My Kingdom for a Renewable Energy Source

What 19th-century British horses teach us about free markets.

 
 

My Kingdom for a Renewable Energy Source
PHOTO: ISTOCK/GETTY IMAGES
 

‘In 50 years, every street in London will be buried under 9 feet of manure.” With this 1894 prediction, the London Times warned that the era’s primary source of transportation energy—the horse—would soon create an environmental crisis.

In New York City, about 100,000 working horses produced roughly 2.5 million pounds of manure a day. Residents were exposed not only to the stench but to biohazards like anthrax. One commentator estimated in 1908 that roughly 20,000 New Yorkers died each year from diseases related to horse waste.

But the deluge of dung predicted by the Times never arrived. Instead the free market solved the problem in roughly 25 years, while creating new goods and industries that transformed society. 

The enormous demand for a cleaner and more efficient source of energy led to remarkable innovations in the internal combustion engine. By 1920 horses in cities had been almost entirely replaced by affordable autos and trucks.

The revolution was not driven by government. In fact, the transition away from horses would have taken longer if states had followed today’s policy of subsidizing specific energy sources.

Since the 1970s, politicians have artificially pushed resources into renewable energy. Today the solar industry employs nearly 400,000 workers. That sounds impressive, but it accounts for only 1% of America’s electricity production.

Suppose governments in the 1890s, desperate to replace the horse, had jumped on the first available alternative, the steam engine. Heavy subsidies would have produced more steam engines and more research on steam technology. This would only have waylaid the development of the far superior internal combustion engine.

The lesson is that governments are in no position to predict technological breakthroughs, and their attempts to do so can delay innovations by entrenching inferior technologies.

Diesel cars are another example. European states have been subsidizing them for decades, but diesel engines create considerably more noxious gases and particulates. Now Britain and Germany are reversing their policies and trying to phase out diesel.

Or take the attempts to push renewable energy into poor countries. About 1.3 billion people, many in sub-Saharan Africa, lack electricity, making it incredibly difficult to purify water or preserve food and medications. World-wide subsidies for renewables total more than $100 billion a year, according to the International Energy Agency. But scientists still haven’t solved their core problem: Peak electricity demand comes early in the morning and at night, when the sun isn’t shining and the wind may not be blowing.

Nearly a half-century of subsidies has not delivered the next energy revolution. The great manure crisis of 1894 suggests a far better way to advance clean, affordable and safe energy: open competition on a level playing field.

Mr. Ohanian is a senior fellow at Stanford’s Hoover Institution and a professor of economics at UCLA. Mr. Temzelides is a scholar at the Baker Institute for Public Policy and a professor of economics at Rice University.

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