A Revealing Ad Exposes The Department Of Energy’s Hypocrisy
By Amit Ghate
Not long ago I heard a shocking radio advertisement from the US Department of Energy and the Ad Council. Convinced that I misheard it, I downloaded the ad from the Ad Council’s website. Here’s my transcription of the opening, including sound effects in brackets <>:
“This is the sound of a brand new outdoor grill being hurled off a 20 storey building. Now a stylish glass coffee table. An electric guitar.
These are the things you could enjoy, all cast into oblivion, because when you throw away money on wasted electricity, you throw away everything you could have bought with it.”
After reading this, you might wonder: “How could this be considered shocking? Of course money spent on energy is not available for spending on other things. Indeed, what could be more logical and incontrovertible?” But if you’ll take a minute to consider both the source and intent of the ad, you might just join me in my consternation.
Remember, first, that the ad comes from the same government (whether Democrat or Republican) that has given us bailouts, QE1, QE2, QE3, cash for clunkers, subsidies for the likes of Solyndra, etc., all in the name of providing “economic stimulus”. For decades, politicians and the media have assured us—that by the alchemy of Keynesianism—when the government forcibly takes our tax money to fund things we wouldn’t voluntarily fund on our own, there’s no loss; rather, it somehow creates a miraculous boon to the economy.
So how could a government agency then turn around and say: spending on one thing displaces spending on another? For if that’s the case, doesn’t it mean that every dollar of the TRILLIONS spent by government on “stimulus” is money we could have used to purchase goods and investments we’d individually prefer? That is, isn’t every clunker the government purchased equivalent to the sound of a home renovation being flushed down the toilet and every Solyndra the sound of a productive factory being destroyed?
Undoubtedly, the ad is correct. Indeed, it’s perhaps the best possible 60 second exposition of Bastiat’s famous essay, “What is Seen and What is Not Seen.” But what could have brought a government agency to the point of confessing it?
A tacit admission of its inability to produce.
Invariably, when the government usurps economic control from the private sector, it’s unable to satisfy consumer demand. To compensate, it pleads for “conservation.” The pleas are so common that they may seem innocuous, but they’re really not, as they mask a pernicious form of impoverishment—one which promotes rationing over production. The ad is emblematic of this, for while it’s couched in terms of “avoiding waste”, its underlying message is to discourage us from enjoying a product that would otherwise enhance our lives.
Indeed, this is the ad’s other shocking aspect: it unwittingly exposes the striking contrast between the operations and motives of enterprises run privately vs. those controlled by the government. To see this, let’s review the economic actions of private individuals and enterprises absent government intervention.
Driven by the profit motive—i.e. the desire to make their own lives easier, fuller and more vibrant—free people engage in production and trade. They understand that to consume the goods and services necessary for their own sustenance and enjoyment, they must first produce them by means of their capital and labor.
This is perhaps easiest to appreciate when analyzing a self-sufficient farm, but it’s no less true in a modern economy. Here most production is performed by groups of individuals organized into companies specializing in the creation of particular goods and services. Specialization allows for greater efficiency and greater production per person, but it simultaneously requires that we all trade for almost everything we want or need—a requirement that gives rise to the “market.”
In such a market it’s incumbent on producers to find, encourage and accommodate customers (for without trading partners, producers couldn’t obtain the other goods they need). First and foremost this means offering valuable and affordable products. But as every businessman knows, it doesn’t end there. Producers must also communicate with consumers and build loyalty, which they do through marketing and sales.
For example, we’ve all discovered fabulous restaurants after viewing tantalizing photos of a chef’s latest concoction, or learned of a new product’s incredible features as we did from Apple’s iPhone and iPad ad campaigns. Similarly, we’ve all benefited from discount offers of the form: “buy 1 item, get the second free” or “take 10% off with any purchase or $50 or more.” Yet as much as these benefit us consumers, they also act to increase each company’s profits and sales.
Moreover, in cases where demand exceeds forecasts, productive enterprises understand that it’s still not in their interest to shoo customers away, direct them towards competitor’s products, or drastically raise prices to ration supply. Instead companies make every effort to satisfy (and thereby keep) their customers by ramping up production, regardless of the difficulties that might entail. In the process, consumers once again benefit from each producer’s long term self-interest.
This win-win relationship, in which private enterprises profit by honoring and fulfilling consumers’ desires, results in the bounty of goods so characteristic of free markets.
But it all goes out the window when government intervenes.
In the specific case of energy production for example, consider that over the years the government has, de facto, taken over the energy business. Not by direct ownership of the means of production, but by countless controls, regulations, rate boards, environmental impact assessments, brokering of dubious “externalities” and sundry other interventions. As a result, energy production has been severely curtailed.
As a customer of the heavily-regulated utility SCE, I (and millions of my neighbors) experience these effects firsthand. In contrast to the volume discounts given in private markets, below is a graphic delineating SCE’s pricing scheme.
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