National ethanol intoxication stays at DWI levels for another year at least

Bob Dineen, chief flack for the US biofuels industry, is delighted with the extension of the ethanol and biodiesel tax credits that ex-Illinois senator Obama didn’t filter out of the tax compromise.  No, the Brazilians aren’t going to be relieved of the import duty that’s preventing us from using the one biofuel (their sugar cane ethanol) that may be genuinely green.  Dineen’s remarks included the following notable admission about the credit: “It is the foundation upon which this industry was built.”  In other words, after twenty years of trying to make it a business, fuel ethanol from corn is a losing proposition that destroys value rather than creating it, and can only be sustained by reaching into the pockets of taxpayers for $6B a year, or about one in every seven dollars of all corn sales.  On top of the $4B in plain old corn subsidies.  It’s payable to those “family farmers” whose average operation in Illinois (for example) is worth $1.5m just for the land, and the nice folks at Archer Daniels Midland, Cargill, and the like. Average farm household income, by the way, is about 15% higher than the US average.

There are losing businesses that should be subsidized with public money, like education, parks, public transit, policing, and the military.  They are called market failures.  But there is no market  failure associated with growing corn and making automotive bourbon out of it, except the negative externalities like the dead zone in the Gulf of Mexico created by fertilizer runoff into the Mississippi, which should occasion a tax, not a credit.  The Investor’s Business Daily deplores the credit extension, but you know what kind of  commie lefty rag IBD is.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

11 thoughts on “National ethanol intoxication stays at DWI levels for another year at least”

  1. "But there is no market failure associated with growing corn and making automotive bourbon out of it,…"

    No, this is what is known as a "government failure"; They're every bit as common as market failures, you know.

  2. Brett is right; governments are just as likely to deviate from perfectly maximizing public value as markets are from completely exhausting all gains from trade. Of course, those of us who teach about market failure have never dreamed of claiming that, as a result, we should abandon the use of markets. Too bad those who rant about "government failure" tend to be less cautious.

  3. "Too bad those who rant about “government failure” tend to be less cautious."

    Well that's the zero-sum smear-game here right?

    The louder one shouts their side forward and asserts the other side is utterly in err, the more likely the needle will move towards one's side. Every inch counts. That's why there is no intellectual counter balance to capitalism right now. And why the market is our culture's only cure-all. It reigns unopposed. After socialism got beat to death nothing remained to fill the vacuum for the next Hegelian mash up. Our Godzilla has no Mothra…

    And so the zero-sum smear-game continues unabated: Witness recent Sullivan posts about how much better off, and closer to the rich in ultimate benefits, the poor are right now. I expect to see much more of this, which translate as: Respect thy wealthy class you ingrates, they've made your life so much better. I think that is sellable in Peoria. And so it goes. The gilded age continues unabated. Next step: Health care reform (which promised a small reversal of the poor getting poorer) is unconstitutional and probably so is Social Security.

    Who knew?

    Only the Cato Institute apparently…

    But soon we'll all know if it is shouted loudly and strongly enough…

    And it will be.

  4. I've been reading Brett's comments for a long time and never for a second did I take him to believe we should abandon the use of government.

  5. Brett, just curious whether you can point to any comment you ever made on this website in which you expressed clear approval of government's substantive involvement in any non-national-security related area?

  6. When you're trying to drain the swamp, you don't spend much time praising drinking water, but you shouldn't be mistaken for somebody who is simply opposed to water, period.

    I admit, freely, to having a low opinion of government. Government is essentially a somewhat evolved version of the protection racket. And not very highly evolved, either. It's most valuable service is simply limiting it's own predation, and blocking other governments from preying on you. Governments which are still stuck in the protection racket mode are common enough that this should be evident. During the 20th century more people died at the hands of their own governments, than somebody else's! The best of governments are not very good, the worst of governments are genocidal.

    Government is THE classic example of a necessary evil. Something which unavoidably involves doing evil, but which is necessary to avert a worse evil.

    Alas, they are necessary. Mainly because other governments exist, and because even if you got rid of them everywhere at once, proto-governments like street gangs and the mafia would grow into the full blown thing soon enough. But they are necessary. Unfortunately.

    Police protection, national defense, a handful of other services which are inherently reliant on coercion, these are what government is best at.(Not good at, mind you, just best at, and besides, you don't want the private sector corrupted by dealing in coercion. The government starts out corrupt, so that's not an issue with them.) A government which restricted itself to these few activities, and let people get on with their lives otherwise, organizing themselves for other things in a non-coercive fashion, this wouldn't be too bad. Kind of like your intestinal flora do good service so long as they STAY in your intestine, but that doesn't mean you should aspire to peritonitis, let alone gangrene.

    I have occasionally likened government to Godzilla: You need him around to beat back attacks by other giant monsters, but you should never forget that he leaves a trail of shattered lives with every step he takes. There's a REASON you keep him trapped whenever you can, he's NOT your friend.

    An anarchist? I wish I were that optimistic…

  7. Brett,

    Your dreaming, a nice, simple dream perhaps, but still a dream. Government is necessary to protect the individual from excesses in the market, too. It's even necessary to protect the market from excesses in the market. It hasn't worked out so good of late and it hasn't worked our very fairly for most of us. That's what a lot of the fight is about.

    Sincerely love your comment about government failure; love the tag by M. Klein man even more.

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