Diary

Why Not Cap & Trade Everything?

The general logic behind the cap & trade system (explained at great length in my previous post) is that we need x (green energy) but are using y (fossil fuels) because it is currently impossible to gain the same benefits from x at the same efficiency & price as y. Therefore, the free market has failed because it is not developing ways to use x fast enough. To correct this, an environment is artificially created where using y gets increasingly more expensive, forcing people to find ways to make x cheaper and more efficient than y. There may be some short term pain, but in the end it will be worth it because x will be available sooner than it otherwise would have been and we would have ended up using x anyway.

My question: if this really works, why don’t we apply cap & trade logic to other areas of the market? Surely it will usher in all sorts of incredible technology ahead of time, right? For example, take a recent article discussing graphene sheet. This stuff is going to be the greatest. It’s the “thinnest material in the universe as well as the strongest ever measured” yet is still “flexible like plastic” and can be “rolled up like a scroll”. Future applications “include touch screens, solar cells, energy storage devices, cell phones and high-speed computer chips”. Unfortunately, scientists say that graphene sheets replacing silicon in computer chips is “a long way off…far beyond the horizon” because “silicon is a multi-billion dollar industry that has been perfecting silicon processing for 40 years.” But wait a minute! Why not enact a silicon cap & trade program as a type of shortcut to reaching this new technology? In cap & trade terms, the market has failed. Computer companies and the general public are too stupid to do this quickly enough on their own, so shouldn’t the government step in and deliver a market correction to lead things in the right direction? Maybe Big Silicon is even disrupting the market by stifling research to avoid loosing its stranglehold? If we artificially increase the price of silicon so eventually it’s too expensive to build computers with, won’t that force early development of graphene technology?

Sure, there is a chance that might work, but how likely is it? Should we destroy the U.S. computer industry to find out? Businesses have already been working feverishly to develop this technology and they are doing it based on nothing more than free market incentives. In other words, they know they will make a lot of money if they can successfully develop this technology, so do we think that the government is somehow going to make them work smarter or harder? In fact, according to this article there have already been breakthroughs in this field that have come faster than expected and the government had nothing to do with that other than the Pentagon handing out some money. Does anyone seriously think that if we enacted a silicon cap & trade say, 5 years ago, that those breakthroughs would have come quicker? If so, remember that with such a system computers would become more expensive and it would open the door for foreign competition to utterly dominate the market unless protectionist tarriffs are passed. But then the consumers lose because everything becomes more expensive, they can’t afford to buy as many computers, business profits go down, and then there isn’t as much money to invest in researching the new technology anyway. Does that make sense? If so, then let’s just cap & trade every single market area where we want technological advances. There may be a possibility that we’ll run out of elements to use because, for example, graphene sheet is made from carbon, so if carbon and silicon are both taxed then it could be problematic to come up with new, cheaper technologies. However, if you can swallow the fantasy that cap & trade can work in the first place, it’s probably not a leap for you to believe that we’ll just discover or invent new elements to use with all those new technologies.