Production or Conservation: A Perilous Dichotomy for Energy Policy
Richard E. Wagner

Political competition often leads to policy options being posed in terms of stark dichotomies. A dichotomy evokes an image of war, which makes it easy to rally the troops of supporters. With a dichotomy, you must choose sides. You can’t have a bit of each. One such politically crafted dichotomy is taking shape over energy policy. This dichotomy is between production and conservation. This dichotomy appears to force us to take a position between producing more energy or consuming less.

President Bush has emphasized production, as illustrated by such things as support for some oil drilling in Alaska and some possible renewal of interest in nuclear energy. More generally, he would reduce a variety of bureaucratic rules and requirements that now limit the production of energy. In contrast, Senate Majority Leader Dashle has stated that the President’s program is dead so long as Dashle is Majority Leader. Dashle’s alternative is conservation through increased regulation. Windmills and solar panels would replace oil derricks. Such consumer products as automobiles and air conditioners would be required to use less energy in the future, regardless of their greater cost.

Politics is often about showmanship and the creation of images, regardless of how false or misleading the resulting impressions might be. This is certainly the case when it comes to energy policy. There is no genuine dichotomy between production and conservation. There is no need to choose one path over the other. We can have both. Moreover, different people can choose different mixes of production and conservation to suit their own needs and desires.

A number of people may find themselves taking a 600-mile trip by car. Someone who drives at 30 MPH will use less gas than someone who drives at 60 MPH, but the trip will also take twice as long. How much conservation different people pursue will depend on such things as the price of gasoline and the value they place on their time. As gasoline becomes more expensive, people will economize on its use, just as other people will seek to increase production. Conservation and production are pursued simultaneously in a market economy. Higher prices encourage consumers to conserve while at the same time they encourage producers to produce. There is no dichotomy and no need for any kind of either/or choice.

To be sure, conservation is voluntary in free markets. It is not forced on people against their will. Politics, however, often forces conservation upon us. When it does, there are often particular groups of people who stand to gain at the expense of everyone else. Forced conservation entails the substitution of group decision-making for individual choice. Group decision making on a large scale tends to be oligarchic and responsive to special interests, even when it is democratically organized. This is why forced conservation is a servant of special interest that masquerades as a servant of the general public interest.

How much gasoline will be produced in a society? In a market economy this will depend on how much people are willing to bid for gasoline relative to such other users of petroleum as producers of plastic products. Everybody has some influence over production. If people increase their urge to drive their cars on long vacations, market competition will bring about a natural reallocation of petroleum from plastics to gasoline.

It is easy to understand why some manufacturers who make heavy use of plastics might support some type of forced conservation. This would limit the competition for petroleum they face from automobile drivers, which in turn would lower their costs of production. Major trucking firms might even join in alliance, and call for curbs on such inessential travel as vacations so that plastic production can continue without becoming more expensive. This would also have the incidental feature that trucking would not become more expensive because there would be less upward pressure exerted on gasoline prices. Politics can truly make strange bedfellows.

There are other ways that some people might gain from forced consumption, even if at the expense of others. For instance, many urban dwellers in the northeast drive less than people elsewhere, making greater use of mass transit instead. When they drive they often do so in smaller cars and at slower speeds. It is perhaps easier to find parking spaces with smaller cars, and traffic congestion lowers speeds. Forced conservation that leads to smaller cars would be less of a burden in such places than it would be in places where people spend more time in their cars.