The great deregulator? – Watt?

From the Economic Library

Robert Bradley

Jimmy Carter's tenure as President of the United States (1977-1981) included significant deregulation of airlines, motor carriers, and railroads. Other advances have been made in communications, tax policy and regulatory budgets. But the “Great Deregulator” took a radically different approach to energy, which (along with inflation) defined his economic notoriety.

Carter began deregulating oil and natural gas wellheads but imposed a windfall tax on crude oil and imposed in-state regulations on natural gas. Carter's basic way of thinking was oriented toward federal supply and demand planning, as outlined in national energy plan 1977.

what is the problem?

The energy crisis of the Carter era was blamed on the irreversible and worsening depletion of oil and natural gas. Physical immobility means increasing costs of extraction, creating supply and price issues. “Exhaustible resource economics” has become mainstream content in textbooks and journals, giving rise to a new sub-discipline, Energy Economics. The 39th president's engineering mindset is determined to overcome perceived limits to growth.

The foundation had been laid by the oil shortages of 1972-74 and the gas curtailments of the winters of 1971/72 and 1976/77. For Carter and his energy czar James Schlesinger, [1] Crude oil and natural gas must be replaced by ultra-abundant coal, synthetic petroleum, and coal-gas (synthetic fuels), supplemented by renewable energy sources. (Nuclear was never accepted and was ruled out entirely with the Three Mile Island incident in March 1979.)

On the demand side, transportation, industry and power generation must consume less energy, not to mention homes and businesses.

Major new legislation – explained in thousands of pages in the Federal Register – empowered the nascent U.S. Department of Energy (1977). The new laws (1978) are the National Energy Conservation Policy Act; the Power Plant and Industrial Fuel Use Act; the Utility Regulatory Policy Act; the Energy Tax Act; and the Natural Gas Policy Act.

1980: Synthetic Fuels Corporation Act; Biomass Energy and Alcohol Fuels Act; Renewable Energy Act; Solar Energy and Energy Conservation Act; Solar Energy and Energy Conservation Banking Act; Geothermal Energy Act; and Ocean Thermal Energy Conversion Act.

Planning, more planning

this national energy plan Nature magazine noted in 1977: “Neither government policy nor market incentives can improve nature.” [2] Carter acknowledged the adverse effects of price caps on supply and demand, but he blamed his activism on foreign political control by OPEC (“There are no free markets or effective competitive forces in world oil supply and prices,” he said in his memoirs). [3]

These misguided rationales lead to frustrating, wasteful, and even bizarre regulatory experiences. a new term, gapismdescribes how, given the “imbalance” under price controls, the government passed a number of programs aimed at a combination of increasing supply and reducing demand. Edward J. Mitchell observed: “One can only speculate that many gapologists do not really appreciate that at higher prices consumers do buy less and producers offer more.” Eliminate the gap. [4]

Economist's mistake

Experts, academics, and planners all agree on the fixed depletion premise of Carter's energy policy. Forgotten or ignored is Scarcity and Growth: The Economics of Resource Availability (1963), which challenged the depletion theory and attributed “increasing rather than decreasing returns” to “human ingenuity and wisdom.” [5]

Harold J. Barnett explained: “There is a tendency to think of technological progress as a random phenomenon, a bit of luck that is bound to run out sooner or later (there is always a hint that it will happen sooner) . [6] But the data shows otherwise. “Every cost-reducing innovation opens up the possibility of application in so many new directions that the stock of knowledge is not only not exhausted by new developments, but may even grow exponentially.” [7]

It would take a contrarian, Julian Simon, to resurrect Barnett-Morse's Great Book of 1963 in the Carter era. [8] In the 1980s, as energy prices were deregulated, resource optimists won the argument. After all, energy economics is just economics. And less bleak.

in conclusion

Jimmy Carter clearly had good intentions when he chose to use bureaucratic maneuvers to provide Americans with reliable and affordable energy. But he could have quickly ended the energy crisis through contrary public policies.

Carter was influenced by faulty theories about what human ingenuity could achieve in free markets, with or without major negative foreign policy events. These misconceptions have huge negative consequences. The energy lessons of the 1970s should not be forgotten.

[1] “Schlesinger's vision of national economic policy was closer to French directive planning than to the invisible hand…” James L. Cochrane, “Carter Energy Policy and the Ninety-fifth Congress.” exist Energy Policy OutlookCrawford D. Goodwin, editor. (Washington, DC: Brookings Institution, 1981), p. 14. 553.

[2] Executive Office of the President, Office of Energy Policy and Planning, national energy plan (Washington, DC: GPO, 1977), p. 14. Thirteen.

[3] jimmy carter, Keeping the Faith: Memoirs of a President (New York: Bantam Books, 1982), p. 14. 94. In a 1977 speech to the nation, Carter memorably used the phrase “moral war” to describe the United States' overall challenge to OPEC and oil imports.

[4] Edward J. Mitchell, U.S. Energy Policy: A Primer (Washington, DC: American Enterprise Institute, 1974), pp. 20-21.

[5] Harold J. Barnett and Chandler Morse, Scarcity and Growth: The Economics of Natural Resource Availability (Baltimore, MD: Johns Hopkins Press, Resources for the Future, 1963), pp. 3, 8.

[6] Barnett and Morse, scarcity and growth,p. 235.

[7] Barnett and Morse, scarcity and growth,p. 236.

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