Streetwise Professor

A quick follow up to the previous post.

I noted that negative prices have been a thing in Texas for years. Indeed they are in every market with substantial renewables penetration.

This is particularly true in the US, where the Production Tax Credit pays qualifying renewables facilities $23/MWh to produce, regardless of prices. Meaning that a recipient of the PTC will continue to produce even if prices are -$22.99/MWh.

So why do prices go negative? In particular, why do other producers who do not get the credit continue to produce even when there are negative prices? Why don’t enough of them cut output to make sure that prices don’t fall below variable cost?

The answer in a word is: indivisibilities. Or, if you prefer, non-convexities.

Specifically, many thermal generators incur costs to shut down or start up. These are basically fixed costs, of the avoidable variety. A unit currently operating can avoid shutdown costs by continuing to operate. A unit currently idle can avoid startup costs by remaining idle. Minimum run times and ramping constraints are other examples of non-convexities.

So, for example, when demand is low and wind turbines continue to blend birds (and generate electricity), prices can go negative but a gas or coal or nuke plant may continue to operate (and incur fuel costs as well as incremental O&M) because it is cheaper to PAY to sell output (and pay variable costs as well) than it is to shut down.

If the cost of adjusting output of a plant to or from zero was zero, whenever prices fall below marginal operating cost the plant would shut down. This would put a floor on prices equal to marginal cost. However, if there is a fixed cost of adjusting output to or from zero, it can make sense to continue to operate even when prices do not cover variable costs–and when prices are negative–in order to avoid paying this cost of shutting down (and/or the cost of starting back up again when prices are higher).

Generation technology is such that efficient baseload plants (i.e., units with lower per MW variable costs) tend to have higher shutdown and startup costs, and more acute operating constraints that give rise to other forms of non-convexity. As in all things in life, there tends to be a trade-off: low variable costs must be traded off against higher avoidable costs/less flexibility to adjust output. Thus, negative prices hit such units especially hard. They are faced with the bleak choice between paying to sell what they produce, or paying a cost to avoid producing. Obviously this choice is bleaker, the costlier it is to avoid producing. For many, the cost of shutting down is big enough that they continue to spin even when prices are negative.

Economists have long known that non-convexities can interfere with the operation of a price system. If you look at classic Arrow-Debreu proofs of the welfare theorems (i.e., that competitive prices call for the efficient level of production and consumption), you’ll see that they assume that production technologies are convex. That is, they assume away things like shutdown and startup costs. When production technologies are characterized by non-convexities (e.g., fixed avoidable costs), the proofs don’t go through.

Indeed, an equilibrium in prices and output may not exist if indivisibility problems are sufficiently severe: in my earliest academic life, my work on applying core theory focused on this issue. If an equilibrium does exist, it may be inefficient.

Put simply, the invisible hand can get really shaky if indivisibility problems are severe.

Liberalized electricity markets (e.g., PJM and other ISOs) have devised various means of addressing these indivisibilities. The results are not first best, but the mechanisms allow an energy market with prices approximately equal to marginal cost to survive.

The subsidization of wind, especially through the PTC, greatly exacerbates indivisibility/non-convexity problems because its effects fall with particular force on generating units with more pronounced indivisibilities. These tend to be the most efficient, and also the ones most essential for maintaining reliable system operation.

This means that although renewables subsidies punish investment in thermal generation generally, they punish investment in units that operate nearly continuously at low cost with particular severity. Having these units available nearly 24/7/365 is vital for keeping electricity prices low, and for ensuring a highly reliable power system.

So the distortions caused by renewables subsidies, particularly of the pay-to-produce variety, are more severe than “we have too much renewables capacity and too little thermal capacity.” Yes, that’s a problem, but the distorted price signals also distort the types of generation invested in. In particularly, they are particularly punitive to generation with more acute indivisibilities. Since these also tend to be low operating cost, high reliability technologies, that is a very costly distortion indeed.

I am back following a forced outage, due to forced outages of Texas electricity generators caused by the cold snap–brutal by Texas standards, routine compared to what I experienced in my 40+ years up north–that is just relaxing its grip. Having some foresight, I had laid in some firewood, and that kept things from getting unbearable. Other than the power outage, water pressure was an issue: I thought my faucets needed a prostate check, but as of about 10AM the flow is back.

So, with fingers crossed, I have the opportunity to comment on what happened. As with so many things–everything?–today, the commentary has been highly partisan, and largely wrong. Blame wind power (or the lack thereof)! Uh-uh! Blame fossil fuel generation!

The facts are fairly straightforward. In the face of record demand (reflected in a crazy spike in heating degree days)

TEXAS heating demand is not forecast to return to near-normal until Sunday: pic.twitter.com/w3cGWF5OXn

— John Kemp (@JKempEnergy) February 18, 2021

supply crashed. Supply from all sources. Wind, but also thermal (gas, nuclear, and coal). About 25GW of thermal capacity was offline, due to a variety of weather-related factors. These included most notably steep declines in natural gas production due to well freeze-offs and temperature-related outages of gas processing plants which combined to turn gas powered units into energy limited, rather than capacity limited, resources. They also included frozen instrumentation, water issues, and so on.

Wind was down too. Wind defenders have been saying that wind did great! because it sucked less than ERCOT (the Electricity Reliability Council of Texas) had forecast; that is, wind generation was somewhat higher than the low levels that ERCOT had predicted. The defenders were spinning, even if the turbines were not.

However, wind performance was objectively worse than thermal. In the weeks prior to the Big Freeze, wind was operating at ~50-65 percent of installed capacity, and supply ~40-60 percent of Texas load. When the freeze hit on Monday (and I was throwing another log on the fire), due to turbines freezing, capacity utilization fell to around ~10 percent to ~5 percent, and wind was generating ~3-10 percent of ERCOT load. Meaning that the relative performance of wind vs. thermal was worse during the cold wave, even as bad as thermal performance was. Further meaning that if wind had represented a larger fraction of Texas generating capacity, the situation would have been even grimmer.

The last few days wind defenders have been saying that the problem wasn’t with wind per se, but the failure to winterize adequately wind generators in Texas. After all, there are windmills in Antarctica! (Not to mention Sweden, etc.).

This brings to mind what Adam Smith wrote in the Wealth of Nations:

By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.

That is, you need to consider cost. Yes, winterizing windmills to withstand the conditions observed in Texas this week is inside the production possibilities frontier, but winterizing is not free. It is a question of whether the benefits exceed the cost.

The same thing is true with regards to thermal generation (and natural gas production). After all, power plants in far colder climes (it was below zero in Missouri, for example) hummed along in even more frigid conditions. Similarly, gas continues to flow every year in winter conditions in Canada and Siberia. But achieving these results is not free. It is a question of cost vs. benefit.

The cost of not winterizing power plants that shut down due to temperature-related outages (rather than limitations on fuel supply) were certainly material. Power prices spiked to around $9,000/MWh, and were routinely over $1,000/MWh. For a 500MW plant, losing an hour at a $9000 price means $4.5 million in revenue forgone. Even at $1,000, that’s $500K up the flue. (That’s the gross loss. The net loss is harder to calculate, given that natural gas prices also spiked).

That’s a lot of money, but whether it would have been worthwhile to incur the cost to ensure operation under the conditions we observed also depends on the probability of the event. Given the extremes observed, the probability is pretty small. Meaning that it might have been rational for generators to forego the expense: zero failure rate is never optimal. This is in contrast to a generator in say Minnesota, for which such conditions are the norm.

I would imagine that there will be a pretty intense review of utilities’ decisions regarding winterizing their plants. The cost should be fairly easy to estimate. By applying market prices or the value of lost load (VOLL) it should be similarly straightforward to estimate the cost of such weather induced outages. The probability, however, will be much harder. It is inherently difficult to estimate the probability of extreme events, especially when they are seasonal in nature.

Similar considerations hold for gas processing plants and gas wells. The opportunity cost, and the cost of upgrades, are fairly straightforward to quantify. The probability that the upgrades will actually pay off (by avoiding shutdowns) is far more amorphous.

The events of this week also bring to the fore longstanding debates regarding the appropriate generation mix in Texas. Yes, thermal experienced unprecedented outages, but as noted above, it performed both absolutely (measured by capacity utilization) and relatively (measured by decline in utilization) better than wind. Texas would have been better off with less wind and more thermal. Maybe not enough to avoid blackouts altogether, but enough to mitigate substantially their severity.

Texas has had longstanding concerns about reserve margins. The main drivers have been the retirement of substantial amounts of coal generating capacity, and relatively low rates of increase in natural gas generation (a measly 3.5 percent over the past 4 years) at the same time wind capacity has more than doubled and solar capacity has increased by 2000 percent.

The problems here are twofold. First, wind and solar availability and output are often negatively correlated with demand. (Solar wasn’t doing much at 10PM on Monday, now was it?) Second, and more insidiously, wind and solar generation depress prices–often to below zero–at other times, which undermines the economics of thermal generation. Hence, the low rate of investment in gas, and the actual disinvestment in coal.

As I said, this is a longstanding problem. I remember hosting a roundtable on this issue at UH in 2005 or 2006. Generators were already raising alarms that negative prices were a powerful disincentive to investment.

Things have only worsened since, and perverse policy is to blame. It is unarguable that wind and solar capacity have increased to extremely inefficient levels due to lavish subsidies, especially at the federal level. As a result, Texas has a grotesquely inefficient resource mix.

And with the new administration, the outlook is even worse. It has embraced increasing demand for electricity (electrify everything!–echoing the malign and evil Bill Gates) and subsidizing the production of electricity using unreliable renewables.

Texas’s travails raise questions about the viability of ERCOT’s “energy only” market design, in which generator revenues are solely from the sale of energy (or ancillary services). In this model, price spikes are intended to incentivize investment in generation (and upgrades to enhance availability rates). But price signals distorted by excessive renewables are a strong disincentive to investment.

The standard kludge in these circumstances is capacity requirements plus a capacity market. This was mooted in my roundtable so many years ago. If price signals are allowed to work, a capacity market is unnecessary and inefficient. But prices have been so distorted that it will receive serious attention going forward.

This is unfortunate, in the extreme, as the better approach would be to destroy the price distortions at their source–subsidies for renewables. Alas, in the current political environment it is likely that the nation will move strongly in the opposite direction, making the problem worse not better. Perhaps Texas could find ways of counteracting national policies–e.g., by imposing a state “reliability tax” on renewables–but this is likely to be politically impossible (although it would be a nice illustration of the theory of the second best!) Meaning that in the end, we will kludge our way to increasing reserve margins.

Not a cheery picture, but what is these days?

One metaphor that might shed some light on how seemingly small events can have cascading–and destructive–effects in financial markets is to think of the financial system as consisting of borgs programmed to ensure their survival at all costs.

One type of borg is the clearinghouses/CCP borg. The threat to them is the default of their counterparties. They use margins to protect against these defaults (thereby creating a loser pays/no credit system). When volatility increases, or gap risk increases, or counterparty concentration risk increases–or all three increase–the CCP Borg responds to this greater risk of credit loss by raising margins–sometimes by a lot–in order to protect itself.

This puts other borgs (e.g., Hedge Fund Borgs) under threat. They try to borrow money to pay the CCP Borg’s margin demands. Or they sell liquid assets to raise the cash.

These actions can move prices more–including the prices of things that are totally different from what caused the CCP Borg to raise margins on. This can cause increases in volatility that triggers reactions by other Managed Money Borgs. For example, these Borgs may utilize a Value-at-Risk system to detect threats, and which is programmed to cause the MM Borg to reduce positions (i.e., try to buy and sell stuff) in order to reduce VaR, which can move prices further, triggering more volatility. Moreover, the simultaneous buying and selling of a lot of various things by myriad parties can affect correlations between prices of these various things. And correlation is an input into the borgs’ model, so this can lead to more borg buying and selling.

All of these price changes and volatility changes can impact other borgs. For example, increases in volatilities and correlations in many assets that results from Managed Money Borgs’ buying and selling will feed back to the CCP Borgs, whose self-defense models are likely to require them to increase their margins on many more instruments than they increased margins on in the first place.

This is how seemingly random, isolated shocks like retail trader bros piling into heavily shorted, but seemingly trivial, stocks can spill over into the broader financial system. Borgs programmed to survive, acting in self-defense, take actions that benefit themselves but have detrimental effects on other borgs, who act in self-defense, which can have detrimental effects on other borgs, and . . . you get the picture.

This is a quintessential example of “normal accidents” in a complex system with tightly coupled components. Other examples include reactor failures and plane crashes.

I note–again, reprising a theme of the Frankendodd Years of this blog–that clearing and margins are a major reason for tight coupling, and hence greater risk of normal accidents.

I note further that it is precisely the self-preservation instincts of the borgs that makes it utterly foolish and clueless to say that creating stronger borgs with more powerful tools of self-preservation, and which interact with other borgs, will reduce systemic risk. This is foolish and clueless precisely because it is profoundly unsystemic thinking because it views the borgs in isolation and ignores how the borgs all interact in a tightly coupled system. Making borgs stronger can actually make things worse when their self-preservation programs kick in, and the self-preservation of one borg causes it to attack other borgs.

Why do teenagers in slasher flicks always go down into the dark basement after five of their friends have been horribly mutilated? Well, that makes about as much sense as a lot of financial regulators have in the past decades. Despite literally centuries of bad historical experiences, they have continued to try to make stronger, mutually interacting, borgs. Like Becky’s trip down the dark basement stairs, it never ends up well.

The vertigo inducing story of GameStop ramped it up to 11 yesterday, with a furore over Robinhood’s restriction of trading in GME to liquidation only, and the news that it had sold out of its customers’ positions without the customers’ permission. These actions are widely perceived as an anti-populist capitulation to Big Finance.

Well, they are in a way–but NOT the way that is being widely portrayed. What is going on is an illustration of the old adage that clearing and settlement in securities markets (like the derivatives markets) is like the plumbing–you take it for granted until the toilet backs up.

You can piece together that Robinhood was dealing with a plumbing problem from a couple of stories. Most notably, it drew down on credit lines and tapped some of its big executing firms (e.g., Citadel) for cash. Why would it need cash? Because it needs to post margin to the Depositary Trust Clearing Corporation (DTCC) on its open positions. Other firms are in similar situations, and directly or indirectly GME positions give rise to margin obligations to the DTCC.

The rise in price alone increased margin requirements because given volatility, the higher the price of a stock, the larger the dollar amount of potential loss (e.g., the VaR) that can occur prior to settlement. This alone jacks up margins. Moreover, the increase in GME volatility, and various adders to margin requirements–most notably for gap risk and portfolio concentration–ramp up margins even more. So the action in GME has led to a big increase in margin requirements, and a commensurate need for cash. Robinhood, as the primary venue for GME buyers, had/has a particularly severe position concentration/gap problem. Hence Robinhood’s scramble for liquidity.

Given these circumstances, liquidity was obviously a constraint for Robinhood. Given this constraint, it could not handle additional positions, especially in GME or other names that create particularly acute margin/liquidity demands. It was already hitting a hard constraint. The only practical way that Robinhood (and perhaps other retail brokers, like TDAmeritrade) could respond in the short run was trading for liquidation only, i.e., allow customers to sell their existing GME positions, and not add to them.

By the way, trading for liquidation is a tool in the emergency action toolbook that futures exchanges have used from time-to-time to deal with similar situation.

To extend the plumbing analogy, Robinhood couldn’t add any new houses to its development because the sewer system couldn’t handle the load.

I remember some guy saying that clearing turns credit risk into liquidity risk. (Who was that guy? Pretty observant!) For that’s exactly what we are seeing here. In times of market dislocation in particular, clearing, which is intended to mitigate credit risk, creates big increases in demand for liquidity. Those increases can cause numerous knock on effects, including dislocations in markets totally unrelated to the original source of the dislocation, and financial distress at intermediaries. We are seeing both today.

It is particularly rich to see the outrage at Robinhood and other intermediaries expressed today by those who were ardent advocates of clearing as the key to restoring and preserving financial stability in the aftermath of the Financial Crisis. Er, I hate to say I told you so, but I told you so. It’s baked into the way clearing works, and in particular the way that clearing works in stressed market conditions. It doesn’t eliminate those stresses, but transfers them elsewhere in the financial system. Surprise!

The sick irony is that clearing was advocated as a means to tame big financial institutions, the banks in particular, and reduce the risks that they can impose on the financial system. So yes, in a very real sense in the GME drama we are seeing the system operate to protect Big Finance–but it’s doing so in exactly the way many of those screaming loudest today demanded 10 years ago. Exactly.

Another illustration of one of my adages to live by: be very careful what you ask for.

Margins are almost certainly behind Robinhood’s liquidating some customer accounts. If those accounts become undermargined, Robinhood (and indeed any broker) has the right to liquidate positions. It’s not even in the fine print. It’s on the website:

If you get a margin call, you need to bring your portfolio value (minus any cryptocurrency positions) back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your position(s) to bring your portfolio value (minus any cryptocurrency positions) back above your margin maintenance requirement.

Another Upside Down World aspect of the outrage we are seeing is the stirring defenses of speculation (some kinds of speculation by some people, anyways) by those in politics and on opinion pages who usually decry speculation as a great evil. Those who once bewailed bubbles now cheer for them. It’s also interesting to see the demonization of short sellers–whom those with average memories will remember were lionized (e.g., “The Big Short”) for blowing the whistle on the housing boom and the bank-created and -marketed derivative products that it spawned.

There are a lot of economic issues to sort through in the midst of the GME frenzy. There will be in the aftermath. Unfortunately, and perhaps not surprisingly given the times, virtually everything in the debate has been framed in political terms. Politics is all about distributive effects–helping my friends and hurting my enemies. It’s hard, but as an economist I try to focus on the efficiency effects first, and lay out the distributive consequences of various actions that improve efficiency.

What are the costs and benefits of short selling? Should the legal and regulatory system take a totally hands off approach even when prices are manifestly distorted? What are the costs and benefits of various responses to such manifest price distortions? What are the potential unintended consequences of various policy responses (clearing being a great example)? These are hard questions to answer, and answering them is even harder in the midst of a white-hot us vs. them political debate. And I can say with metaphysical certainty that 99 percent of the opinions I have seen expressed about these issues in recent days are steeped in ignorance and fueled by emotion.

There are definitely major problems–efficiency problems–with Big Finance and the regulation thereof. Ironically, many of these efficiency problems are the result of previous attempts to “solve” perceived problems. But that does not imply that every action taken to epater les banquiers (or frapper les financiers) will result in efficiency gains, or even benefit those (often with justification) aggrieved at the bankers. I thus fear that the policy response to GameStop will make things worse, not better.

It’s not as if this is new territory. I am reminded of 19th century farmers’ discontent with banks, railroads, and futures trading. There was a lot of merit in some of these criticisms, but all too often the proposed policies were directed at chimerical wrongs, and missed altogether the real problems. The post-1929 Crash/Great Depression regulatory surge was similarly flawed.

And alas, I think that we are doomed to repeat this learning the wrong lessons in the aftermath of GameStop and the attendant plumbing problems. Virtually everything I see in the public debate today reinforces that conviction.

Short sellers have been hate objects since the earliest days of the U.S. stock market–witness the checkered lives of the likes of Daniel Drew or Jacob Little. It is therefore no surprise that the travails of their latter day descendants–hedge funds like Melvin Capital–that have resulted from the huge runups in the prices of stocks like GameStop ($GME) have been the source of considerable schadenfreude. I would suggest, however, that this will end in tears not just for the hedgies, but for those who contributed to their massive losses.

Long story short (no pun intended).  Small investors pile in a stock (GME, and some others like Blackberry), driving up its price.  Hedge funds think the stock is overpriced, so they go short.  A group of small investors thinks that this is an opportunity to punish the short sellers (a lot of mutual disdain/hate here), so via the reddit group WallStreetBets they coordinate to buy more, driving up the price further.  This imposes big losses on the shorts, who buy to cover, driving up the price further, imposing more losses on the remaining shorts, driving them to cover, etc., etc. 

It brings to mind an old doggerel poem from the Chicago Board of Trade in the 19th century:

He who buys what isn’t his’n, Must buy it back or go to prison.

In the case of GameStop, the price action went hyperbolic:

That chart ends at yesterday’s close. Things have been even more crazy overnight, with the price hitting $500/share. There have been gyrations caused by the shutdown of the chatrooms and some retail platforms stopping trading in this and other heavily shorted stocks. But the fundamental dynamic in play now–shorts slitting their own throats in panicked buying to cover–means that attempts to constrain the long herd will not have a lasting impact.

The short interest that had to (and has to) be covered is huge–short interest in GME was 140 percent of outstanding shares–and a larger share of the float. (How can there be more shorts than shares? The same share can be borrowed and lent multiple times!) The effects of the short covering are seen not only in the price, but in the stratospheric cost of borrowing shares. Earlier this week it was about 30 percent–juice loan territory. Now it is at 100 percent.

In many respects, this is reminiscent of some of the more storied episodes in Wall Street history, or more recently the 2008 VW corner which punished shorts severely. But there is a major difference. In some of the earlier episodes (including major corners of shorts in railroad stocks in the 19th century, or battles between shorts and stock pools in the 1920s, or the VW case), there was a single dominant long squeezing the overextended shorts. Here, it seems that the driving force is a relatively large group of small longs, acting with a common purpose.

How will it end? Well, the stock is obviously overvalued, and driven by “technical factors” (as is sometimes said euphemistically). It will crash to earth. When? Well, when the shorts get out. Who will lose? Well, the shorts are likely a big portion of the purchasers at these nosebleed levels, so they will be the biggest losers. But there will be some latecomers and trend followers who will have followed the Pied Piper of rising price, and will lose in the inevitable crash.

Should we really care? There is some possibility that the disruption in GME and other heavily shorted stocks could have knock-on effects. Hedge funds suffering large losses may have to dump other positions, causing those prices to decline. (The events surrounding the Northern Pacific corner, for example, sparked the Panic of 1901.)

One fascinating aspect of this is how it demonstrates the deep populist discontent that is in abroad in the land. The hedge fund laments have been met with a barrage of scorn and ridicule, with a major theme being “you a$$h0les got bailed out in 2008 while the little guy got hammered–how you likin’ it now?” Completely understandable. Revenge of the nerds, as it were.

But, alas, I do not think the visceral satisfaction will last. Things like this inevitably result in litigation. The WallStreetBets lot are in for major lawsuits filed by the losing hedge funds, and perhaps others (e.g., investors who had sold call options).

Following the trend and herd trading is not manipulation–as long as the herd doesn’t explicitly coordinate with the intent to move the price to uneconomic levels. However, many on WallStreetBets expressed an intent to drive up the price in order to impose losses on their bêtes noires, and apparently coordinated their buying activity to achieve this result. Intent and cooperation make the manipulation. Note that the explicit communication and coordination could also transform this into a Section 1 Sherman Act claim–with the attendant triple damages.

Now the hedge funds will never collect even a fraction of their losses. But for them, the process will be the punishment inflicted on their foes. Pour encourager les autres.

The SEC is not committing to any action right now. It merely says it is “monitoring” the situation. The DOJ has also been silent.

However, they will be under tremendous pressure to act. Ultimately, the decision will be political–precisely because of the political nature of the populist resentment. The hedge funds and Wall Street generally will be howling for the government to file cases. But if the government does so, there will be widespread popular outrage that the government is taking the side of the Wall Street elite. Again.

This will be the first thing on Gary Gensler’s plate at the SEC. He is in a no win situation. (Breaks me all up.)

In sum, the events of the past days have been fascinating from both an economic and a political perspective. They represent a back-to-the-future moment of colossal battles between longs and shorts, but with a major twist: whereas the historical battles tended to be between colossi, this one pits an army of Davids against a few colossal hedge funds. This in turn gives rise to a political narrative, which again has historic echoes–the little guy vs. Financial Capital. It’s like the 19th century, all over again.

The battle will play out for some time. For a few days or weeks in the markets, and in the courts for years after that.

Big Tech’s war on speech–or more precisely, on speech that they dislike–escalated wildly in the aftermath of the Capitol “insurrection.” Starting with the erasure of Trump (and others deemed in his orbit) from Twitter and Facebook–actions that drew rebukes even from France and Germany–it continued to expand over the weekend, most notably with Amazon’s abrupt termination of its hosting agreement with Twitter competitor (and nascent conservative platform) Parler, and Apple’s and Google’s extirpation of the Parler app from their app stores.

This is an escalation, yes. But in a war that has been raging for years. Amazon, Apple, Facebook, Google, and Twitter merely see an opportunity to gain a big victory in that war.

During that war, a standard response from many on the non-left has been: “They are private companies. They can do what they want. Constraining their ability to take these actions is anti-capitalistic, and anti-liberty.”

These arguments are simplistic, and as a result, it is easy to conclude that many of those making them are simpletons.

The simplistic presumption behind these arguments is that only governments can coerce, or exercise power to constrain liberty.

It is no doubt true that government power to coerce is typically greater than that of private individuals and enterprises, and that therefore government is most likely to be the enemy of freedom. But that does not imply that government is the only enemy thereof, and that therefore only governments should be constrained from limiting freedoms.

The presumption that private entities possess little coercive power is based on an implicit assumption. Namely, that competition between firms and individuals in markets sharply constrains coercive power, whereas government faces little competition and can therefore coerce more effectively.

The implicit assumption is reasonable in many contexts. I don’t have to worry about being coerced by my grocer or even auto manufacturers. Competition is robust, and if they try to coerce me, I can shop elsewhere. Absent collusion, I can rely on competition to discipline coercion.

The implicit assumption is definitely and wildly unreasonable in the case of the large tech companies. There network effects have sharply reduced competition, and greatly constrained choice. Further, as Amazon/Google/Apple v. Parler show, these companies are willing and able to utilize their control over certain assets to destroy those whom they oppose.

The standard arguments discounting the likelihood of predatory pricing or other predatory conduct don’t apply here. Those arguments presume profit maximization as the corporate goal. But the underlying motive for Amazon or Apple or Google to cut off Parler is almost certainly not to make higher profits later–Parler is not even a competitor of Amazon. Instead, their motive is nakedly political. Jeff Bezos is no doubt willing to take what for him (richest man in the world) is a small economic loss in order to advance his political and ideological objectives. (Do you think he bought the WaPo to make money? As if.)

It’s also essential to note that these “don’t interfere with private contracting decisions” arguments completely fail to recognize that the ship sailed decades ago, and that the current legal and regulatory environment represents almost a complete inversion of the appropriate spheres of which contracting decisions should be left alone, and which may justify some restrictions.

In the US, federal, state, and local governments have imposed extensive restrictions on the freedom to contract in competitive industries, while allowing firms in highly non-competitive industries (like the tech firms) to operate with impunity. Bakers and florists operate in high competitive markets–yet they cannot exclude some customers due to their religious convictions. Restaurants in highly competitive markets are highly constrained in their ability to choose whom to serve. The same goes for landlords in highly competitive rental markets, employers in highly competitive labor markets, and banks in highly competitive lending markets.

If you agree with–or even accept–such restrictions on private firms in competitive markets, you have no basis to demand that no constraints be imposed on firms in highly uncompetitive markets, just because they are “private.” Moreover, even if you disagree with the imposition of such restrictions in competitive markets, that does not necessarily entail disagreeing with restrictions imposed in uncompetitive ones. It is quite logical to oppose restrictions in competitive markets and oppose them in uncompetitive ones.

Indeed, as I noted when I first took on this issue some years ago, there were common law restrictions on firms with considerable market power even in what is arguably the most libertarian/classical liberal period and country in history–18th/19th century England/UK. Common carriers like inns and coaches were deemed to have market power, and the common law required such “common carriers” not to discriminate. That it an era of laissez faire that has not been equaled since.

Furthermore, and most importantly, it is simplistic–and actually idiotic–to presume that there is a bright line between public and private. The tech companies wield enormous political power, both through traditional means (lobbying, rent seeking, influence buying) but more importantly through their control over information flow, and their information about you, and their use of your information to control the information you get. The ability to manipulate politics, political outcomes, and government policy that this information dominance provides is arguably unparalleled in history. The two most powerful weapons in politics are money and information. Big tech has wild amounts of both.

What do you think that we are seeing right now, other than an attempt to utilize that dominance to manipulate political and policy outcomes? Saying that this is acceptable because these entities are formally private companies is to give them power that a US government with monopoly of violence is not permitted to wield. If you are fine with that, then you are my enemy, and the enemy of most Americans.

I also note that amidst all of the accusations that Trump is a fascist, and his supporters are fascists, a defining characteristic of classical fascism is collaboration between the state and large corporate enterprises. Who is the puppet and who is the puppeteer is not always easy to determine, and can change over time, but an alignment of interest between the state and large enterprise is characteristically fascist, and antithetical to liberty.

At the very least, these tech companies should be subjected to non-discrimination requirements–requirements that common carriers have been subject to for centuries, and which even non-common carriers (e.g., the baker and florist) are routinely subject to today. These platforms have market power, and those that control them use that power to discriminate, most notably on the basis of viewpoint and political belief/affiliation, and do so to influence how the government coerces you. They should be stripped of their right to do so.

With respect to Parler in particular, it has sued Amazon and Twitter, on three grounds. The most interesting is a Section 1 claim alleging a conspiracy between Amazon and Twitter to destroy a Twitter competitor. This is potentially the most dangerous claim, but also the one that is least likely to survive a motion to dismiss. Yes, such a claim of conspiracy is plausible, but evidence of a conspiracy must include more than parallel conduct or mutual interest. So far, what we know publicly does not provide evidence of an actual conspiracy.

The second claim is tortious interference. This could potentially have legs. Amazon has clearly interfered with Parler’s ability to provide services to its customers. It is very plausible that that interference is tortious.

I am thinking that Parler customers might have a tortious interference claim as well, that could be pursued via class action.

The third claim is breach of contract. Amazon gave Parler 30 hours notice of termination: Parler claims the contract requires 30 days notice. No doubt the contract is byzantine and complex and long, and that Amazon can point to some clause which permits termination with less than 30 days notice under certain conditions. Then it becomes a matter of fact whether those conditions were met. Parler will no doubt argue that they were not, and at the pleading stage the court has to accept plaintiffs’ version of the facts.

Truth be told though, Amazon may well be willing to accept a loss on the breach claim, and maybe even the interference claim. It will be all rather moot for Parler: it is likely dead even if it prevails on those claims. But Amazon will have achieved its true objective: killing an apostate.

Big tech is our enemy. It must be fought. It must be defeated. Posturing about their inviolability because they are private companies is simplistic, wrongheaded, downright stupid–and highly destructive to the point of being evil. They dominate the public space in ways no “private” entity has ever done, and thereby have directly and indirectly immense powers of coercion that must be controlled. They are currently wielding those powers ruthlessly. Only fools and knaves accept that based on some imagined principle that private entities are immune from any constraint.

For a perfect illustration of why the UN (and most NGOs and most of those talking about Great Resets and the like) represent a grave threat to the lives, health, and livelihoods of those whom they claim to want to help, consider this ignorant drivel on the introduction of water futures on the CME from  Pedro Arrojo-Agudo, the UN’s “special rapporteur on the human rights to safe drinking water and sanitation.” (Hey! He’s not just an everyday run of the mill rapporteur! He’s a special rapporteur!).

According to Bloomberg, water futures “risks a price run-up for a resource that ‘belongs to everyone’ and is a vital tool in combating the Covid-19 pandemic.” Further:

“The news that water is to be traded on Wall Street futures market shows that the value of water, as a basic human right, is now under threat,” Arrojo-Agudo said in a statement. “It is closely tied to all of our lives and livelihoods, and is an essential component to public health.”

Beyond the fact that the reference to “Wall Street futures market” is ignorant (and an offense to Chicagoans!), this short statement is packed with more substantive economic ignorance.

Oh, the blather sounds good: water is “a human right” that “belongs to everyone.” Yay! But it’s exactly this kind of crypto-socialist blather that wreaks great harm when put into actual policy.

For one thing, something that “belongs to everyone” ends up belonging to no one. Or more precisely winds up being grossly misallocated or misused or wasted. Those who don’t own have no incentive to utilize wisely. They have too little incentive to avoid polluting. They have little incentive to increase availability or quality. Indeed, I warrant that many–and arguably the lion’s share–of the problems that Mr. Arrojo-Agudo is rapporteuring about (or whatever it is that rapporteurs do) are directly attributable to the lack of property rights in water, or grossly suboptimal rights. Relatedly, they are directly attributable to the lack of market mechanisms built on property rights to allocate a scarce resource–clean water–and the reliance on political mechanisms plagued by rent seeking and corruption to do so.

It’s not easy to design and enforce property rights for water, for a variety of reasons. Some of these reasons inhere in the nature for water. For example, designing and enforcing rights to an aquifer are challenging. But many of the problems are political, and public choice in nature. Look at the conflicts over water in the American West for myriad illustrations.

But grasping the nettle of these challenges, and even doing it imperfectly, is distinctly preferable to the policies that arise from an “it belongs to everyone” attitude. That is a recipe for dissipation, waste, and pollution. Water socialism works just as badly as all the other kinds.

As for the “speculative bubble” fears, such creatures are far more common in the fevered imaginations of the likes of UN rapporteurs, NGO nudniks, etc., than in the wild. They hysteria over an oil price bubble in 2007-2008 is an example. This is something that even Paul Krugman and I agree on. Show me a commodity price bubble, and I have a high degree of confidence that it can be explained by fundamental factors. Indeed, interventions intended to combat these bubbles almost always lead to less efficient resource utilization than the alleged bubbles themselves. Price “bubbles” in commodities are usually simply the bearers of bad fundamental tidings.

That is, attempting to suppress “price run-ups” makes things worse, not better.

I’ve already opined that I consider it unlikely that the CME/Nasdaq water futures will register much trading volume, for relatively technical reasons. The same reasons apply to other possible water futures contracts. So Mr. Arrojo-Agudo should direct his nervous energy to other subjects.

But the anti-property, anti-market mindset that the UN rapporteur embodies is a grave threat to prosperity and health. This mindset makes people poorer and more miserable wherever it rules policy. Which is why the UN, NGOs, Great Resetters, and the like pose a far greater danger than all the speculative bubbles ever stacked one atop the other.

Martin Wolf has waddled into the lists again to take another tilt at Milton Friedman. Since Milton is alas not with us to accept the challenge (luckily for Martin) I will again try to serve as his trusty second and defend his honor.

I will start at the end:

There are many arguments to be had over how corporations should change. But the biggest issue by far is how to create good rules of the game on competition, labour, the environment, taxation and so forth. Friedman assumed either that none of this mattered or that a working democracy would survive prolonged attack by people who thought as he did. Neither assumption proved correct. The challenge is to create good rules of the game, via politics. Today, we cannot.

This is a lie and a slander–in particular the italicized part. To start with. Friedman’s social responsibility piece was an oped, not a weighty tome or even an academic journal article. (I snorted when some idiot in Bloomberg referred to it as Friedman’s magnus opus. Er, no, that would be A Monetary History of the United States or A Theory of the Consumption Function. But this illustrates the level of intellect of those challenging Friedman’s article.). As a result, it was not a comprehensive analysis. It focused on a basic premise and argued that premise within the constraints of the form, which are severe. So many of the criticisms are bashing straw men–issues that Friedman could not address except tersely, if at all.

With regards to the lie and the slander, this relates to my criticism of one of Wolf’s earlier sorties. Specifically, Friedman “assumed” nothing of the sort. If you look at his broader body of work–something that Wolf betrays absolutely no sign of doing–you will know that his main objection to government, big government in particular, and government regulation is that legislatures, the executive, and regulators would be influenced and corrupted by the regulated, and by corporations in particular. This is why he argued vociferously against big government and against most government regulation: the power thus accrued would be manipulated by private interests, most notably corporations.

Friedman’s solution was to reduce the stakes in the game by reducing the power of government and relying on competition in the marketplace. Again, Friedman was an advocate of free markets, not of corporations, and he opposed regulation primarily because it allowed corporations to undermine markets.

One particular illustration of this relates to an issue that Wolf raises: market power. Along with Stigler, Friedman argued that government regulation was frequently, and indeed overwhelmingly, antithetical to competition and supported market power.

With respect to creating “good rules of the game,” Friedman also argued that giving government more power was inimical to the creation of good rules.

That is, Wolf is arguing that we have a political problem–which was exactly Friedman’s point throughout the 1950s-1980s. You may disagree with Friedman on these issues. But you cannot–as Wolf slanderously states–say that he did not think about them seriously, or that he assumed them away. Might I suggest that Marty read, oh, Capitalism and Freedom? Or is an oped all he can handle? Maybe there’s a market for Milton Friedman for Dummies.

Now to the beginning. Wolf quotes Luigi Zingales, the Director of the Stigler Center. (George is probably spinning in his grave.)

In an excellent concluding article, Luigi Zingales, who promoted the debate, tries to give a balanced assessment. Yet, in my view, his analysis is devastating. He asks a simple question: “Under what conditions is it socially efficient for managers to focus only on maximising shareholder value?”

His answer is threefold: “First, companies should operate in a competitive environment, which I will define as firms being both price- and rule-takers. Second, there should not be externalities (or the government should be able to address perfectly these externalities through regulation and taxation). Third, contracts are complete, in the sense that we can specify in a contract all relevant contingencies at no cost.”

Needless to say, none of these conditions holds. Indeed, the existence of the corporation shows that they do not hold. 

This is nonsense on stilts, and represents a return of the hoary Nirvana Fallacy that another late, great economist, Harold Demsetz, pointed out over 50 years ago. Yes, the conditions of the First and Second Welfare Theorems don’t hold. Who knew? That says jack about what are the best arrangements for our fallen world. That requires a comprehensive comparative institutional analysis, an analysis that is conspicuously lacking in the debate over Friedman’s article.

So what does Wolf say corporations should do (or not do)? Here’s a list:

My contribution to the ebook emphasises this last point by asking what a good “game” would look like. “It is one,” I argue, “in which companies would not promote junk science on climate and the environment; it is one in which companies would not kill hundreds of thousands of people, by promoting addiction to opiates; it is one in which companies would not lobby for tax systems that let them park vast proportions of their profits in tax havens; it is one in which the financial sector would not lobby for the inadequate capitalisation that causes huge crises; it is one in which copyright would not be extended and extended and extended; it is one in which companies would not seek to neuter an effective competition policy; it is one in which companies would not lobby hard against efforts to limit the adverse social consequences of precarious work; and so on and so forth.”

Let me give a pithier version: “Be good.”

As public policy advice, this ranks right up there with Mr. Mackey:

Completely absent from Wolf’s articles on Friedman is any discussion of how to implement the incentives to “be good” (by Wolf’s lights), or how corporations will acquire the information to know how to be good.

Incentives and information are the foundational concepts of modern economics. It’s beyond bizarre that the FT’s “Chief Economics Commentator” couldn’t be bothered even to mention them.

Wolf’s article is a sermon, not an economic analysis, or even a pedestrian analysis of an economics issue. The world is fallen, and you sinners must repent, and promise never to sin again! Well, as a song I like (and no it’s not autobiographical!) says, “I used to pray every night for God to wash away my sins, but I just get up and do ’em all over again.”

You can have a serious discussion about Milton Friedman’s slender piece, especially within the context of his much broader work. But the jeremiads directed against it by Wolf and others are not serious. They are intellectually vapid, and devoid of any meaningful policy prescriptions.

Hell, maybe Stigler was wrong–at least about Martin Wolf. Maybe he can’t win an argument with Milton, even when Milton isn’t around.

The biggest intellectual defect of modern environmentalism–and there are many–is its monomania. The obsession with greenhouse gases has led it to advocate drastic changes in the production and consumption of energy without regard for the non-GHG-related consequences of these changes, including in particular the environmental consequences.

Fossil-fuels are carbon intensive, but the alternatives to fossil fuels and fossil-fueled vehicles, heaters, appliances, etc.–electricity generated by wind and solar, batteries, vastly expanded transmission networks, electric cars and appliances–are incredibly material intensive.

Many–most–of these materials need to be mined. Electric vehicles and batteries utilize massive amounts of metals and minerals, e.g., copper, nickel, cobalt, lithium. The mining of these things generates massive amounts of pollution of the air and water and the ground.

Just a few examples. Many of the largest Superfund sites in the US are defunct copper mines, like the Berkeley Pit in Montana, where decades after its retirement the country’s largest earthen dam holds back–hopefully!, as I’ll discuss in a moment–6.5 trillion gallons of toxic sludge. And the mine itself is now a 900 foot deep, mile long, toxic lake.

What did I mean about “hopefully!”? Well, there have recently been massive failures of containment dams at mines in Canada, Brazil (at least two) and Australia, which have cost hundreds of lives and massive ecological and economic damage.

Even when there are not such catastrophic failures, the accumulation of toxic tailings is hardly green.

And tailings are not the only issue. Let’s talk about air pollution, shall we? Specifically with a mineral that will be crucial to the production of massive batteries–nickel.

Riddle me this: what city has the worst air pollution in Russia, and among the 10 most polluted in the world? If you answer “Norilsk”, you’re a winner. Why? Nickel production. The world’s largest nickel mine and processing facility located there spews out “four million tons of cadmium, copper, lead, nickel, arsenic, selenium and zinc” per year. And the river runs a beautiful красный for good measure. Not very зеленый!

The “green” electrification of the entire world will require massive amounts of rare earths. The vast bulk of rare earths are produced in China. Not because it is uniquely endowed with them–they are actually quite common. Because only the Chinese are willing to accept the pernicious environmental impacts of rare earths mining.

And it’s not just environmental impact. It is historical impact as well. Rio Tinto obliterated a 40,000 year old archeological site to expand an iron ore mine. The “Sacred Valley” in Peru is also being mined extensively.

These things are happening at current scale, and they are an inevitable consequence of industrialization. But the question is whether the benefit of reducing GHG emissions justifies increasing commensurately these impacts. For you multiply these environmental consequences by many times when you consider the impact of multiplying electrical vehicles and appliances and batteries by many, many times.

Wind and solar generation facilities also consume massive amounts of material. Many of these are mined, or involve polluting production processes (including not immaterially–pun intended–concrete, which is a major GHG producer).

But there’s also the land. I’m so old that I can remember (though I was very young at the time–so I’m not THAT old!) Lady Bird Johnson campaigning against the visual blight of highway billboards. Quaint, really: they were a ribbon of eyesores, at most. In contrast, the amount of wind and solar facilities required to achieve the grandiose objectives of the Green New Deal or its proposed counterparts around the world (ya I’m looking at you Boris) would create square mile after square mile of eyesores.

Not to mention (a) displacing land from other productive uses, and (b) creating large risks for fauna, especially birds. Wind farms are collections of bird blenders, and solar farms bird fryers.

The lack of thought to environmental consequences behind grandiose “carbon neutral” visions is also apparent in the failure to consider the substantial diseconomies of scale in wind and solar. Meaning that costs will rise disproportionately to increases in renewables generation.

You can expand wind output on an intensive margin–siting windmills closer together. But this cannibalizes the wind, leading to output per turbine decline with density, and hence rising costs. You can expand wind output on an extensive margin–devoting more land to wind farms. But this also reduces average and marginal productivity because it requires expanding into progressively less windy places. Moreover, it results in higher average and marginal costs, because even holding windiness constant, the marginal value of the displaced land in alternative uses increases (because holding windiness constant, you’ll develop on the cheapest, least productive land first).

Solar is hard to expand on the intensive margin, but expansion on the extensive margin faces the same sources of rising cost as wind.

Meaning that these plans to substitute wind and solar for existing fossil fueled generation at the same time as dramatically substituting electricity for other forms of energy (e.g., electric cars instead of ICEs, electric appliances instead of gas) will inherently result in steeply rising costs.

Steeply.

If you look at countries (or states like California) that have even been able to get a mere ~20 percent of their electricity generation from renewables, you will see they are also the countries where electricity is most expensive. Usually by a factor of 2 or 3 or more than those that rely on conventional generation. Given the inherent increasing cost nature of renewable production, think of how much more expensive it will be to produce close to 100 percent of total energy consumption from renewables.

Rational people take into account trade-offs. Drastic reductions in GHGs involve massive costs. Many of these costs are environmental. The environmental pollution–real pollution, not the sort-of-pollution of say CO2–that will result from the massive production of materials necessary for electric vehicles, electric appliances, large scale storage batteries, transmission lines, wind turbines, and solar installations is staggering. Staggering. The consumption of natural resources–not just those buried in the earth, but the earth’s surface–will be prodigious. The cost of energy will rise, which will make people poorer: and the poorest will be hardest hit.

I often use Jefferson Davis’ proposed epitaph for the Confederacy–“Died of a Theory”–to illustrate the destructive tendencies of those wedded to a single principle, to the exclusion of other considerations. Unfortunately, it is too early to use it as an epitaph for modern environmentalism, because that is all too alive. But the idea fits. Monomaniacally wedded to theories of climate change and GHGs, modern environmentalists are pursuing a course that will, paradoxically and perversely, wreak massive environmental destruction.

How green is my valley? After the greens get done with it–not very green at all.

From 911 through the early days of the invasion of Iraq, there were some on the right who argued that the Anglosphere–the US, UK, Australia, Canada, and New Zealand–would save the world from a dark future. I was always skeptical, because it was evident that the Commonwealth countries in particular were already hurtling down the road to serfdom: from the earliest days of this blog, I referred to the UK as the “Ghost of Christmas Future,” because its embrace of collectivism and political correctness bode ill for the US.

Recent events have validated that skepticism–and how. I could cite many verses in many chapters, but two recent developments make the point.

The first is covid. The allegedly doughty Anglosphere has been as been as much of a collectivist collection of bedwetters and repressers as any country or group of countries in the world. The panic and consequent lockdown policies are largely attributable to the hysterical predictions of University College London’s crack–as in crackpot–epidemiological modelers. And the government’s panicked response thereto. The UK locked down once–to little effect. It is now locked down again, with progressively more draconian restrictions on normal life.

The evidentiary basis for this: zip, zilch, nada. There is no evidence that lockdowns improve public health outcomes, and there is considerable evidence that they don’t. There is evidence beyond counting that the economic and health consequences of lockdowns is severe. All pain. No gain.

Parts of Australia have also imposed draconian lockdowns, complete with police state enforcement methods and limitations on individual freedom. Ditto New Zealand. Canada has also been highly restrictive.

These efforts have been statist and collectivist in the extreme, with the smattering of protests about liberty being screeched down by the better thans who have proven themselves utterly impotent, not to mention incompetent. But we’re supposed to obey them. Because they give incantations to SCIENCE!

The other telling indicator of the intellectual and moral bankruptcy of the Anglosphere elites is climate policy. The UK, Australia, Canada, and New Zealand are all hard core worshippers in the Church of Climate Change (while the pews of the Church of England are empty, notably).

Australia has implemented policies intended to displace totally fossil fuels within a short time frame, substituting renewables in their place. This has had a too small to measure impact on global climate, but has blessed Australia with more expensive and less reliable electricity.

Not to be outdone, “Conservative” British PM Boris Johnson said “hold my ale,” and has just announced a grandiose “green industrial revolution.”

Note to Boris: the original industrial revolution was an endogenous, self-generated process that massively improved living standards; your proposed “industrial revolution” is a government-driven, centrally planned process that will produce penury in exchange for trivial environmental benefits (and indeed, may involve serious environmental harm, when the consequences of mining, distorted land usage, etc., are considered). To compare what happened in the 18th and 19th centuries to what you propose for the 21st is an abuse of language that staggers the imagination.

So what is Boris’ Big Plan? This:

“My ten point plan will create, support and protect hundreds of thousands of green jobs, whilst making strides towards net zero by 2050.

“Our green industrial revolution will be powered by the wind turbines of Scotland and the North East, propelled by the electric vehicles made in the Midlands and advanced by the latest technologies developed in Wales, so we can look ahead to a more prosperous, greener future.”

The push forms part of the UK’s pledge to go carbon neutral by 2050, and comes ahead of the COP26 climate summit in Glasgow next year.

The plans include producing enough offshore wind to power every home, quadrupling how much Britain produces to 40GW by 2030, which would support up to 60,000 jobs.

It also aims to generate 5GW of low carbon hydrogen production capacity by 2030, and develop the first town heated entirely by hydrogen by the end of the decade.

The UK Government also wants to advance nuclear as a clean energy source to help support 10,000 jobs.

Then there are wider plans for electric vehicles, public transport and well as an expansion of cycle and walk routes.

Mr Johnson will also discuss making homes more energy efficient, creating 50,000 jobs by 2030 and installing 600,000 heat pumps every year by 2028.

In other words, like California, except with crappy weather.

The key word is “plan.” It’s Boris’ 10 Year Plan. Maybe Boris can borrow from Lenin and promote it with a slogan: “Utopia is Tory government combined with green electrification of the entire country.”

It bears all of the intellectual defects of such grandiose schemes. The reliance on centralized decision making. The focus on dictating technological means for achieving an objective–and relying on technologies that are either unproven, or extremely unlikely to be scalable (wind energy in particular). Further, the monomaniacal agenda: reducing CO2 emissions, to the exclusion of any consideration. Putting aside that CO2 is what makes things green, there is apparently no consideration of the environmental consequences (e.g., from mining) of large scale wind power and battery usage (in autos and to make intermittent wind a reasonable power source). Nor is there consideration of other trade-offs: what are the costs, in terms of foregone output and opportunities, of pursuing this single goal? What are the benefits that will be achieved?

Further, the entire agenda is profoundly anti-freedom. The private automobile was the greatest liberating force of the 20th century–which is why the left hates it with such a passion. Boris’ (not so) green electric machines will be far more costly, and far more limiting, making them more expensive and less useful to the hoi polloi. The policy obviously aims to push the proles onto public transport. Yeah. I’m sure British train service will get so much better. And even if it does, it is inherently more regimented and limiting than autonomous personal transport.

I guarantee that this effort will be a bacchanal of rent seeking, incompetence, and failure. If you doubt this, contemplate the multiple failures of the UK government’s covid responses like testing and test-and-trace. But sure, they will totally nail a complete re-engineering of the entire energy system!

If Boris et al really believe that CO2 is a deadly menace, then tax it and get the hell out of the way. Let individuals figure out the most efficient way to trade-off carbon vs. other human wants. This centrally planned approach is doomed to failure. Which means that the green industrial revolution may spark a real revolution when Britain sinks into penury. While sitting in the dark and cold.

Again, climate policy is merely an example. I could go on. But it illustrates the Anglosphere’s descent into collectivism and statism and corporatism: and alas, the US–at least about half of it–want to follow them all the way down.

The beginning of this descent can be dated to the end of WWII. Churchill’s loss in 1945 is probably a good starting point. The pace of decline has varied over time: things were so dire by the late-1970s in the UK that Thatcher came to power and slowed, and in some cases reversed the decline. But it has resumed apace, and the adoption of green energy lunacy by an ostensibly conservative government suggests that the decline is now irreversible.

In some ways, Australia’s decline is the most depressing. Once upon a time Oz was more individualist, and disdainful of the pommy bastards. There was a kinship between Australia and the American west, a frontier kinship as it were. But that seems largely a thing of the past.

This came home to me when I re-watched the Mad Max trilogy last week. Watching those paeans to rugged individualism (personified by Mel Gibson’s Max), then reading about Australia today (especially the lockdowns in Victoria and the dysfunctional energy policies), I said to myself: “What the hell happened to you?”

Well, whatever happened to them has happened to the Anglosphere as a whole. (Don’t even get me started on Canada, ex Alberta.)

And it is happening to the US too. The recent election results, and many other political developments, suggest that at most half the country resists joining the UK et al on the road to serfdom. And that half is politically marginalized–perhaps by electoral manipulations engineered by the other half.