Dan:

Besides, you can probably find 'scholarly' opinion to back up any position, with the evidence to fit, but it would prove little. I'd be more interest in a less subjective way of looking at it and a statistical rather than 'scholarly' position. But perhaps the difference it semantic.

Yes, I agree. Of course with the social sciences it is very hard to create unquestionable statistical studies so these arguments will go on forever.

Dan:

I would probably argue that what the government should do instead is to give tax-breaks to innovative sectors (which is still 'picking winners', but with a broader scope) rather than making direct investment.

That's more reasonable, and the US does that. We offer energy tax credits for solar, wind, and conservation. Certain energy production produces important externalities (carbon, pollution) so it is reasonable for the government to try to equalize the true cost of polluting technologies to clean technologies. Of course, the devil is always in the details.

Dan:

But still, I have shown that venture capital has been lower than it was before the 2008 crash. You seem to be brushing that aside as if it's not an issue.

Yes, I think it is a very poor argument. You haven't proven that the baseline was an appropriate level of investment, so why should we definitively state that a decline is a bad thing. After all, investment in home construction is also down, and that's a positive because the housing stock is overbuilt. Part of the reason for the VC decline in energy investments is that natural gas prices are very low and successfully competing with all sorts of solar and wind investments. But I'm not worried because solar technology will continue to improve. The market will be transformed eventually when the right technologies / business ideas are found.

Fundamentally, you and I will disagree because I think that the market can sort this problem out better than the government. It will be imperfect, but less imperfect than when the government gets into the VC business.

Dan:

And a VC picking winners is similar to a government doing it, really. It partly becomes a self-fulfilling prophesy because it's with the VC/gvt support that helps companies to succeed. But also, it's not 100%. Many companies that VCs invest in still fail. What they are aiming to do is to make enough on those that end up succeeding to cover their losses. So to measure success for a VC you would look across all of their portfolio, would you not?

Similarly with government investment. They picked a lemon with Solyndra, but is that all of the picture?

There are fundamental differences. When VC firms do this wrong, they get spanked. Their funding dries up; the employees who are responsible have their careers curtailed. When the VC firms do well, they get more money and do more investing. VC firms typically have time frames of 3 to 7 years with measurement along the way.

Score keeping for government investments is problematic. To a certain extent this will be relevant in the next election as it should be, but there should be more important issues on the table (foreign policy, overall economic policy). We've already learned that Solyndra information was delayed until after the recent minor election. It's a good bet that the other problems out there will be hidden where possible until after the next election when so much is at stake. Will the government make more loans to companies that are in trouble to hide the truth?

The other problem is that the top individuals making these decisions are typically not in their field of expertise. They are politicians, and friends of politicians; they will dole out money to those who support their ideology and their campaigns. Decisions aren't being made based on the economics. Instead of an industry with 30 years of institutional experience, we have people entering a business because all of a sudden the government has opined that we have to stimulate the economy. Clean energy is a laudable goal. This is not a good way to get there.

Ray Jay wrote:That's more reasonable, and the US does that. We offer energy tax credits for solar, wind, and conservation. Certain energy production produces important externalities (carbon, pollution) so it is reasonable for the government to try to equalize the true cost of polluting technologies to clean technologies. Of course, the devil is always in the details.

Is it possible that one of the details is this: we subsidize alternative energy, thus encouraging start-up companies for which there might be slight demand. Then, once say Solyndra starts, we also make loan guarantees to them. So, we are subsidizing both the customer and the provider. At the end of the day, we have so distorted the market that we should not be surprised when tax money goes down the rathole on speculation.

In other words, I think it is possible that over-investment by the government is retarding innovation (because we are not focused solely on the research side) and creating demand for what may turn out to be inferior technology.

Fundamentally, you and I will disagree because I think that the market can sort this problem out better than the government. It will be imperfect, but less imperfect than when the government gets into the VC business.

The wisdom of this will become more evident over the next year or two as more of the government's VC "investments" go belly up. It is the height of arrogance to think that this Administration, littered with academics who have never run so much as a lemonade stand is able to pick winners and losers in the marketplace. Of course, that presumes they actually care about being successful. I'm not convinced they care about anything so much as trying to spur "green energy" demand by any means necessary.

And, Solyndra isn't the only bad pick. If anyone believes that, they've skipped over the other bad picks I've posted--and there are more to come.

There are fundamental differences. When VC firms do this wrong, they get spanked. Their funding dries up; the employees who are responsible have their careers curtailed. When the VC firms do well, they get more money and do more investing. VC firms typically have time frames of 3 to 7 years with measurement along the way.

Score keeping for government investments is problematic. To a certain extent this will be relevant in the next election as it should be, but there should be more important issues on the table (foreign policy, overall economic policy). We've already learned that Solyndra information was delayed until after the recent minor election. It's a good bet that the other problems out there will be hidden where possible until after the next election when so much is at stake. Will the government make more loans to companies that are in trouble to hide the truth?

Yes. It's what politicians do: spend taxpayer money to hide the truth from taxpayers. In this case, it's like a husband hiding his gambling losses by taking cash advances on the credit cards, but that's the advantage of being able to keep one's "wife" in the dark while publicly claiming "transparency."

The other problem is that the top individuals making these decisions are typically not in their field of expertise. They are politicians, and friends of politicians; they will dole out money to those who support their ideology and their campaigns. Decisions aren't being made based on the economics. Instead of an industry with 30 years of institutional experience, we have people entering a business because all of a sudden the government has opined that we have to stimulate the economy. Clean energy is a laudable goal. This is not a good way to get there.

QFT!

Here's a list of donors and Obama investments from Breitbart (so we can't be convinced that it is fully accurate). He indicates that 80% of the investments are to Obama supports. Equally disturbing is that many of the amounts have already been funded by VC companies. The VC's are hedging their bets by having the taxpayer share the risk while they get all the upside.

http://biggovernment.com/whall/2011/11/ ... op-donors/

Oh, and while I'm on a roll, there are people on the list who are billionaires including the founders of Google. Do we really need the government to subsidize the investments of multi-billionaires?

Steve:

Is it possible that one of the details is this: we subsidize alternative energy, thus encouraging start-up companies for which there might be slight demand. Then, once say Solyndra starts, we also make loan guarantees to them. So, we are subsidizing both the customer and the provider. At the end of the day, we have so distorted the market that we should not be surprised when tax money goes down the rathole on speculation.

It's even worse than that because many states (especially California) mandate that utilities purchase a certain percentage of their power from clean sources. So, we subsidize the producers, we subsidize the consumers, and then we mandate that the middleman uses that power, I guess because the subsidies are insufficient.

Ray Jay wrote:Steve:

Is it possible that one of the details is this: we subsidize alternative energy, thus encouraging start-up companies for which there might be slight demand. Then, once say Solyndra starts, we also make loan guarantees to them. So, we are subsidizing both the customer and the provider. At the end of the day, we have so distorted the market that we should not be surprised when tax money goes down the rathole on speculation.

It's even worse than that because many states (especially California) mandate that utilities purchase a certain percentage of their power from clean sources. So, we subsidize the producers, we subsidize the consumers, and then we mandate that the middleman uses that power, I guess because the subsidies are insufficient.

As a complete aside, California is heading off a cliff. Whether anyone wants to admit it or not, that State is regulating and taxing itself into bankruptcy. They have the highest sales tax (some locales were temporarily over 10%!) and the 3rd highest income tax rate (according to Forbes). Companies are leaving for other States (like Texas). Unions (notably teachers and prison guards) have inordinate influence. Unemployment is very high. Largesse to college students is significant. Illegal aliens are welcome and receive many benefits. In other words, it is the Obama Administration's poster child for how to run government, including the energy mandates, environmental restrictions, etc. This is the direction to take the country?

Do we really need the government to subsidize the investments of multi-billionaires?

Probably not. But then, its been doing that with oil companies for a very long time.And Big Agra. And that for lbusinesses in long established commercially viable sectors of the economy.
It ain't the early stage support to commercialization that is criminal. Its the lack of ownership and therefore either lack of acountability or return to the tax payer if there is success. And involvement in a sector once its commercially viable , like oil, is just plain wrong.

Why not start by going after the money being pumped into Oil companies and Big Agra and Big Pharma. Stop that vast pipeline and the money being pissed away in early stage high tech will seem a pittance. (And by the way, the rationale stands. If no one wants to invest in a new sector without incentives, including billionares, but the development of that sector is likely to be of high strategic interest and high value to the US economy, then perhaps the investment makes sense.... At least until the sector is competitive and viable. At that point the govenrment has done its job. (Its all about timing and the development curve.)
Hows the propping up of oil, coal, big pharma and big agra make sense? And thats many times larger and less "employment sensitive" than start ups...

RickyP, are you saying that you do not want government subsidies? If so, then I agree with you. What I think you are saying is you don't like subsidies of industries that you don't agree with. That is a major difference. One is fair to all industry, and lets the market rule, and the other is discriminatory and based on who knows whom in the government.

Which one is more fair...

Ray Jay wrote:Steve:

Is it possible that one of the details is this: we subsidize alternative energy, thus encouraging start-up companies for which there might be slight demand. Then, once say Solyndra starts, we also make loan guarantees to them. So, we are subsidizing both the customer and the provider. At the end of the day, we have so distorted the market that we should not be surprised when tax money goes down the rathole on speculation.

It's even worse than that because many states (especially California) mandate that utilities purchase a certain percentage of their power from clean sources. So, we subsidize the producers, we subsidize the consumers, and then we mandate that the middleman uses that power, I guess because the subsidies are insufficient.

While I am in general agreement with this sentiment, I have to volunteer that part of the gov'ts job is to deal with externallities that are not priced into a market. Poor air quality and its costs in a place like LA, for instance, are not factored into the cost electricity from a coal fired vs. wind generated electricity based upon the market alone. The gov't has to cover the poor kids with asthma making more trips to the ER and, therefore, has a proper role in trying to price in the true cost of poor air quality (not to mention just trying to protect health and welfare of its citizens absent of extra costs.)

What is the actual cost of poor air quality? The true cost of coal vs wind generated electricity? I don't know, and probably no one else does either, with any certainty. But there is an important role for the gov't to play in industries where the market does not account for all the costs. How much of a role, the method of intervention, whatever, that's all subject for debate. The Solyndra scandal (and it is a scandal) gives some credibility to the wrong-headed argument that the gov't can't get it right so it shouldn't be involved at all. It should be involved, but it needs to do a much better job.

B

RickyP, are you saying that you do not want government subsidies? If so, then I agree with you. What I think you are saying is you don't like subsidies of industries that you don't agree with. That is a major difference. One is fair to all industry, and lets the market rule, and the other is discriminatory and based on who knows whom in the government.
Which one is more fair...

Fair to who? You righties always talking about whats fair. When did you get so soft?
I'm not an ideologue so i don't have hard and fast rules. Only guidleines.
Generally I say let the market work. But ensure the market can't be gamed.
Many overseas countries game the system. Well, that is they provide sudsidies and advantages to their industries to compete with US industries who are left without any G support because the US are "Free traders",(in everything but maybe agriculture?) In this case, I beleive the government may decide they have a role if there is a genuine strategic interest (economically, militarily ec) in ensuring the US based industry is fairly competing. That can be in trade policy, standards application, taxation...a spectrum of remedies that should not be grants or loans.
Second: I dislike ongoing subsidation of industries that are in a fair market. And i think that Big Agra, OIl and Big Pharma are in industries that no longer really require govenremnt assistance. In any way.
Third, Geo makes a fair point about externalites. Govenrment policy should always take into account the costs to society that an industry may not account for in its production costs...
Having said that, i do also see a role for the govenremnt in subsidizing original scientific reasearch (Universities institutes etc) and in helping industry sectors that they see as essential to the strategic develpment of the nation - to achieve commercial viability. But I really dislike the tools that they used with Solydra (loan guarantees, grants).
I like the way GM and Chrysler were brought back to life. Own part of the comppany and let the owners buy that share out as they reach commercial viability. With the auto guys that didn't take long because they only had to turn things around. With a project like oil sands or large scale energy of another sort, that can take a while. You're going to say, what do government guys know about running a company. Hell, you hire your talent to represent the interests of the state partner. With the proviso that he has a limited scope. Get to commercialization as soon as possible so the govenremnt gets paid off and then we'll reward you and even perhaps find you another opportunity.

geojanes wrote:

Ray Jay wrote:It's even worse than that because many states (especially California) mandate that utilities purchase a certain percentage of their power from clean sources. So, we subsidize the producers, we subsidize the consumers, and then we mandate that the middleman uses that power, I guess because the subsidies are insufficient.

While I am in general agreement with this sentiment, I have to volunteer that part of the gov'ts job is to deal with externallities that are not priced into a market. Poor air quality and its costs in a place like LA, for instance, are not factored into the cost electricity from a coal fired vs. wind generated electricity based upon the market alone. The gov't has to cover the poor kids with asthma making more trips to the ER and, therefore, has a proper role in trying to price in the true cost of poor air quality (not to mention just trying to protect health and welfare of its citizens absent of extra costs.)

Sorry, but this is just wrong.

I grew up in SoCal. I remember days where it hurt my lungs to run and the smog was so bad I could not see the mountains 10 miles away. That world no longer exists and it's not because of solar energy. The air quality has dramatically improved, but not during the "solar era."

Oh, I know, I can hear it now: "Where's the proof?"

You can't handle the proof!

I know there are cities and areas in CA that still struggle with air quality. However, in many of those cases, it is a matter of geography. The wind blows everything from the ocean against the mountains. I don't care how clean your factories and cars are, there's going to be pollution and the mountains are going to hold it in. You want clean air? Take the people out of California.

What is the actual cost of poor air quality? The true cost of coal vs wind generated electricity? I don't know, and probably no one else does either, with any certainty.

We know one thing with certainty: wind and solar are not competitive. If they were, they would not need to be heavily subsidized and foisted upon the populace.

But there is an important role for the gov't to play in industries where the market does not account for all the costs. How much of a role, the method of intervention, whatever, that's all subject for debate. The Solyndra scandal (and it is a scandal) gives some credibility to the wrong-headed argument that the gov't can't get it right so it shouldn't be involved at all. It should be involved, but it needs to do a much better job.

Again, when it is creating the market by subsidizing the purchase of solar panels, spurring the production of solar panels by investing in failing companies, and mandating specific amounts of power that MUST come from said sources, we are guaranteeing not just inefficiency, but massive inefficiency. California has abandoned rational decision-making for "feel good" decision-making it cannot afford.

What the government should be doing is looking at innovations that would make alternative energy affordable and feasible. That would be rational. Instead, it has decided what forms of energy are acceptable and is doing everything it can to promote their use--to the detriment of our budget and our economy.

rickyp wrote:B

RickyP, are you saying that you do not want government subsidies? If so, then I agree with you. What I think you are saying is you don't like subsidies of industries that you don't agree with. That is a major difference. One is fair to all industry, and lets the market rule, and the other is discriminatory and based on who knows whom in the government.
Which one is more fair...

Fair to who? You righties always talking about whats fair. When did you get so soft?

Just asking YOU which is more fair, I know that people making their own results legally is the best.

I'm not an ideologue so i don't have hard and fast rules.

Please stop, RickyP. My sides hurt after a laugh like that. Give a guy a warning...

I would gladly consider government loans to developmental companies with the following stipulations:
1) All monies need to be paid back within 4 years.
2) Any company that bankrupts will pass on the debts incurred to the government to the board of directors and CEOs
3) Any intellectual properties of these companies are usable by the government for free until the loan is paid back

Right now this money is free without strings. While I do not want to beat a dead horse, the Solyndra company is a great example of this. Take the money, and go bankrupt without further strings to the government.

I feel the same way about people taking money from the government. I am not speaking of general provisions to the populace, but specific giving. You need to have some conditions of being in the program, and continued repercussions for misuse.

http://money.cnn.com/2011/02/23/news/companies/gm_bailout/index.htm

GM still getting benefits that other companies do not get... GM was certainly not a startup company needing initial subsidization.

You seem to be saying two different things.
Use government money to research and start up industries, but not established industries. (Agra, Pharma, Oil)
Provide government money to help established industries (GM, Chrysler)

Would you support government subsidization of start up oil refineries? We certainly do need more output in that sector. That would help the working class people as well. I think we could both agree that would be beneficial.

Maybe this pipeline is a great idea. That would provide jobs and a source of petroleum. Both of which help the lower classes by cheaper gas prices which affects the price of everything, due to shipping. Jobs AND lower prices? It is a win/win!

(SIDEBAR: RickyP, your last post contained a great deal of spelling errors and it appears that you have been slipping in this area again. I bring it up not to berate, but to help you pay more attention to your posts. It can only help your position. 13 errors in the last post.)

I would gladly consider government loans to developmental companies with the following stipulations:
1) All monies need to be paid back within 4 years.
2) Any company that bankrupts will pass on the debts incurred to the government to the board of directors and CEOs
3) Any intellectual properties of these companies are usable by the government for free until the loan is paid back

Right now this money is free without strings. While I do not want to beat a dead horse, the Solyndra company is a great example of this. Take the money, and go bankrupt without further strings to the government

.

I agree, except the time line. That should be set according to whatever business plan is accepted. Some things take longer. And I don't know standard bankruptcy law ... but a properly managed government partnership should never bankrupt. It might be wound up due to failure to prove commercialization is posible, but they shouldn't bankrupt. There was no invovlement with Solyndra, no personal responsiblity by a government representative manager, and as far as I can tell no fiscal responsibility by the board or executive for the loans.

You seem to be saying two different things.
Use government money to research and start up industries, but not established industries. (Agra, Pharma, Oil)
Provide government money to help established industries (GM, Chrysler)

Replace "established" with "commercially viable". GM and Chrysler had stopped being viable without restructuring. Restructuring no one else could afford but the gov. And the importance of the auto industry to the US economy can't be diminished so it was a strategic investment in the economy. And its worked out pretty well.

Would you support government subsidization of start up oil refineries?

I believe the problem with oil refineries is that the current operators want to operate at 98% capacity or even more. So they don't want to build capacity that will lower all operating to less than their ideal levels... Its very expensive to build a refinery with current regulations, so maybe a new operator with a new design that could lead innovation in limiting pollution? Some other benefit than simply more capacity. Although the added capacity would be worthwhile, I think you'd want more from a project than just that before the Gov got involved. Nurturing innovation...
I think domestic production of oil makes a lot more sense than shipping oil in... although reducing oil consumption is smartest, and a proper effort at conservation could probably reduce consumption 10% more quickly than a new refinery could be built. The pipline is a good idea. Especially if they satisfy the concerns over the aquifer in Oklahoma with a slightly altered route.

I do apologize for causing you the physic pain over my spelling... (Its typing not spelling that really the problem. I have these fat fingers... ) I'll be buying a new computer shortly with spell check in my browser, I trust. At the moment I have to cut and paste spell check and don't always take the time. Plus its set on Canadian spelling and we're idjits who accept many forms of words that more anal people don't. .

rickyp wrote:

I would gladly consider government loans to developmental companies with the following stipulations:
1) All monies need to be paid back within 4 years.
2) Any company that bankrupts will pass on the debts incurred to the government to the board of directors and CEOs
3) Any intellectual properties of these companies are usable by the government for free until the loan is paid back

I forgot the most important requirement of startup funding support from the government. EVERY company is entitled to it, as long as the rules for the money remain the same for every company.

Total props to the Chevy Volt!

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. Some tax credits and subsidies are offered for periods up to 20 years, though most have a much shorter time frame.

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

Who says Obama can't successfully run a company!