Construct an analysis?
construct an analysis of the efficiencies and inefficiencies created by government intervention and consider whether such interventions should be abridged or extended.
Answer:
GOVERNMENT INTERVENTION, OR MARKET FORCES?
Certainly, the prevailing view is it would be best to let the efficiencies of the market resolve them.
The question of government intervention, or market forces, breaks into two parts: should the government intervene; and will the government intervene?
Historically, at least since the Second World War, whenever energy supplies became difficult, the government felt obliged to act. Whether this was true of the UK Prime Minister during the UK’s ‘Fuel Protests’ in 2000 (after having initially expressed a view that the matter was for the industry to resolve), or the Governor of California during the rolling blackouts, or earlier, the public’s need for energy is so important that when supplies are threatened governments have been driven to act.
Should the government act, is another matter. Companies (‘the Market’) are numerous, in evolutionary competition, and contain tens of thousands of bright, motivated people. Fast and effective solutions come from the market. By contrast, government contains extraordinarily few thinkers (in terms of those who actually influence decisions), is slow, and is dogged by multiple, conflicting, objectives. If you want to solve a cost-based problem that is current, ask the companies to do it.
But the first problem is that, intrinsically, the Market is about production and consumption, not about reduction and saving. Companies make profits by making more goods, or providing more services; they make losses if they sell less. Certainly, given high prices, or adequate legislation, energy supplying and conserving technologies will be efficiently invented and developed. But fundamentally, the drivers of the Market push for doing more with more, not less with less.
An equal difficulty, however, is that companies respond very poorly to problems with time lags. Unless a problem is crystal clear, and almost immediate, effort expended today to resolve the problem is lost profit, weakened market position, and, in the current ridiculous share-price driven economy, makes the far-seeing company a prime take-over target.
Certainly, there is a degree of company expenditure in anticipation of problems, but absolutely nothing on the scale needed to move the economy rapidly away from oil when supply becomes tight. Even the oil companies we speak to spend virtually nothing on looking at future global oil availability.
In virtually every case that one can think of, from tobacco, asbestos, pesticides, fluorocarbons, general Health and Safety legislation, to building insulation codes and forthcoming CO2 controls, it is government that has to anticipate future problems, and set the parameters within which companies can efficiently respond. Companies simply cannot risk spending significant money before the signals (whether from price, or legislation) arrive.
And the awfully long time lags associated with changing an economy’s basic energy sources means that if the signals do not come now from a government doing sensible calculations about the hydrocarbon future, that when the signals do arrive, from high prices and shortages, and the efficient companies finally swing into gear, the pain and shocks will be those of the 1970s writ large.
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Answer:
GOVERNMENT INTERVENTION, OR MARKET FORCES?
Certainly, the prevailing view is it would be best to let the efficiencies of the market resolve them.
The question of government intervention, or market forces, breaks into two parts: should the government intervene; and will the government intervene?
Historically, at least since the Second World War, whenever energy supplies became difficult, the government felt obliged to act. Whether this was true of the UK Prime Minister during the UK’s ‘Fuel Protests’ in 2000 (after having initially expressed a view that the matter was for the industry to resolve), or the Governor of California during the rolling blackouts, or earlier, the public’s need for energy is so important that when supplies are threatened governments have been driven to act.
Should the government act, is another matter. Companies (‘the Market’) are numerous, in evolutionary competition, and contain tens of thousands of bright, motivated people. Fast and effective solutions come from the market. By contrast, government contains extraordinarily few thinkers (in terms of those who actually influence decisions), is slow, and is dogged by multiple, conflicting, objectives. If you want to solve a cost-based problem that is current, ask the companies to do it.
But the first problem is that, intrinsically, the Market is about production and consumption, not about reduction and saving. Companies make profits by making more goods, or providing more services; they make losses if they sell less. Certainly, given high prices, or adequate legislation, energy supplying and conserving technologies will be efficiently invented and developed. But fundamentally, the drivers of the Market push for doing more with more, not less with less.
An equal difficulty, however, is that companies respond very poorly to problems with time lags. Unless a problem is crystal clear, and almost immediate, effort expended today to resolve the problem is lost profit, weakened market position, and, in the current ridiculous share-price driven economy, makes the far-seeing company a prime take-over target.
Certainly, there is a degree of company expenditure in anticipation of problems, but absolutely nothing on the scale needed to move the economy rapidly away from oil when supply becomes tight. Even the oil companies we speak to spend virtually nothing on looking at future global oil availability.
In virtually every case that one can think of, from tobacco, asbestos, pesticides, fluorocarbons, general Health and Safety legislation, to building insulation codes and forthcoming CO2 controls, it is government that has to anticipate future problems, and set the parameters within which companies can efficiently respond. Companies simply cannot risk spending significant money before the signals (whether from price, or legislation) arrive.
And the awfully long time lags associated with changing an economy’s basic energy sources means that if the signals do not come now from a government doing sensible calculations about the hydrocarbon future, that when the signals do arrive, from high prices and shortages, and the efficient companies finally swing into gear, the pain and shocks will be those of the 1970s writ large.
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