The CP only does what the plan wants to do---you should punish them for being shady---we have 2 net benefits
Market financial support is winner picking
fatal conceit in the context of energy policy makes their impacts inevitable and cause policy failure
Robinson 8 Colin, Institute of Economic Affairs “Climate Change Policy: Challenging the Activists,” http://www.iea.org.uk/files/upld-book440pdf?.pdf
There is, however, more to the apocalyptic forecast than that because it always contains a call to action. It comes in two parts. Part one is the ‘conditional’ forecast – what would happen on unchanged policy. Part two is the plan – what should be done to avoid the dire consequences that the forecast reveals. The latter-day apocalyptic forecaster, when turning to the plan, almost invariably recommends centralised solutions carried out by governments and international organisations. It would be unusual, if not unprecedented, for someone, having seen the apocalypse, to recommend leaving solution of the foreseen problems entirely to decentralised market forces. There must be coordinated, centralised national government or international action so that someone is seen to be doing something. Recom- mendations are usually for direct government intervention in the market by targets, regulations, government-controlled investment programmes, taxes or sometimes ‘market instruments’ (of which more later).
But there is a serious problemwith the view that centralised action, via governments and international organisations, is required to avoid the apocalypse. This form of action suffers from the same inherent problems as does central planning, which has, wherever it has been tried, failed. Briefly, there are two reasons. First, the information required for centralised action to work – which is information about the future – cannot readily be gathered.Information is not available off the shelf, to be collected together in Whitehall or similar locations, because it isessentially decentralised and much of it is tacit. Theproduction and dissemination of information areprimarily market phenomena and the suppression of markets, whichis the inevitable consequence of central planning, also suppresses the information that planners would need if they were to operate successfully.
The second problem is that, even if the information were avail- able, the incentives to deal with problems are lacking. There is no Whitehall counterpart to the powerful self-interest motives to solve problems that exist in markets. On the contrary, the pursuit of self-interest by people in organisations that have a monopoly of policy-making is most unlikely to be to the public benefit. Public choice theory has shown the dangers of assuming, as much main- stream economic theory does, that politicians and bureaucrats, domestic and international, are wise, far-sighted and disinterested and will simply identify and then pursue the ‘public good’.
By contrast, the market system is essentially a massive problem- solving mechanism. Markets may appear to operate slowly and ‘imperfectly’ but they do so surely: their existence is the reason why past apocalyptic forecasts have not come true. Competitive markets are powerful adaptive systems which contain strong incentives to solve the problems of the day, whether trivial or apparently serious. Unfortunately, the essence of the market’s functions is often clouded by the mechanistic neoclassical models used by many economists which concentrate on end-states of markets rather than the processes by which they adjust to change. Hayek’s insight – that competition is a process of discovery, quite different from stylised textbook models of competition which show the states of markets once competition has been exhausted – is the key to understanding the problem-solving power of markets (Hayek, 1948). Competitive markets provide the information and the incentives that spark the discovery process in which human ingenuity is exercised to deal with economic, social and technological problems. Marketplace incentives, operating mainly through price signals, induce entrepreneurs to seek out and then exploit market opportunities so as to make profits. Sometimes, entrepreneurial action may result in no more than the discovery of a slightly cheaper way of making a product or a slightly more efficient method of organising a firm. At other times, it may result in a major invention and its subsequent exploitation with global consequences. On a Hayekian view, the apocalyptic forecaster/ planner who believes he or she can see a long way into the future and has the answer to the world’s problems, substituting for and surpassing the problem-solving capabilities of markets, has been misled into the ‘pretence of knowledge’, if not into a ‘fatal conceit’(Hayek and Bartley, 1988).
Of course, no one can be sure that there will always be an economic or technological fix for every conceivable problem that ever arises. But past history, including the failure of predicted catastrophes to materialise, suggests that market systems act effectively to deal even with predicted global disasters. Russell Lewis’s chapter in this volume gives some examples of past false predictions of catastrophe. One particularly apposite example, on which it is worth dwelling because it is the most recent and the one that bears similarities to the concerns of today, is the ‘energy crisis’ of the 1970s when there was a consensus that rapid depletion of energy resources (especially crude oil), allied with the exploitation of monopoly power by the Organisation of Petroleum Exporting Countries (OPEC), would result in ever-rising energy prices. ‘The days of cheap energy are gone for ever’ was the slogan of many commentators, unwise enough to think they could see ‘for ever’ into the future. Only centralised action by governments and inter- national bodies could, it was argued, avoid a major world energy crisis. In the event, despite the almost total absence of the government and international action that had been deemed so important, energy markets adjusted to the ‘crisis’ so that, within ten years, the world was (by the mid-1980s) awash with oil and OPEC was meeting to try to prop up crude oil prices. Instead of crude oil prices tripling in real terms by the end of the century, as had been the consensus of forecasts in 1980, they began to decline almost as soon as the fore- casts were made and halved by the end of the century. Even in the first half of 2008, despite increases in crude prices in the previous few years, they were still lower in real terms than in 1980.3