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Page added on December 4, 2012
Energy Efficiency, Economic Efficiency and The Pretense of Knowledge
Key facts:
- Energy efficiency, as defined by those who embrace it as a policy guide, is focused strictly on saving energy even if it means sacrificing overall economic efficiency.
- Energy efficiency programs focus on the relationship between one input into the production process, energy, relative to the output generated by that process.
- This simplistic view makes no consideration for the strong possibility that other inputs — labor, plastic, steal, copper, glass, etc. — might actually increase.
- Economic efficiency, on the other hand, relates total costs to the value of the output that those costs generate.
- We may observe people making decisions that we consider to be inefficient, but the proper conclusion to draw is that we, not they, are misperceiving their costs and benefits.
- In order for an increase in energy to translate into an increase in economic efficiency, it would have to result in an overall decrease in the average cost of production or, if you are a consumer, the cost of consumption. The people implementing the energy efficiency plan would have to be better off from their own perspectives.
- Mandates and special incentive programs would not have to be put in place to promote energy efficiency, unless we assume that the government is in a better position to judge the best interest of individuals or businesses than the individuals or businesses themselves.
- When experts and policy advocates push energy taxes, incentives, and mandates to promote energy efficiency, they are doing what Nobel Prize-winning economist F.A. Hayek warned against: crafting public policy through a “pretense of knowledge.” They pretend to have information about other people’s preferences and alternative uses of resource that they could not possibly obtain.
- Ultimately, energy efficiency programs are necessarily an exercise in paternalism and behavior modification.
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7 Comments on "Energy Efficiency, Economic Efficiency and The Pretense of Knowledge"
BillT on Tue, 4th Dec 2012 1:56 pm
Efficient energy is when you no longer need any. For example: If you stop producing I-pads, you get a total efficiency as you use zero energy or resources. Since I-pads are not a necessity, it could easily be dumped today with huge savings in all areas.
Indeed, it WILL happen as the conditions that allow I-pads to exist cease themselves to exist. Tomorrow would be fine with me. Add in all the other electro-junk and the world would breath a sigh of relief.
Arthur on Tue, 4th Dec 2012 4:21 pm
“Efficient energy is when you no longer need any.”
Bill, I am rather sure you are at least several hours per day glued to the computer screen, like most of us. If you have a desktop, that thing can consume 100-150 Watt, including monitor. And that consumption pattern will likely last until the end of your days. If you intend to live of the land and privately owned solar/wind generation, reducing your computing energy consumption to 3 Watt is not a bad idea at all.
GregT on Tue, 4th Dec 2012 4:25 pm
“When experts and policy advocates push energy taxes, incentives, and mandates to promote energy efficiency, they are doing what Nobel Prize-winning economist F.A. Hayek warned against: crafting public policy through a “pretense of knowledge.” They pretend to have information about other people’s preferences and alternative uses of resource that they could not possibly obtain.”
When experts and policy advocates repeatedly warn us that we need to improve energy efficiencies because our infrastructure will not be able to keep up with future demands, and we don’t listen to them, the alternates are mandated reduction or systemic collapse and chaos.
Kenz300 on Tue, 4th Dec 2012 10:03 pm
Transportation uses a lot of energy. We all could be more energy efficient if we walked more or rode a bicycle. Mass transit is more efficient than the automobile. If you must use an automobile use an efficient one. There are many electric, biofuel, hybrid, CNG and LNG fueled vehicles on the market. Even the gas powered cars are much more efficient today than they were just a few years ago. 40 MPG or more is better than 8 MPG.
Arthur on Wed, 5th Dec 2012 1:53 pm
A typical day in the office, regardless either LA, New York, London, Amsterdam, Berlin or Moscow:
– Drive to your work
– Fetch your badge to enter building, greet security
– Take the elevator to the correct floor
– Sit behind your desk and switch on computer
– Walk to coffee machine and get your first cappuchino of the day (with many to follow)
– Daily meeting with collegues; tell how the work is getting on, what you intend to do today.
– Sit behind the computer for the rest of the morning, fetch 2-3 more capuchinos and go to the toilet at ca. 11:00
– Lunch break, discuss soccer game of last weekend, avoid politics.
– Back to the computer, fight sleep caused by too heavy lunch. Two more coffee.
– 15:00 collegue has cake because of his birthday. 15 people standing around the table next to the coffee machine, thinking of what to say next.
– 17:15 switch off computer, time to go home
– Greet security again, use your badge to open the door and drive home.
This is the office reality of (out of the top of my head) 60% of the total workforce of a modern economy.
Observation: nothing in this setup is essential to actually be in the centralized office, certainly not with modern means of communications like broadband internet, webcams, headsets, conferencing software, cloud. The work can be done from home as well or if necessary from a local office at walking distance from the workers home, harbouring people of diverse organisations, who have nothing to do with each other apart from sharing a toilet and offering each other cake celebrating a birthday.
Big advantage: the car is no longer necessary for office workers. Realizing that a car is mainly used for commuting, this means a relief for the family budget.
Charmaigne on Wed, 5th Dec 2012 2:52 pm
The central point of the article is “the pretense of knowledge” that drives public policy and mass media agendas.
Money for nothin’ and the chicks for free. Just make sure you do it all with other people’s money, on the public dime. Pretend you know things you could not possibly do.
Convince enough chumps to believe you and you can live quite well. Get everybody to live and do what you tell them to.
Come to poppa. He knows best. The beauty of charisma and a pretense to knowledge.
Kenz300 on Wed, 5th Dec 2012 3:45 pm
Walk a little more, ride a bicycle a little more and take mass transit a little more. You will get some exercise, be healthier and reduce your energy use and transportation costs.