Faust's Bargain: Charity and Government

The latest edition of Columbia includes an article by Alton J. Pelowski entitled "In Defense of Life, Love and Freedom" describing the problems when a private charity becomes dependent on public funding.  Similarly, Catholic Charities in Illinois are closing their adoption services because of new requirements to change their screening criteria to accept gay couples in order to receive government funding.

Although I empathize with their distress, American Catholics who have traditionally supported government-sponsored social programs have only themselves to blame.  Non-profit organizations who have been happy to trade arduous fund-raising for siphoning tax revenues are likewise guilty.

"Free money" is always hard to resist, but there's always a catch.  Once you've accepted the money you lose the freedom to run your organization as you like (which is why some organizations like Hillsdale College eschew public funding).

Indeed, the Catholic charities are faced with a dilemma of their own making.  If they refuse to  compromise their principles for money, they must either close their doors or return to the days when they relied on their own voluntary fund-raising efforts.  The latter option is obviously more difficult; a consequence of diverting funds from private donations to publicly mandated tax revenue.

Instead it looks like they're taking the easy option: quitting.

Government Motors Wins Again

Let's recap, shall we?  Taxpayers were tapped to provide bailout money to cover for GM's poor decision making.  Then bondholders and pensioners were pinched to cover for GM's unsustainable union contracts (and potentially as a political "thank you" from the previous election).  Then taxpayers were hit up again to subsidize the Volt program specifically, whether they wanted to pay for an electric car or not.  After all of this, we wind up with a car that still costs about $10k more than its target market and randomly catches on fire.  Da Komrade, the system is working fine!

http://www.bloomberg.com/news/2011-11-29/gm-s-volt-battery-fires-threaten-to-knock-moon-shot-off-target.html

Grading Solyndra on the Adoption Curve

So Solyndra goes bankrupt and the taxpayer is left holding the bag, to the tune of five-hundred million dollars ($500,000,000).  This really isn't a surprise and is a stellar example of why the free market, rather than government, is much better suited to speculative investment.  This is especially true in the case of technology.  Now, I'm a dollars and sense kind of guy, and I'll adopt "green" technologies when it makes sense.  Kinda like the commercial where all these folks are badgering this guy to "save the planet" and finally the technician says "The money you save on the washer will pay for the drier" and the guy says "Why didn't you say that in the first place?"

For example, ten years ago I looked at hybrids and there was just no way; they were too expensive.  Five years ago I looked again and I actually considered it; but the numbers still didn't quite work out.  I imagine in a few years the return on investment will be there and I'll buy some sort of low fuel consumption vehicle.  Until then, I'll keep driving my 27 mpg sedan.

This is known as the technology adoption curve:















Full Size Version

Once something becomes indisputably efficient and easy to adopt, it becomes mainstream and the majority of consumers buy it.  Until then, people buy the technology for other reasons: because it's "cool" or a status symbol, they like "new" things or because they want to make an investment (and possibly make a profit).

Those early adopters can afford to throw money away, and it's their choice to do so.  However, when government gets into the game it makes ALL of us into early adopters, whether we want to or not, whether we can afford it or not.  This sort of "venture cronyism" is a bad parody of its free-market equivalent.

I accept that businesses fail.  That doesn't bother me.  What makes me mad is that someone else forced me to cover a throw of the dice and they came out snake-eyes.

Successful Subsidized Energy? Not so fast...

The news coming out of the German energy market is a fascinating case study but it follows the typical pattern. Central planners decide they want to influence the supply and demand by manipulating producers and consumers. They are successful in that they get more of what they subsidize and less of what they penalize. However, they also have unintended consequences. In this case it is surpluses and shortages, reminiscent of the gas shortages of the 70s in the US and numerous other examples in the USSR. Laws are in place preventing the individuals from making adjustments to address the imbalance, in this case compulsory preference for the intermittent energy sources (solar and wind). Consumers still need a reliable source of energy that can pick up the slack when solar and wind are unavailable, but government interference is discouraging investing in conventional plants. Since the people are bound by law from fixing the problem it falls to the central planners to develop a solution. Their answer is as typical as it is ironic; subsidize coal plants.

But wait! Consumers are getting paid to use energy! They're getting it for free, right? Well not exactly. The subsidies aren't free; they are simply obfuscated by the tax code. Furthermore they represent a compulsory cost; what people pay to subsidize the energy industry is disassociated from their purchasing choices or their actual energy use.

The definition of insanity is doing the same things and expecting different results. Central planning consistently results in shortages and excesses, increased collective costs borne by the taxpayer, disenfranchising of the consumer and empowerment of the centralized planners and their crony capitalist / special interest lackeys. This latest example from Germany is no exception.

http://www.bloomberg.com/news/2011-09-29/utilities-giving-away-power-as-wind-sun-flood-european-grid.html