On the Sociology of Innovation: Public versus Private Investment in Alternative Energy Development for the Twenty-First Century

Abstract

For more than a century, social scientists have predicted an end to known supplies of petroleum, coal and other nonrenewable energy commodities. Experts and policymakers have sought to hedge off this allegedly approaching calamity by promoting alternatives such as solar, hydroelectric, wind, biomass, and geothermal energy. More recently, Washington policymakers have been advocating a move to hydrogen energy, and have proposed multi-million-dollar research and development (R & D) programs to produce the technology capable of applying hydrogen energy to motor transportation. This article analyzes some of these energy proposals in light of data amassed by the late economic history scholar Julian Simon. Simon’s path-breaking research suggests that there really is no “energy crisis” at all, because energy scarcity is reflected in price, and real energy prices have been declining for more than a century (1996, 163). Humans are born problem-solvers, concluded Simon, and they can best solve their energy problems through private-sector competition in free markets. Private entrepreneurs, notes Simon, have managed to improve extraction methods so much that known stocks of coal and petroleum are much more plentiful now than ever before. Moreover, there is great danger that government planning and funding of energy R & D will stifle rather than foster energy innovation because government funding breeds rent-seeking and other non-inventive behaviors among scientists that outweigh the benefits of funding (Kealey 1996).