Gingrich: Free Markets Are “Pious Hope’

Newt Gingrich:

If Obama wins and you had a line-item veto on his energy plan, what would you eliminate?His energy plan is largely pious hope. He hopes they can make breakthroughs and do this or that.

It’s fascinating how when belief in the power of market capitalism clashes with belief in the need for public policy to advance the narrow interests of powerful corporations, conservative politicians invariably come down on the “advance narrow interests” side of the ledger. After all, the “pious hope” element of Obama’s energy and climate proposals is the belief that if we put an appropriate price on carbon emissions, the new market incentives this creates will lead to the development of a mix of affordable low-emissions power and energy efficient applications.

After all, we have the stuff we have — the power plants, the factories, the cars, the stores, the products, etc. — because right now that’s what it makes sense to build. There are significant negative externalities associated with carbon emissions. But right now, those externalities aren’t prices. Consequently, the market has worked to create an economy that functions well, but that involves emitting a lot of carbon. It would be odd, under the circumstances, for the market to have given us any other kind of economy. But if we change the structure of the market to ensure that emitters need to pay the true cost of their emissions, then the market will keep working and the economy will develop in a different direction. There’s nothing especially pious about the hope, it’s well-grounded in theory and in our experience with past environmental regulations. The real pious hope is the idea that if we do nothing to change incentives, a miracle solution will just emerge out of the ether for no reason. That could happen, but it’s not especially likely. And the combination of pessimism about the ability of the economy to adapt to a carbon price with extreme optimism about the ability of miracle answers (clean coal!) to emerge if we just kind of wait around and maybe throw a few tax breaks around is totally nonsensical. Nonsensical, but lucrative for executives at large energy firms. And, therefore, widely embraced by conservative politicians.