“Classical liberalism does not have a long resume in the history of energy thought. Prior to the 1970s energy crises, it was a backwater for free-market intellectuals, although the opportunity was there for both scholarship and political advocacy.”
I recently constructed a new home with a two-story library, ladders and all. On one side are my energy-related books; on the other, economics. Several thousand volumes are, for the first time, organized in one place. Better late than never as I am in my 66th year.
The energy books, many unearthed from storage, bring back a lot of memories. Some observations follow.
Classical liberalism (or the political term, libertarianism) does not have a long resume in the history of energy thought. Prior to the 1970s energy crises, it was a backwater for the free market intellectuals, although the opportunity was there for both scholarship and political advocacy.
In particular, oil production under the rule of capture–and government intervention in the name of “conservation” to correct this “market failure” or “commons problem”–had no classical-liberal interpretation. I attempted to do just this in chapters 2–4 in Oil, Gas, and Government: The U.S. Experience (completed 1985; published 1996).
But failing to write up my revisionist perspective for a shorter publication (such as in the Texas Law Review), my take was lost in a 2,000-page treatise. It might have been my greatest strategic mistake.
Mises vs. Hotelling
With the 1970s energy crisis, first with natural gas and then with petroleum, “energy economics” was born, and dozens of economists became quick energy experts.
Energy economics at the time was little more than Harold Hotelling’s “proof” that “depletable” minerals (oil and gas in this case) were subject to higher costs and higher selling prices over time. The Arab Embargo of 1973/74 proved that, and government and oil have been wed ever since. Think shortages, conservationism, oil-import dependence, energy insecurity, and, in general, a government role in encouraging supply and discouraging demand.
It was all wrong. There is no separate “energy economics,” really.
Ludwig von Mises made the greatest statement on this in Human Action in several paragraphs on “useful mineral substances” (p. 641) where he concluded that minerals were not different from other goods and services in a Hotelling sense (although he did not refer to him).
Human Action: A Treatise on Economics stands as the greatest masterwork on economics/political economy of the 20th century. And it stands tall today.
Various Books
My library is littered with energy security books–and a bevy of muckraking volumes on big-is-bad “Big” Oil, Then there are a number of sensible studies of the failure of state and federal regulation of oil and gas.
Those several hundred volumes are now eclipsed by the global warming library, from government assessments to alarmist volumes to skeptic books. The prolific Pat Michaels, father of the lukewarming school, has a small library of volumes by himself.
Then come the major thinkers, bad and good. I have all of Paul Ehrlich and his Malthusian ilk. Same for Vaclav Smil (energy realism). Same for Julian Simon and his hardy band of resource optimists. I even have my own volumes trying to impart a free-market history and vision.
Most Important Book?
Without question: William Stanley Jevons’s The Coal Question (1865, 1866).
The first writer of an energy treatise, Jevons nailed it on energy density and efficiency. There was no going back to chancy renewables–coal was the enabler of industrialization. Ditto for what was just getting started across the Atlantic–petroleum. And ditto to what was to come: natural gas.
MasterResource has literally dozens of entries on Jevons’s contribution. The father of energy economics has much to impart in today’s debates.
Most Courageous Book
This award, in my telling, goes to Julian Simon’s The Economics of Population Growth (1977), popularized as The Ultimate Resource (1981). At a time when everyone ‘knew’ that oil and gas were depleting (including at Resources for the Future, previously a bastion of resource realism/optimism), Simon was arguing just the opposite!
“All in all,” Simon concluded, “there seems to be no reason to believe that national resources should be treated in a manner different from other physical capital when considering the economic effect of different rates of population growth.”
Ludwig von Mises might have been the first economist to conclude the same–thus undercutting the notion of an “energy economics” apart from general economics. But Simon put it into play in a very special way that would prove seminal–and courageous in context.
Most Underrated Book
Simon’s aforementioned The Economics of Population Growth is certainly a candidate. Erich Zimmermann’s World Resources and Industry (1933, 1951), a rare treatise, presented his “functional” (real world) theory of resources in addition to a wealth of statistics and insight. There is so much knowledge in the book, although the University of Texas professor got off track with a strange case of resource pessimism.
With their books and many booklets, a number of free-market scholars provided cross-currents against the Malthusian mindset. Here are five that I will forever respect.
Of course I am leaving out some great scholars, and none more worthy than M. A. Adelman (see my two-part tribute to him here and here). Today, Michael Lynch carries on the Adelman tradition in a grand way.
Worst Book(s)
There are just too many equally bad candidates to choose one. But I will mention a few finalists in the Hall of Shame category.
The worst titled book, coming from an retired oil industry executive no less, would be John Hofmeister’s Why We Hate the Oil Companies (2010). We? Hate? Hofmeister, ‘former president, Shell Oil Company,’ the book cover states, came up from the public relations side to become a very poor executive. Shell Oil (the U.S. side of Royal Dutch Shell) got what it deserved both during and after his tenure.
Energy: The New Era by S. David Freeman would be in the running for really, really bad. Published in 1974, it would set the tone for Jimmy Carter’s national energy plans of productionism and conservationism.
Hubbert’s Peak: The Impending World Oil Shortage (2001) and Beyond Oil: The View from Hubbert’s Peak (2005) by Kenneth Deffeyes are bad on bad. Both picked up a lot of endorsements from Nobel Laureates and even some big-school geologists. Then came a new generation of extraction technology to send Peak Oil crashing down.
Ditto for Julian Darley’s High Noon for Natural Gas (2004). Then came a new generation of natural-gas extraction technology….
Among the infamous is Paul Ehlrich’s The Population Bomb (1968), which was a litany of failed prognostication (“The battle to feed all humanity is over”) and energy bunk (“we are madly depleting nonreplenishable resources”).
One more award for Bad is Joe Romm’s Cool Companies: How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions (1999). Channeling Amory Lovins, Romm stated:
The entire notion that low-hanging fruit is easily exhausted turns out to be a myth…. A “cool” company will cut its emissions by 50 percent or more while reducing its energy bill and increasing productivity, with a return on investment that can exceed 50 percent and in many cases 100 percent.
Romm formed the Center for Energy and Climate Solutions [CECS] as “a one-stop shop for businesses seeking to reduce greenhouse gas emissions.” But CECS, as well as his star “cool” company, Enron Energy Services, were out of business by 2002.
Final Thought
It is my hope that the often lonely, typically before-their-time, scholars on the energy realism side get their due. Essays should be written on each of them. They are Hall of Famers whose ideas and names live on.
To them I eternally tip my hat.