18 March 2013

The Market and Politics of Ethanol

Sunday's NYT article about closing ethanol plants here is an excellent example of shallow journalism. All the while reporting the hardships to local rural communities caused by the reduction in ethanol production, the author never so much as suggests there might be a question--a serious question--about whether ethanol should be produced. (For some earlier thoughts about the implications of the answer to this normative question check here.)

The dead giveaway in the NYT article is this sentence from the head of the Nebraska Ethanol Board: "the reality that it’s going to take an awful lot of time, money and political battles to realize that opportunity.” 

Why should it take political battles to make production of ethanol profitable? Only because the market sees no value in producing it. And unlike political battles over, say, expenditures on education, infrastructure, or national defense, production of ethanol is indisputably not a public good. Any "political" solution to ethanol's profitability problems amounts to nothing more than taking money from the many and giving to a politically favored few. And I imagine the same folks begging for ethanol subsidies were complaining about the federal government's loan guaranties for bankrupt Solyndra.

There's nothing new about trying to get a bigger share of the money in the government's feeding trough. What irks me is the failure of a newspaper held in high esteem by many even to realize that's what's really going on.

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