It’s economically viable *now*, and no longer needs government support.
Richard Simpkins
1

If it doesn’t need government support then we should pull government support — in this case and in the case of all corporate welfare.

All investment comes at the expense of other investment. That is why we compare internal rate of return to cost of capital, which is a function of supply of and demand for capital (savings). When there is an investment that produces X, what happened is not that we have X plus everything else we now see instead of just everything else we now see, but rather that we have X plus everything else we instead of Y plus everything else we see. We do not know what Y would have been because we chose X over Y — or, somebody chose X over Y. IRR is the investors’ estimate of the present value of the returns on the investment — which in a market will come from the consumers — all of us — voluntary opting to purchase its output. The estimate could be mistaken, of course — but in that case the investment will fail, the investors will lose money and thus their ability to allocate capital in the future will be diminished — this is the punishment for not anticipating what the consumers — all of us — want. The government is less answerable to the consumers. The investment decisions are much further removed from the consumers — the decisions are made by bureaucrats appointed by officials who face elections every few years, with only a few competitors, and the choice is candidate X or candidate Y, whereas in the market, every consumer chooses from among all possible options 24/7 and the outcomes represent the aggregate. But government does have, and it uses, the capacity to force everyone to make an investment, and often, to force, or effectively force, everyone to consume what is produced.

All government investment, like all investment, comes at the expense of other investment — this is the opportunity cost. And all government investment comes at the expense not only of other government investment with proceeds of taxes or borrowing, from the private sector, but of the free use of that capital had it been left in the private sector — where it would have been invested with greater focus on what consumers — people — actually want.

When the question is government investment versus private investment, the difference is what the government thinks ought to be produced versus what investors believe that consumers will want to consume. That almost all investors are “only out for profit” is a good thing — because it means that their objective is to figure out how to efficiently produce that for which we are willing to pay. The government stops producing X because it has changed its mind about whether we should have X, and now believes that we should have Y. Companies stop producing X because people have stopped buying it, and they start producing Y because it has done well in focus groups and test markets — i.e., early indications are that Y is what we want. Or it could be because it has started to cost more to make X than people are willing to pay for it — which means that an input necessary to produce X has become scarce in physical supply or is more profitably used to produce Z, which is in high demand (which means that consumers have chosen that that input is better used to produce Z than X). The entire process is one of consumers — the people — directing production, rather than of the State directing production.

That is what is overruled by government investment. Choice. Not only is there an opportunity cost — not only can we say “government gave us X, and now there is X plus everything else we see instead of just everything else we see,” but the Y that did not happen would have represented what the investors believed that consumers wanted, rather than what the State believed that the consumers ought to have.

Subsidies override the consumer. Be for them if you want, but that means that you believe you know better than the consumer. Own that.

If subsidies are “no longer” needed but once were, then this is still a matter of overriding the consumer. But at the very least, if you believe that they are not needed then you should support ending them — in this case for all energy investment, including fossil fuel.

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