Let’s stick with the subject of the Detroit bailout for a moment. The public debate on the issue has been intelligent, interesting and invigorating. That doesn’t mean it’s all smart. The latest me-too line of reasoning is that all the auto execs are incompetent. But I think that’s a little too easy. Undisciplined, yes. Unfocused, maybe. But what’s been happening in Detroit for the last few years has been dynamic too. Look at what Steve Miller did at Delphi and smart folks like Wilbur Ross haven’t exactly sat around with their thumbs . . you know . . . there.

Next to their homes, cars are most folks biggest asset. Unlike a home, it’s a depreciating asset but that doesn’t mean there isn’t a lot of value tied up in thing. Just as the credit bubble deformed the housing market–not just prices but also the size, style and location of houses–the auto market has been misshapen by easy money and cheap gasoline.

Since the auto problem is tied into the energy problem–and the convoluted knot suggests Obama needs an industrial policy to go along with that national energy policy–most people recognize that we should be working on cars and the oil issue in concert. That doesn’t mean there is an obvious solution. Creating demand for alternative energy cars and building an infrastructure to support them is a huge task.

Government should create the conditions that allow entrepreneurs to build businesses within and around this “new” industry. The free market opportunities are great. But they won’t get started without a goose from government, especially right now. If the Defense department got the ball rolling on the Internet, there’s no reason we can’t look to Washington to get a new, green transportation industry underway. But smart folks will disagree on how to get it done. And they should.

But the American Enterprise Insititute’s Kenneth Green isn’t one of them. Using The American as a platform, he’s made some dubious comments already. But this dim-witted one is tendentious beyond belief.

It’s hard to see how greening Detroit will help car companies, car drivers, or American taxpayers. Greener vehicles are more expensive to make and bring in less profit than other cars. They cost more to finance, more to repair, and more to insure. Their sales depend heavily on tax incentives—which means that selling more of them will require more taxpayer dollars.

That scare graph is followed by a bunch of numbers that can all be dismissed by pointing to the fact the all of the costs for energy efficient cars are elevated by their tiny market share. Don’t get me wrong, the path to a new auto industry won’t be cheap or easy. But to throw up a bunch numbers for parts, insurance and the cost of the prototypes as proof that a new type of car is inherently too expensive to pursue is just amateurish debating.

As for fuel cells, GM’s prototype fuel-cell car runs on hydrogen and emits nothing but water vapor. It’s hard to get greener than that—but it’s also hard to find a more expensive car: the prototypes cost $1.5 million to produce.

With this kind of thinking, we would never have had a cell phone industry (not that we might not have been better off.) New products are expensive; prototypes are expensive. But when something catches on, costs fall. This is about as axiomatic as it gets for modern industry.

Instead of engaging the new challenges in a useful way, Green is just making himself and his political/intellectual fellow travellers irrelevant in every way.

Stop the Green Carjacking


November 20, 2008, The American


Category: BP Cafe

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Green Roadblocks”

  1. subscriber says:

    Totally agree that Green’s attitude is harmful; Green’s in the same camp as Bush, who last week wanted fuel mileage standards reduced! Backing away from important challenges is one of the reasons we’re in this sorry economic state. America used to meet challenges head-on (synthetic rubber, Manhattan project, man to the moon), but now … pathetically little.

  2. CNBC Sucks says:

    Without huge amounts of government research spending (said Manhattan Project and later) and a ginormous implied subsidy from Price-Anderson indemnification, you would have not one watt generated from nuclear power. Not one single, dangerous, dirty, indisposable, radioactive watt. Repetit…not one watt.

    Without a huge investment in defense, the world’s most powerful Navy, and an implicit guarantee to keep the sea lanes open, your oil trade would be totally at risk. I don’t think I need to explain this further given current events…just a tip of the hat to the Indian Navy for starting to pick up some of the burden.

    It is simple: There is no discussion of free markets when it comes to energy. There are no energy free markets. None.

  3. CNBC Sucks says:

    Sorry for the double post, but I should add that as a registered Republican, I am all for nuclear power as long as we build one nuclear reactor directly under the New York Stock Exchange and one under the CNBC studios.

  4. DMR says:

    There have been technologies (like cell phone networks) that needed no incentives because market penetration was so exponentially fast. Others like the internet and nuclear power tacitly enjoyed the dollars pouring into the defense sector.

    I think Green does a lousy job at making a fundamental point: how does the government know which alternative energy is the best? They have already warped the market with their ethanol subsidies (I can name poor people in a dozen third world countries who lost their staple diets to the inflation that caused), and they are still chasing the windmills of a supposed hydrogen economy that would require an entire new infrastructure to be put in place. The economy is gradually moving towards an electric economy that leverages existing power lines, but I can’t claim to know that to be the best. Would I rather have companies making limited bets and losing their shirts trying figure out the right technology or would I like a grand tax payer assisted multi trillion dollar effort chasing one wrong answer?

  5. awilensky says:

    Greene is just towing the line in the family business; do nothing to change the cost structure of the old think, and leave industry alone. He is paid to do that. He is an idiot on the payroll.

    All electric drive trains have as near a zero maintenance cost as can be acheived in any over the road application. They have no pistons, hot sump lube, or ignitions. They run, as a whole, as a far more trouble free drive systems that internal combustion. Ask and maintainer of a fleet of electric golf carts. All cars need some fixing, but electric drive lines are as good as it gets. And that is really the trouble that Detroit had with the electrics – less parts and repair dollars for the repair and supply chain.

    A veritable phalanx of small, entrepreneurial companies filed through the BIG 3 pitch rooms to license all manner of alternative drive line tech – this all occurred over the past 15 years or so. They all signed NDA’s and were all rebuffed.

    The only thing I can say about Wagoner and his ilk is this (after seeing them testify and on the news circuit):

    They have all developed a permanent squint from lying so often; even they cannot internally swallow the crap they are required to repeat ad nauseum. And as for the Union guys sitting at the job banks that have signs in the parking lot saying, “no foreign cars” — it’s your turn too (I am a CWA union ex-member) – no soup for you.

  6. daveNYC says:

    “Their sales depend heavily on tax incentives—which means that selling more of them will require more taxpayer dollars. ”

    The Prius gets a $3k tax credit and is selling like hot cakes, but I suspect that even if you removed the credit it would still be doing well. He also doesn’t mention the favorable tax treatment that SUVs are getting.