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Friday, January 30, 2009

A Lesson from China

China's One-Child policy is often cited as an example of an effective, wide-ranging government policy based on hard-nosed pragmatism. Its origin however, is an interesting tale in its own right.

When the People's Republic of China was founded in 1949, Mao (who would later take several wives) encouraged large families to replace those lost by decades of war. The program was successful in increasing China's population, which rose from 583 million in 1953 to over 1.3 billion today. However, the population became too large, and so the One-Child policy was phased in during the 1970s. If the original policy had never been enacted, the second policy would not have been necessary.

What is the relevance of this to the US? Well, for decade the US government subsidized (and to this day continues to subsidize) the coal and oil industries and set-up utility monopolies in order to provide cheap energy. This program was successful in keeping prices low, but at a cost of greater pollution, inefficiency, and stifling of innovation. Now, the government is trying to go the other way: using tax breaks and subsidies to promote alternative energy. I wonder what would have happened if the government had not gotten involved in the first place. The price of energy would probably have beeen higher, but that would have encouraged conservation and innovation- the very things the environmentalists are pushing for now. All the technology has been around for a long time (electric cars have been around since the mid 1800s) but because of the subsidies and tax breaks, the market was distorted and these technologies never took off. And the government's largest alternative energy program, ethanol from corn, is pretty much universally acknowledged as a giant boondoggle by the experts.

I say get the government out of the energy business entirely.

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