Wednesday, August 13, 2008

The Definitive Case Against "Energy Independence"

It will make us poorer.

Robert Higgs satirizes the popular idea that we must achieve "energy independence" by comparing it to a need to attain "banana independence". Nobody is naive enough to suggest we must grow our own bananas, rather than ship our money to tropical plantations. It's accepted that our climate is not conducive to banana farming and that any attempt to grow bananas in the US would be a waste of resources. The same holds for energy independence. By substituting our importing of energy from elsewhere, we would have to apply more of our scarce resources in the production of energy instead of in some other form of production.

Resources are finite. Wealth is created and spread throughout the population by using our scare, finite resources in the most effective and efficient manner. Right now oil remains cheaper than most any other energy resource. Some may say this is due to the full costs of its utilization are not being captured by the market price. But any argument that argues we would be wealthier producing our own energy should be viewed with extreme skepticism. As Prof. Higgs stresses in his concluding paragraph: this is a fact that was clearly explained by David Ricardo nearly 200 years ago! Why so many people have yet to recognize it I cannot understand.

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