a yurtArbitrary tolls and regulations restrict economic freedom and distort economic development.

In From Poverty to Prosperity, Nick Schultz and Arnold Kling discuss the work of economists like Douglass North whose research shows how institutions promote or hamper prosperity. The authors also discuss the World Bank study which claims some 80% of a country's wealth is in intangible capital. Natural resources and regular capital contribute less to wealth than protocols or recipes that are the evolved spontaneous orders assisting everyday producers and consumers.

New Jersey could create more gas station jobs by insisting tire pressure be checked on every car (also increasing mileage and reducing carbon footprints). This would be a regulation creating thousands of "green" jobs and would raise costs just a bit.

But these bits add up. How many tens of thousands of American engineers now focus each day on green technology projects? How many millions of hours do Americans spend recycling each year in ways that don't increase the value of their waste? How many millions of minutes do people spend now waiting for their mercury lamps to stop blinking, or trying to figure out how to stop them from humming or buzzing?

What percentage of the cost of new housing is lost through antiquated building codes, arbitrary regulations, waiting for building permits, or spent trying to qualify for some weird state or federal "green" certification or subsidy? A friend of mine builds yurts for a movie stars' nonprofit and my sister tells me they are popular in one of the San Juan Islands because land use regulations prevent new housing (so people live in yurts instead). Like the thin buildings in Amsterdam that resulted from taxing building width, we suffer silently and invisibly from myriad prosperity-decreasing taxes and regulations. They raise the price of gasoline (leading us to plan part of our lives to buy gas in a nearby state if we live near a border), they raise the price of ice cream with regulations that raise labor costs and regulation milk production, they dramatically distort the financial system, leading to a stream of barely-tested financial instruments designed in part to avoid regulations limiting past financial innovations.

Millions of solar panels and thousands of windmills have been produced and installed in Western Europe and the U.S. and the great majority cost more to produce and install than the value of energy they produce. If, like the production of organic vegetables, such green energy was funded by green consumers willing to pay more for a product they think more valuable, we would have no particular reason to complain.

Solar panels and windmills may eventually be great technologies to reduce fossil fuel consumption, but today's aren't, they are political technologies thrown on markets through taxes and subsidies. Like politically-protected dirty coal from West Virginia, they distort natural technology development and make people poorer.

Other regulations prohibit coal-fired power plants from upgrading to more cost-effective and cleaner technologies (because regulations both mandate "best available" technologies with upgrades and grandfather in older more polluting technologies).

Deep-ocean drilling using novel technologies is a response by oil companies to being blocked from shallow water and land drilling by politicized governments in Mexico, Venezuela, Russia, Iraq, Iran, Nigeria, the U.S., and other places where plenty of oil and gas is in much easier to find and drill places that are off-limits for political or institutional reasons.

An interview with Shultz and Kling from Reason.tv is posted here.


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