A New Deal

Rep. Rahm Emanuel is calling for another New Deal. I'm not sure why given what a mess the first one was, but nonetheless he makes his case, and among his points calls for more government intervention in the energy sector:

Second, we must address our nation's energy needs. With gas and fuel prices rising, the typical family is paying $2,000 more for energy this year than in 2000. Congress has already taken action to address this problem by passing the first increase in fuel economy standards in 32 years, but we can do more.

Our government must invest in new technologies and alternative energy sources that will make our nation more energy efficient and save money for consumers and businesses. New investments in energy technologies could also create new industries that will create new jobs and contribute to or even redefine the way we do business. I believe that new energy technologies, the use of new sources of energy and improved conservation efforts have similar economic potential to do what the Internet and the computer did for our economy over the last 20 years.

Rahm obviously has no idea how markets work, which is unsurprising given that he has spent most of his life in politics. You see, when the price of something goes up -- in this case energy -- it attracts more participants, something economists call "market entry." They see all that money to be made and want a piece of the action. So when the price of energy goes up it prompts other people to look for alternative products so that they can get their own piece of the action. Solar energy for example. When gas is cheap there is little incentive to look for alternatives.

So this investment that Emanuel is calling for is already underway, and government intervention only makes sense if you somehow think that the government would be a better job of picking the best technology than the marketplace. And if this was the case then the Soviet Union would still be around.