population, that spending great sums to do anything about it other than local mitigation efforts was not only foolish; it would also squander revenues that could actually effect solutions to a range of other problems, such as malnutrition and lowering barriers to trade.

He criticized environmental organizations for their zeal in recommending carbon taxes, since such a measure is necessarily regressive and would negatively affect the poor.

Lomborg Questions ‘Green’ Energy

Even in a recent commentary, Lomborg had this to say about the ineffectiveness of “green energy:”

Instead of focusing on climate change, the Climate Commission hyped the benefits that Denmark would experience if it led the shift to green energy. Unfortunately, on inspection these benefits turn out to be illusory. Being a pioneer is hardly a guarantee of riches. Germany led the world in putting up solar panels, funded by €47 billion in subsidies. The lasting legacy is a massive bill, and lots of inefficient solar technology sitting on rooftops throughout a fairly cloudy country, delivering a trivial 0.1% of its total energy supply.

 Denmark itself has also already tried being a green-energy innovator – it led the world in embracing wind power. The results are hardly inspiring. Denmark’s wind industry is almost completely dependent on taxpayer subsidies, and Danes pay the highest electricity rates of any industrialized nation. Several studies suggest that claims that one-fifth of Denmark’s electricity demand is met by wind are an exaggeration, in part because much of the power is produced when there is no demand and must be sold to other countries. The sorry state of wind and solar power shows the massive challenge that we face in trying to make today’s technology competitive and efficient.

Lomborg knows that any shift from fossil fuels will not likely happen anytime soon. He says that “trying to force carbon cuts instead of investing first in research puts the cart before the horse,” since the modern world requires modern power—and technologies like wind and solar cannot provide it. These renewables therefore cannot replace high capacity systems like coal and natural gas (nor nuclear or hydro, for that matter), unless the world wants to sabotage its reliable, secure electricity supply.

Even so, if climate change due to the greenhouse effect is not the most pressing matter, why is he pressing so hard today to find a replacement for fossil fuels?

Climate Alarmism

Lomborg has said from the start that the earth is warming because of humanity, and that the warming is cause for concern, since it would likely result in environmental and economic damage.

But he differed from climate alarmists like Joe Romm and James Hansen, who have stridently pushed for draconian measures to eradicate what all three consider to be the cause of the problem, a supersatuation of carbon dioxide emissions caused by economic activity, using mechanisms like the Kyoto Protocol and international cap-and-trade/carbon taxes to reduce CO2 emission levels substantially below 1990 levels.

However, Lomborg, unlike the others, has argued that anything the world could do, even if it achieved its Kyoto goals, would only postpone warming for about six years in 2100. Several years ago, in an exercise for his Copenhagen Consensus Center think tank, he identified 10 major problems facing the world–but assumed there was only $50 billion that could be freed up to tackle them. After assessing the financial cost of solving each problem and comparing this to the cost of doing nothing, he then brought together 30 of the world’s economists to prioritize what should be done in order to get the greatest bang for the buck.

He found that in solving the climate problem using the Kyoto approach, the world would spend $40 trillion a year to prevent what was estimated to be $3 trillion a year in environmental damage. Needless to say, climate change came dead last in this exercise, well behind the others.

The New Lomborg: Going Green for Climate

This is where he stood on the issue until the last several months. Now, though, he evidently believes the cause of climate change “should not continue unchecked. The question is whether we can find a cure that isn’t worse than the disease. I think we can.” Rather than making carbon-based fuels more expensive, he reasons, which may solve nothing, why not be smarter about it? “Why not “devote ourselves to making green energy cheaper?” If we make renewables more efficient, we could make them cheaper than fossil fuels, and then everyone would stop burning oil and coal without being forced.

Today, Lomborg calls for massive research and development in renewables like wind, wave, solar, fuel cells, and biofuels, trusting a breakthrough in cost and performance will occur that will make it possible to replace most fossil fuel use, thereby stabilizing global warming over the course of this century. He also suggests looking into better systems for carbon capture, energy storage, and fourth generation nuclear. To make current renewable technology more functional, “direct-current lines need to be constructed to carry solar and wind energy from sunny, windy areas to where most people live. Storage mechanisms need to be invented so that power is not interrupted whenever there is no sunshine or wind.”

And how to finance all this? Levy a worldwide carbon tax of $7 per metric ton, raising $250 billion annually, of which $100 billion would be targeted for green energy R&D; $50 billion for adaptation measures; $99 billion to inculcate environmentally sensitive development practices for poor nations; and a paltry $1 billion for research on geo-engineering schemes like manmade volcanoes.

For evidence such an approach would succeed with this level of funding, Lomborg points to a McGill University study, An Analysis of a Technology-led Climate Policy as a Response to Climate Change, funded by his think tank, that concluded such “green energy R&D would produce the kind of breakthroughs needed to fuel a carbon-free future.” The study’s principal author, Chris Green, is a professor of economics. On Lomborg’s website, Prof. Green extols the virtues of his ideas next to a photograph of an array of wind turbines.

Edgar Wilson Nye once said, “Wagner’s music is better than it sounds.” But from the perspective of even recent history, annually throwing a quarter of a trillion dollars toward “green technology” would be worse than it seems, given that the perception of R&D research is akin to apple pie warming on a window ledge. Perhaps Lomborg doesn’t know that the United States has little to show for the billions the country has already spent on renewable R&D over the last 35 years (3), not to mention the growing billions spent on renewables from President Obama’s stimulus plan.

It is quite possible the wind industry alone is receiving nearly 70% of its funding from public subsides, either directly in cash outlays or through tax credits. Indeed, perhaps he should do more research on what the more than $90 billion of US stimulus funds originally targeted for renewables are achieving. He might also find the Mafia connection between wind and solar projects of some interest. To say nothing of the projected Cape Wind cost overruns. And the First Wind IPO imbroglio. And the failed Boulder City solar field. And this about hydro storage from Idaho. With $250 billion at stake, the potential for corruption and profligate waste would be enormous.

Try to imagine the onslaught of proposals aimed at getting a share of Lomborg’s annual renewables booty—and the range of likely proposals themselves. Like white to rice, everyone with a new techno-gizmo would be at the trough, with the latest perpetual motion/vacuum energy concepts wrapped up in high tech terminology, many accompanied by the same slick lobbying public relations teams now so prevalent throughout the land.

The National Renewable Energy Lab would likely have to quadruple its staff, accelerating the revolving door practice with the American Wind Energy Association and the Solar Trade Association. Those pushing for funds to install the Smart Grid would celebrate, perhaps taking over the electricity regulatory network. So much for affordable utility rates.

Rathole Economics

In short, what I’ve come to call rathole economics would hold illimitable dominion over all, in the process generating vast lost opportunity costs that might have, if invested with greater wisdom and less politics, yielded more productive results. Unquestionably, basic scientific research and development is important for a better world future. Investments in programs like the Hubble satellite and the large hadron conductor at CERN are examples that illustrate what can be accomplished on behalf of basic energy research.

But in too many instances, the cup of good intentions slips from the lip of effective policy when government attempts to pick winners from the jumble of rent seekers out to improve their corporate bottom lines. Policy by consensus, the very essence of government predisposition, makes government ill-equipped to render knowledgeable decisions, for consensus works to spread the public’s wealth around, transmuting capital into the pork we have come to know so well. Even the National Academy of Sciences today routinely invites representatives of national and regional renewable energy trade organizations to take part in the Academy’s renewable energy reports—as if their interests were scientifically vetted and disinterested. As if the Academy has no obligation to militate against confirmation bias.

As the record shows time and again, government is generally incapable of discerning the difference between technological chafe and wheat, between fact and fiction, made by energy promoters and lobbyists out from the din of the background noise. Imagine the blurry buzz made by those touting wind, solar, pumped hydro, ethanol, switchgrass, electric hybrids, plug-ins, smart grids, AC/DC, transmission highlines—all the armies of light and good (but mostly consisting of snake oil) arrayed against the forces of conventional evil: fossil fuels, nuclear, impounded hydro.

No wonder politicians simply punt, giving something to everyone in the crowd. As Glenn Schleede recently said, “Lobbying prowess is often more important than merit when government officials try to pick ‘winning’ energy technologies.” (4)

Conclusion

Bjorn Lomborg should be careful about what he wishes for. The unintended consequences pursuant to a renewable trough worth $250 billion has the potential to spawn a lot more nonsense, given its potential for increasing the size and direction of government and making energy policy even more political, much less meritorious. It also has the potential to thwart promising technologies by propping up pretenders, as is the case today with public support for wind, solar, and ethanol. Such lost opportunity costs, if Lomborg’s campaign is successful, are likely to be his legacy.

One must ask: Does Lomborg understand energy reality and energy density, as explained by Vaclav Smil in his five part series at MasterResource and popularized by Robert Bryce in his recent book, Power Hungry?

The skeptical environmentalist has become far too credulous.

_________________________________

 1) For Gore, see here; for Vestas, see here and here. There is also increasing evidence that renewables like wind, the chief beneficiary of RES, not only don’t reduce the burning of coal and natural gas fuels, they may also actually increase the use of those fuels, as the recent Bentek analysis in Colorado and Texas has shown. (Also see http://www.masterresource.org/2010/05/wind-integration-realities-the-bentek-study-for-colorado-part-iii and http://www.masterresource.org/2010/09/windpower-overblown-part-1.

 (2) Last year, General Electric, with revenues in the billions, paid no federal income tax. Zero. Largely because of its investment in wind, begun in 2001 when GE purchased Enron’s wind operations at the latter’s bankruptcy. GE is now one of the largest wind manufacturers in the world. According to the Palm Beach Post in 2007, Florida Power & Light Energy, a subsidiary of Florida Power & Light Co, with the nation’s largest stock of wind facilities, claimed its quarterly earnings would surpass its parent company by 2012. I quote from that article: “FPL Energy boasted a 2006 profit of $610 million, triple its earnings in 2005. That followed an earnings increase of 200 percent between 1998 and 2002, then significant profit growth each year thereafter, mostly fueled by wind power projects.” According to Citizens for Tax Justice, FPL paid no federal income tax in 2002-2003, despite having revenues in the billions. (I cannot confirm what the company has paid in recent years.)

For increasing income through renewable public “incentives:” Using existing subsidies for wind (although there are similar inducements for solar), corporations can deduct generous federal 2.1-cent per kWh production tax credits and employ a double declining capital depreciation schedule that can, if financed by equity, recover costs in little more than three years; the latter mechanism is especially lucrative for large corporations with a lot of taxable income, which tax obligations can be offset through equity partnerships with wind projects. They can also tap into various state and local tax benefits. Currently, about 30 states have passed RES laws, forcing utilities to purchase wind energy at uncompetitive prices. And they can the buy and trade renewable energy credits, in the process, avoiding the cleanup of their dirtiest burning thermal generators. See Glenn Schleede’s numerous articles about this, such as here.

 (3) (4) See page 3 of Glenn Schleede’s analysis of Senator Bingaman’s national RES bill, October 7, 2010.

You have to give the man credit: He actually believes what he preaches. He shows pictures of his wonderful grandchildren and his concern for them is certainly evident. There is only one problem with what he shares: There is little evidence to support what he says.

Take this example:

Planet Earth, creation, the world in which civilization developed, the world with climate patterns that we know and stable shorelines, is in imminent peril. The urgency of the situation crystallized only in the past few years. We now have clear evidence of the crisis, provided by increasingly detailed information about how Earth responded to perturbing forces during its history (very sensitively, with some lag caused by the inertia of massive oceans) and by observations of changes that are beginning to occur around the globe in response to ongoing climate change. The startling conclusion is that continued exploitation of all fossil fuels on Earth threatens not only the other millions of species on the planet but also the survival of humanity itself—and the timetable is shorter than we thought. (Emphasis Added P. IX)

Now, the one thing that Dr. Hansen is not going to share with us is the “clear evidence” of a coming crisis. In fact there is plenty of evidence to the contrary. Dr. Hansen may understand some scientific principles but he seems to lack any common sense. He talks about plants becoming extinct because they cannot migrate because cities and farms are in the way. Yet, any person who has ever planted a garden knows that seeds find a way of getting where they want to go.

Dr. Hansen, along with a number of other climate change alarmists (like Al Gore), believes that man is the chief cause of global warming, and that warming is generally harmful. In fact more people die from cold than die from heat. Not only that but increasing levels of carbon dioxide are generally beneficial to plants, enabling them to survive with less water.

Dr. Hansen knows that people who live day to day on this planet are not going to be easily fooled so he offers this to convince us:

How can we be on the precipice of such consequences while local climate change remains small compared with day-to-day weather fluctuations? The urgency derives from the nearness of climate tipping points, beyond which climate dynamics can cause rapid changes out of humanity’s control. Tipping points occur because of amplifying feedbacks… Climate-related feedbacks include loss of Arctic sea ice, melting ice sheets and glaciers, and release of frozen methane as tundra melts. (Ibid.)

Tipping Points: Things gradually reach the point of no return. While the day to day change may be small the point is reached where through what he calls “forcings” and “positive feedbacks” the temperature skyrockets and the planet is destroyed with everything on it.

During the past few years, however, it has become clear that 387 ppm (CO₂) is already in the dangerous range. It’s crucial that we immediately recognize the need to reduce atmospheric carbon dioxide to at most 350 ppm in order to avoid disasters for coming generations. (Emphasis Added P. XI)

The title of the book implies we are headed for a catastrophe or a disaster. But, is this really the last chance to save humanity? Anyone who spends time out in nature (and not just writing about it) knows that our old Earth is able to heal rather quickly. Old highways are reclaimed by natural vegetation, land covered by hot lava soon has ferns and other plants growing on it, and even oil spills are quickly oxidized and “eaten” by micro-organisms that render it harmless.

Dr. Hansen talks about species extinction, yet with none of the examples he gives did the species become extinct because of global warming. In fact, one example, the Dodo bird, became extinct simply because the Dutch sailors ate them all.

There is much evidence that with increasing temperatures species move farther north or higher in elevation while maintaining their original lower elevation limits.

The limit on permitted global warming, if we wish to preserve the great ice sheets on Antarctica and Greenland, and thus preserve the coastlines that have existed for the past seven thousand years, is much less than has generally been assumed. Halting global warming is still feasible—but requires international cooperation in taking urgent, unprecedented actions, which would have additional benefits for human health, agriculture, and the environment. (Emphasis Added P. 34)

The truth of the matter is that if the world reduces the use of fossil fuels there will be starvation on a broad scale, and many more people will die simply because they lack the energy for clean and safe living. Not only that, but while sea level rose rapidly after the end of the last ice age, most of that ice is now gone. There is some melting at the edges of Greenland and Antarctica, but the interior is actually getting thicker.

Dr. Hansen continues to beat on his alarmist theme:

We seem oblivious to the danger—unaware how close we may be to a situation in which a catastrophic slip becomes practically unavoidable, a slip where we suddenly lose all control and are pulled into a torrential stream that hurls us over a precipice to our demise. (P. 70)

He goes on to say:

You may say, “Surely you are joking, Mr. Hansen!” Would that I were. Human-made climate change is, indeed, the greatest threat civilization faces. (Ibid.)

So what is his goal, actually?

Our goal is a global phaseout of fossil fuel carbon dioxide emissions. (Ibid.)

Why do we then keep using fossil fuels if there is such a great need to stop?

Why do fossil fuels continue to provide most of our energy? The reason is simple. Fossil fuels are the cheapest energy. This is in part due to their marvelous energy density and the intricate energy-use infrastructure that has grown up around fossil fuels. (Ibid.)

Dr. Hansen understands that fossil fuels represent highly concentrated energy; energy deposited by the sun over very long periods of time. Yet in his discussion he leads us to believe that solar and wind can take the place of all that.

So what is his solution? Increase the cost of fossil fuels so that alternative sources of energy will appear cheaper. Again, he notes the urgency:

The difficult part is that we must make the transition with extraordinary speed if we are to avert climate disaster. (P. 209)

His program is called “fee-and dividend”:

With fee-and-dividend, in contrast, [to cap and trade, which he opposes] we will reach a series of points at which various carbon-free energies and carbon-saving technologies are cheaper than fossil fuels plus their fee. As time goes on, fossil fuel use will collapse, remaining coal supplies will be left in the ground, and we will have arrived at a clean energy future. And that is our objective. (P. 114)

This program misses two important points: The use of fossil fuels is pretty inelastic: People continue to purchase gasoline even when the price doubles. The second thing that he seems not to consider is that wind and solar represent only intermittent power and require some sort of backup such as coal, gas, nuclear or etc. This standby energy, then, becomes very expensive.

THE ABOVE SCENARIO—with a devastated, sweltering Earth purged of life—may read like far-fetched science fiction. Yet its central hypothesis is a tragic certainty—continued unfettered burning of all fossil fuels will cause the climate system to pass tipping points such that we hand our children and grandchildren a dynamic situation that is out of control. (P. 269)

Few things in life are “certain” except “death and taxes”. Now Dr. Hansen is no longer a scientist, but a politician. His goal is to build so much fear into the average American that he will choose this poorly thought out program. We would not even give his treatise second thought except for the obvious fact that many government officials will take what he says very seriously.

If we expect to continue to improve the living conditions of the poor of the world, and maintain our own then we must reject what men like Dr. James Hansen are preaching. Recognize that the earth has warmed and cooled over the ages, but life has gone on.

—————————–

A more complex review of Hansen’s book has been published by the Science & Public Policy Institute. Jim Hollingsworth can be reached at jimhollingsworth@verizon.net

[Editor note: Some analyses are worth revisiting, including this book review in the  Energy Journal of Cutler Cleveland, ed., Encyclopedia of Energy (6 volumes, Elsevier). Bradley shared his review with Professor Cleveland, who stated his surprise that it passed peer review. The reader can the judge the quality of the review in six years' hindsight.]

This is the Hummer of energy books. The Elsevier Encyclopedia of Energy is almost twice as large as two predecessor energy encyclopedias combined. The price tag is commensurate. This set is only for the wealthy, the addicted, large libraries, and paid-in-kind reviewers.

Encyclopedia editor Cutler Cleveland, an ecological economist, introduces the compilation (p. xxxi) as “the first comprehensive, organized body of [energy] knowledge for what is certain to continue as a major area of scientific study in the 21^st century.” The nearly 500 authors are advertised as leaders in their respective fields—and from forty countries. However, the diversity stops where it is most needed. While many entries are exemplary and the scope of the effort laudable, this encyclopedia showcases the alarmist wing of the energy sustainability debate and excludes contrary views.

Alarmism & Mandates

The politicization begins right up front. The foreword paints a dire picture of the carbon-based energy economy and opines, “Major changes are required in energy system development worldwide” (xxvii). Business-as-usual is the foe because the “desired energy futures will not happen” given “present policies and conditions in the marketplaces that determine energy generation and use” (xxviii).

The solution—“combinations of technologies that meet all sustainable development challenges at the same time”—is advertised as ready to go. Policy reforms include “cost-based prices” that incorporate “external environmental and health costs and benefits (now sometimes larger than the private costs).” For maximum effect, this opening is reprinted in all six volumes.

The encyclopedia’s bias and righteous tone appears in other entries. Eric Heitz of the Energy Foundation states in “Philanthropy and Energy” (5:1), “Smart philanthropy … can help spur markets for the next generation of clean energy technologies that address the energy/environmental nexus, especially global warming pollution.” In “Nongovernmental Organizations (NGOs) and Energy,” the authors describe the role of Greenpeace, Natural Resources Defense Council, and the thousands of smaller sisters as “design[ing] improved energy policies…to [meet] the needs of citizens and marginalized stakeholders” (4:313).

A number of entries critique conventional energies for imposing negative externalities, including “environmental injustices” (2:503). Others assert the sustainability problem and explore solutions. Amory Lovins’s case for greater energy efficiency in the face of market resistance leads him to call for “systematic ‘barrier busting’ atop the policy agenda” (2:398). Kornelis Blok closes “Lifestyles and Energy” with the “intriguing idea” of allocating carbon permits per individual where points are deducted from each person’s “carbon credit card” (3:662). These non-rebutted entries are hardly “encyclopedic.”

The Missing Worldview

A worldview shunned in the encyclopedia interprets the current economy as sustainable and becoming more so over time. This optimistic view dates at least to the resource studies emanating from Resources for the Future in the 1950s and 1960s, particularly Scarcity and Growth (1963) by Harold Barnett and Chandler Morse. The statistics of progress were turned into a worldview by the late Julian Simon and popularized most recently by Bjorn Lomborg in The Skeptical Environmentalist (2001). A vibrant school of thought, loosely described as free-market environmentalism, works within this tradition today. Many economists are sympathetic with this viewpoint.

There is not one entry to inform the reader that such a worldview exists. Bits and pieces of the alternative view are buried in different essays, but none comprises a clear challenge to the alarmism paradigm.

Perhaps the systemic bias should not be surprising. The Wiley Encyclopedia of Energy and the Environment does not present the nonalarmist view either. The Macmillan Encyclopedia of Energy has balance, although it did not start this way. An editor change mid-stream brought in new authors and subjects to address a bias problem.

A second overriding problem of the Elsevier encyclopedia is its repetitiveness and thus length. A good deal of overlap between entries could have been avoided by page-specific cross-referencing and grouping entries by topic. Instead, there is an alphabetical free-for-all with the 380 entries in six tomes. Going from one five-pound volume to another to investigate the same topic is not easy. Similar entries could have been merged. A few entries take “comprehensive” to new heights—e.g., “Marx, Energy, and Social Metabolism” and “Energy Costs of Reproduction.” At least one volume could have been eliminated by regrouping, combining, tightening, and focusing.

The Good

There are many fine entries. A number of the economics and history chapters are penned by names familiar to readers of The Energy Journal and do not disappoint. M.A. Adelman and Michael Lynch on petroleum, Arlon Tussing on natural gas, Vaclav Smil on energy history, Richard Gordon on coal, among others, grace the volume. Technical articles on energy fundamentals are excellent encyclopedia fare. Economists beware of non-economist forays. One entry defines economics (1:359) as: “A branch of behavioral biology dealing with the allocation of scarce resources by Homo sapiens, one of the many organisms found on Earth.”

The work introduces questionable new terms and concepts such as emergy, exergy, heterotrophic energy flows, and industrial symbiosis.

Entries on the history of energy are informative. The long history of solar, wind, and fuel cells gives the reader a quite different perspective on what the foreword blithely calls “modern forms of energy” (xxix). The detail and range of such entries as “Fire: A Sociological and Historical Survey” and “Energy and Culture” make this energy encyclopedia unique.

What little balance there is in the politically charged areas is welcomed. An entry by Adam Jaffe, Richard Newell, and Robert Stavins, “Economics of Energy Efficiency,” somewhat counterbalances four (repetitive) essays on market failure and the “efficiency gap” by Amory Lovins, Marilyn Brown, Arthur Rosenfeld et al., and Richard Howarth. Still, an entry critical of the economics of government energy conservation programs is needed.

“Market failure” has its own entry (3:769-79) and is repetitively discussed elsewhere under the terms “social costs” and “externalities.” (Externalities, by the way, are all negative as if there are no positive externalities from free-market energy abundance). Yet government failure has a long history in energy policy that cautions against jumping from a perceived problem to a government solution, particularly with a monumental undertaking such as national and international carbon rationing.

Rather than have an entry, “Government Failure,” with case studies from the energy sector, occasionally an author will mention in passing potential problems with interventionism. Says one, “There is an ever-present risk of overregulation: ‘state failure’ is the other side of market failure” (3:560). Richard Gordon discusses the government problem in the context of coal regulation as does Adam Jaffe et al. on energy efficiency. Still, the reader will not appreciate the fundamental insights that public choice economics brings to the climate change/energy transformation debate.

Some articles Gordon’s “Energy Policy in the Coal Industry” and Amy Jaffe’s “Geopolitics of Energy”) frame the policy issues as between what interventionists want and what is realistic. Their approach comes across better than assuming the problem and exhorting transformation as is done by many other authors.

Some entries forthrightly indicate the lack of a clear solution to the posed energy sustainability problem (1:379; 1:409), contradicting another point made in the foreword. Nuclear power is treated extensively (16 entries) without support as a major carbon reduction strategy. In “Nuclear Power Economics,” Geoffrey Rothwell (4:393) estimates the cost of a new 1,400-MW unit at between $2.5 and $2.8 billion, making it competitive with power generated from a combined cycle facility fueled by natural gas bought between $3.30 and $4.85/MMBtu, depending on capital costs.

The difficulties of the low-carbon solutions discussed in some entries should have inspired an entry on adaptation as a climate-change policy. The alarmist camp sees adaptation as defeatist, however, and the encyclopedia keeps the door closed on this approach.

The Undeveloped

Surfing the Web sites of the U.S. Energy Information Administration and U.S. Environmental Protection Agency will unearth time-series data indicating many positive trends relating to energy. Available international statistics show progress in most areas. Yet this encyclopedia is deficient in treatment of these trends. Many entries complain about the levels of pollution while ignoring trends. Basic data such as criteria pollutant emissions in the United States since 1970 or emission reductions from power plants and vehicles in recent decades are not presented.

The encyclopedia’s much-discussed resource curse—defined as “the inverse relationship between high levels of natural resource dependence and growth rates” (4:661)—is not analyzed as a problem of socialism versus capitalism. The problem with oil wealth is not oil but government control of oil. (Guillermo Yeatts’s proposal to privatize the subsoil in Latin American countries to democratize and create wealth is part of this debate.) Entries that discuss nationalism and geopolitics could also benefit from a property-rights approach.

An entry on the collapse of Easter Island starting in the 16^th century also provides some back-door balance. Rather than jumping to Malthusian conclusions, the author mentions that the ruinous depletion (starting with deforestation) that appears to have occurred resulted from a lack of property rights to ration demand to available supply (1:875). The lesson here explains in part why there is such energy wealth in some parts of the world and tragic energy poverty elsewhere.

The Not-so-Good

The entries on the history of energy thought are distinctly weaker than those on the history of energy. The founder of mineral and energy economics, William Stanley Jevons, does not even make the index, although he is mentioned once in passing (2:129). Jevons’s The Coal Question (1865) did much more than pose the challenge of mineral extraction contra reproducible goods and services. The book explained why wind, biomass, geothermal, and hydro could not substitute for coal to power industrial society. Jevons also explained how improving energy efficiency increased overall usage over time. Jevons was the first to frame—and partially answer—the energy sustainability issues still debated today.

An entry on resource depletion by John Hartwick (1:771–779) does not consider whether “Hotelling rent” and other depletionist concepts are nonoperative. A better framework, Erich Zimmermann’s functional theory of mineral resources, which sees institutional change, not depletion, as shifting scarcity values, is not presented. The discipline of economic geography, ably summarized by Barry Solomon (2:25–34), also has much to offer in place of a macro depletion approach.

Some entries badly lack balance. Paul Epstein’s “Climate Change and Public Health: Emerging Infectious Diseases” is such an example. As Epstein fails to indicate, Paul Reiter of the Centers for Disease Control and Prevention (U.S. Department of Health and Human Services) vigorously challenged this alarmist position.

Advocacy of energy conservation as a substitute for growing production is prevalent in the encyclopedia. An essay on the history of modern energy conservation applauds S. David Freeman’s 1974 study for the Ford Foundation, A Time to Choose, and states (1:657), “Sadly, there remains a persistent struggle between advocates of energy supply and conservation advocates.” Freeman’s report had no supply-side strategy, and today environmentalists vigorously oppose resource development to increase energy prices and force conservation. No entry alludes to this strategy or suggests that energy sustainability might be better served by growing energy supply.

An entry (2:437–57) on the history of energy service companies (ESCOs) is silent on the crash-and-burn experiences of mega-ESCOs such as Enron Energy Services and PG&E Energy Services. Conservationists were once ecstatic about energy outsourcing, which promised double-digit savings compared to business-as-usual. This turned out to be an accounting fiction that created profits on paper only. The lesson was that commercial and industrial customers were not as energy inefficient (or uninformed) as engineering studies, and some conservation gurus, suggested.

David Stern’s “Environmental Kuznets Curve” claims, contrary to many other studies, that the hypothesized negative correlation between wealth and environmental harms is mostly the result of inadequate statistical methods. “There may be an inverted U-shaped relation between urban ambient concentrations of some pollutants and income” (2:525), but he sees this as tentative at best.

The entries review the climate-science debate as if the science was settled, and the range of findings of climate models could be taken at face value. Major critics such as Richard Lindzen of MIT are ignored.

The incomplete view of climate science leads to a bigger problem—total neglect of the cost-benefit estimates of Yale University’s Robert Mendelsohn and other specialists regarding future anthropogenic warming. Their painstaking aggregation looking at water resources, sea level rise, energy costs, commercial fishing, outdoor recreation, timber, and agriculture concluded that benefits slightly exceed costs for the United States by the year 2100. Mendelsohn has estimated global costs and benefits to be about even on net, although there are winners and losers depending on location and economic system. The CO₂ fertilization effect and relatively benign warming distribution are important in this result.

Surely the reader would want to know about the findings of this relatively new sub-discipline of applied economics.

Summary

Thomas Wälde stated in “International Energy Law and Policy” (3:557):

Sustainable development suffers from an imbalance: rhetoric overwhelms action, affirmation of moral values overwhelms implementation, and good intentions prevail over getting good results. Results can be achieved only if the “game” is properly understood.

This encyclopedia advertises itself as offering the reader the knowledge to understand the energy game. It does not. There is erroneous and incomplete information in many crucial areas. Whole entries are missing that provide the proverbial “rest of the story”.

The ideal energy encyclopedia should be shorter, cheaper, and better. It should present both sides of the energy sustainability debate and show more skepticism toward pessimism grounded in scientific maybes and economic illiteracy.

For greater detail on these points, see Robert Bradley, Climate Alarmism Reconsidered (London: Institute of Economic Affairs, 2003).

The contributors invited by the new editor included the present writer (“Green Energy”), Richard Gordon (“Subsidies and Energy Costs”), Kenneth Green (“Air Pollution,” “Climate Effects”), Richard Stroup (“Environmental Economics’), and Ronald Sutherland (“Efficiency of Energy Use”).

Jevons oeuvre is presented in Bradley, Climate Alarmism Reconsidered, pp. 171–74.

For an attempted resurrection of Zimmermann’s long-forgotten theory, see Robert L. Bradley, Jr., “Are We Running Out of Fossil Fuels?” PERC Reports, September 2004, pp. 3-6.

See e.g., Bruce Yandle et al., “Environmental Kuznets Curves: A Review of Findings, Methods, and Policy Implications” (2004). Available at http://perc.org/publications/research/kuznets2.php?s=2

See the discussion in ibid, pp. 88–90.