GROSSMAN: Bill Gates wants to spend your money

July 24, 2010

Vpt-Grossman-PeterBill Gates, along with several other very rich men, have decided that what this country needs is a Manhattan Project for energy.

Just as the government built an atomic bomb during World War II, the government should spend billions of dollars to create the energy innovations for a low-carbon economy, according to Gates and friends.

I have a question for Mr. Gates: When was the last time you had to choose between an atomic bomb or a conventional explosive of similar yield? The question is not an idle one: The Manhattan Project created a product, where the cost was no object, to prove we could do something that would help us win the war. Energy technologies are ones we’ll need to buy, which we’ll do only if it makes economic sense. Government isn’t bad at grand technological feats. It is terrible at intentionally creating commercial products.

Now I would be truly impressed if Gates said he was going to put up billions of his own dollars to develop energy technologies, but I’m not surprised he isn’t opening his wallet. He’s a smart and savvy businessman, a billionaire who got that way by having a good sense of the market. He would know then that simply waving a check will not produce commercially viable alternative energy technologies.

In fact, if money were all that mattered, we’d have had those alternative energy technologies long ago. Former President Jimmy Carter persuaded Congress to authorize $88 billion to develop so called “synfuels”—oil and gas substitutes made from coal. Carter felt this was urgent because he believed that the world was rapidly running out of oil and natural gas, and that prices for both would rise forever. But all his assumptions were wrong and the synfuels project was soon closed down, I’m thankful to say.

Carter also set a goal of 20 percent of U.S. energy coming from the sun by 2000. No chance. Despite various subsidy programs, in most instances, solar energy is nowhere near a cost-effective substitute for conventional energy technologies. We get less than one-tenth of 1 percent of our energy from solar.

President George W. Bush wasn’t much better. In 2007, to reduce oil consumption, he and Congress pushed a goal of producing 36 billion gallons of ethanol by 2022. But ethanol from corn (the main U.S. source) is inefficient and expensive compared to oil and is no better for the environment. In the meantime, we have a mandated deadline that we almost certainly won’t meet and we’re providing billions of dollars a year in subsidies to try to get there, anyway.

President Obama’s ideas are no improvement. In his recent national address, he called for getting us off oil apparently by building lots of wind turbines. Never mind that they will not replace oil, since they are used for electric generation and we use very little oil to generate electricity. But we’ll be paying out lots of subsidies for wind turbines, too—to produce energy that is expensive and unreliable.

Gates and colleagues, who go by the name The American Energy Innovation Council, have no really new ideas. Yes, there is a call for a supposedly non-partisan government-created Energy Strategy Board, which seems a contradiction in terms. But really, the initiative is about more government funding in an area where government funding has done little good.

In the end, there is something unseemly about billionaires wanting to spend our money, especially where the payoff is so unlikely. When the wealthy members of the Innovation Council are ready to pass the hat to one another—and do it every year—then maybe we should listen. But until they’re ready to put their money where their mouths are, we shouldn’t be putting up the money for them.•


Grossman is the Clarence Efroymson Professor of economics at Butler University.


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