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Edited by Joanne Evans and Lester C. Hunt
Chapter 4: The Theory and Practice of Energy Policy
Richard L. Gordon 1 Introduction At least since early in the twentieth century, many governments have intervened heavily and largely disastrously in the production, processing, and distribution of energy. A vast literature has arisen on these efforts. This chapter presents examples of such programs and states the conceptual reasons why the programs were ill advised. Discussion begins in Section 2 with a review of the errors committed in the name of seeking energy security. The analysis in Section 3 focuses on the United States because of its large size and long, well-documented history of wide-ranging interference. In Section 4, attention is given to policies directed solely at altering energy choice and to those that have a specific environmental focus. An analysis of the stress in current US energy policy of performance standards is presented in Section 5. Section 6 focuses on the way Western European and Japan resisted overwhelming evidence that their coal industries had become profoundly uneconomic. Section 7 concludes. 2 The Theory of Energy Intervention It has become routine in the economics literature to distinguish between the public interest and public choice theories of intervention. The former presumes that policy is designed to correct the departures from the assumptions of pure competition that economists term ‘market failures’. Public choice responds to the obvious lack of market-failure rationales for many or even most interventions by observing interest-group pressures for aid and the circumstances under which these efforts are rewarded. Others have suggested that politicians possess and employ slack that...
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