Pickens Plans to Pick Your Pocket

You may recall the Pickens Plan from last summer. Billionaire T. Boone Pickens ran saturation advertising for a scheme to build windmills and natural gas vehicles. It was good advertising, but a stupid idea founded on false assumptions. Well, it’s back.

The mechanics of the Pickens Plan are dependent on government subsidy. Essentially nobody wants windmills if they have to pay the cost themselves. So Pickens want the taxpayer to chip in.

People are interested in natural gas vehicles. The most passionate argue that there would be more of them but for the lack of fueling stations. They say we are prisoners of gasoline-based infrastructure. (Which was built without subsidy, but never mind…) So Pickens wants you to build a replacement fueling network, too.

I say its a stupid plan because it has to steal resources on a massive scale just to test the idea. We don’t know that it would work. And, we don’t know that it wouldn’t. But it’s compounding the immorality to gamble with stolen money. If Pickens wants to build windfarms, pipelines and power grids, let him risk his own billions and prove that the scheme produces more value than it destroys.

Pickens admits the stupidity by asking for the subsidy. So he justifies the theft with a loftier goal. We need to steal in order to eliminate dependence on foreign oil. Right off, we could eliminate dependence by drilling here and drilling now. Oil works. It is proven, and people willingly invest to produce it. American oilfields are a more direct solution than amber waves of windmills. That’s the first false assumption.

The second false assumption assumes the first. If we can’t tap our own resources, for whatever reason, Pickens argues that buying foreign oil transfers wealth to countries that don’t like us very much. It’s great rhetoric. People don’t like the sound of transferring wealth, and to our enemies! Outrageous!

But that’s a canard. Frank Stephenson blasts it with basic economics:

The $700 billion that Americans spend annually to purchase oil from other countries (according to Pickens) is a price not a transfer. A true transfer— unemployment benefits or a taxpayer subsidy to a failing company—is a payment made to someone who pro­vides no good or service in exchange. By nature transfers are zero-sum. One person “gives” through coercive taxation; the other person receives. (Of course, if one throws a few bureaucrats into the mix, the transfer recipients might receive less than the amount taken from the taxpay­ers.) Ironically, it is Pickens, not oil-exporting countries, who has received transfers in the form of taxpayer sub­sidies for so-called renewable electricity generation. And that bit about needing your help—Pickens wants the largess to continue.

By contrast, when one makes a purchase, the money one pays is the price of the good, one side of a mutually beneficial voluntary exchange. Each party to the transaction trades away something in return for some­thing else he or she values more highly.…

For the $700 billion we send to oil exporters, we get something in return—oil. Our receipt of millions of barrels of oil in exchange for that money is hardly a transfer. We receive a versatile commodity that can be used for everything from making plastics to fueling family vacations. The exporters receive the $700 billion that they can then use to purchase other goods and services.

If the US wasn’t getting at least $700 billion of value from the oil, we wouldn’t buy it. By buying foreign, we also shift much of the indirect cost of oil production onto those evil foreigners. Our vistas remain scenic—at least until obscured by windmills. Our beaches are less likely to become temporary tar pits. And we’re less susceptible to terrorist attacks because our supply is diversified.

I’m willing to believe Pickens isn’t in it for the money. As he says, he already has billions more than he can spend. But if this is the capstone idea for his life, I wonder how he managed to get those billions in the first place. It surely wasn’t by his brilliance.

Via: Division of Labour