True enough. But this was a small subset of the qualitative
insights drawn from economic analyses during the period. Generally, the
period since the early 70s was an awkward period in the U.S.
relationship to the world market. The initial problem was perceived as
dependence, which had led to high prices and massive redistribution of
wealth both domestically and internationally. The policy remedies
initially proposed were attempts to reverse these effects, with a
complicated domestic price control and allocation scheme designed to
insulate the domestic market by defeating the effects of international
market changes. Economic analysis played a key role in exposing the
fundamental flaws in this failed paradigm, which since the late 70s has
been progressively replaced by a systematic reliance on markets to adapt
to inevitable increases in oil import dependence. In such a new
paradigm, prices are not the problem, but rather the key signal for
allocation of resources. When high, they will induce conservation, new
supply, and reduced dependence, precisely what was called for during the
70s, but systematically defeated by misguided policies. But when low,
they will reduce conservation, trim high cost supplies, and increase
dependence. This was the key lesson of the 70s--that despite the
shortcomings of oil markets (concentration, cartelization,
externalities, redistribution effects), the guidance provided by the
market mechanism is more reliable than government controls (however well
meaning) in managing interdependence with the external world.
The failure to adequately capture this central theme leaves Isser
with a seriously flawed premise that unfortunately is of key importance
to the relevance of the remainder of the book. Chapter 5 traces the
development of public opinion toward energy policies through the 70s.
Chapter 6 examines Congressional voting on a selected number of key
energy bills from the late 30s through the 70s. Chapter 7 presents a
theoretical overview of interest group rent seeking behavior, and a
detailed (but highly uneven) chronological account of energy policy
formation from the 40s through the early 90s. The weak thread
integrating this lengthy and rambling account with the earlier chapters
is the contrast between the government willingness to protect the
domestic industry with import controls in the 50s and its unwillingness
to do so in the 80s. In a very confusing final chapter, Isser argues
that "interest group, public choice, economic regulation, and rent
seeking theories were all found to be inadequate explanations of the
structure of oil policies adopted during the past few decades."
Why, then, he asks, is the oil industry unable to implement an oil
import fee? He casually dismisses the notion that industry might not
want such a fee, and asserts that "certainly the national security
argument for limitation of
oil imports is far more legitimate in the 1980s than in the
1950s." The alternative explanation he offers is that:
"The inability of party leaders to discipline their
membership makes it
impossible to pass unpopular legislation even with Presidential
support ... Energy policies which depend on price signals to
encourage
conservation or to limit dependence on foreign oil are
unacceptable,
since the problem is price ... The political immaturity of the
American
people presents a difficult dilemma as pursuit of good policy is
often
bad politics."
Despite the obvious effort that went into preparing this book, and
the meticulous attention to detail apparent in parts of it, Isser has
totally missed the central theme of oil policy development in the U.S.
over the past several decades, namely the increasingly successful
reliance on market signals to adapt to a world of increasing
international interdependence. His narrow and repeated focus on the need
for "higher" energy prices to encourage conservation,
independent of market conditions, betrays a failure to grasp that key
theme. Moreover, the simplistic nature of his conclusion, and its weak
relevance to the detailed body of the book, is disappointing to the
reader.
With editing, this book could have been assembled successfully as
an informative and valuable set of essays, each touching on the subject
of the development of U.S. energy policy. As it stands, a vain attempt
to integrate those essays with a weak thread of U.S. import policy has
provided a whole substantially less than the sum of its parts.
Edward D. Porter American Petroleum Institute Washington, D.C.
COPYRIGHT 1998 International Association for Energy
Economics Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
Copyright 1998, Gale Group. All rights
reserved. Gale Group is a Thomson Corporation Company.
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