Monday, August 04, 2008

How Many Invisible Hands Are there?

It’s not often we get a piece of modern economic analysis, inevitably linked to the notion of ‘an invisible hand’ and attributed incorrectly to Adam Smith (as if it is the truth). Both versions express the neoclassical false version of its meaning and expose it vacuity.

Jay Zawatsky, chief executive of havepower, LLC(?) writes in National Interest online (HERE):

Improving the “Pickens Plan” (4 August)

For the last month, the electronic media has been graced by the weather-beaten face and folksy voice of billionaire oilman-turned-wind-pitchman T. Boone Pickens “splainin’” his plan to reduce U.S. oil imports by 38 percent, thereby lowering the U.S. bill for imported petroleum by $300 billion per year. Pickens envisions the construction of up to eight hundred thousand megawatts of wind-turbine capacity, at a privately funded cost of $1 trillion, from west Texas north to the Canadian border in America’s “wind corridor.” Those “wind watts” would replace the 22 percent of U.S. electricity now generated with natural gas. The natural gas saved would be used to fuel trucks and cars (particularly fleet vehicles), replacing imported petroleum-based gasoline and diesel.

Pickens is putting his money where his mouth is, demonstrating his belief in the efficacy of swapping “wind watts” for “gas watts.” He is footing the multimillion-dollar tab for the national media campaign promoting his plan. Of course, Pickens owns several companies that will benefit from both the construction and operation of the wind turbines and from the switch to natural-gas engines and the construction of a natural-gas delivery infrastructure. But this is America. We need, and should applaud, properly applied self-interest, and we (at least some of us) recognize the societal benefits of Adam Smith’s invisible hand…

…. There is one fly in Pickens’s ointment, however. Along most of the “wind corridor,” the wind blows the strongest and steadiest before the sun rises; its strength diminishes until the hottest point of the day, just as the demand for electricity, particularly in the summer months, peaks. As a result, replacing natural-gas base load capacity with “wind watts” does not work. Peak loads still will have to be met with natural-gas generated electricity. That will diminish by billions of cubic feet the amount of natural gas available to be converted to transportation fuel, defeating the essence of the plan.

…The solution Pickens, and the rest of America, ultimately seeks is independence from imported petroleum. That solution is right under our collective noses. John McCain has begun to grasp it. It is increased nuclear base load capacity.
The cost of building forty-five new nuclear plants is the same as the cost of Pickens’s wind turbines. The cost of building the transmission infrastructure for the nukes is less, as the nukes will not be as remotely located as Pickens’s turbines. The quality and number of domestic jobs created by both the Pickens Plan and the plan for forty-five new nukes are roughly the same. The amount of imported petroleum saved is the same. The bottom line: nukes work; Pickens falls short

Now which is it: the invisible hand that picks Picking’s wind farms or another invisible hand that picks Zawatsky’s nuclear plants? It certainly can’t be both.

Or is it one of the many other ‘solutions’ to the energy problem? Or won’t we know until 2050 or thereabouts?

Is this true of all theories of the invisible hand – is it whichever produces the ‘right’ outcome? Who determines which is right?

Who exactly are among the “we (at least some of us) recognize the societal benefits of Adam Smith’s invisible hand”? Is this a secret society?

Where do they get this twaddle from? Certainly not from anything Adam Smith wrote.

In fact Adam Smith would not recognize Zwawatksy’s uses of the simple metaphor, commonly known in his day among literate people given its quite extensive use by authors, such as Shakespeare, Defoe, and Voltaire, plus a stream of classical authors from Greco-Roman times.

And I don’t believe he would be well pleased with the association of his name with what is pure, gratuitous nonsense.



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