Technological progress, government intervention and public reaction

While doing research for a couple of term papers last fall, I came across the realization that certain forms of government intervention in industries could drive results. My initial focus was on how regulation increased costs on the nuclear power industry that were not symmetric with the regulations of far more dangerous power generation methods. For example, in the US, no one has ever died from nuclear power generation, but this cannot be said for methane gas and hydroelectric dams. (The troubles of coal are often much explosive, but the indirect effects are much worse.) Through the papers, I argue that risk misperception is one factor that drives increased regulation and subsequently increased industry costs.

For the most part, I think that is true, but misperceived risk cannot be the only explanation. Mike Munger has noted a bootlegger and baptist analogy between the fossil  fuel industry and environmental groups during the latter half of the twentieth century as nuclear threatened to dominate the power generation market.

There is no doubt that nuclear has since been on the decline in certain Western nations, but not in many Eastern ones. Why is this the case?

Sovacool and Valentine(2010, 3804) find that six factors were key to the expansion of nuclear power in France:

  1. strong state involvement in guiding economic development
  2. centralization of national energy planning
  3. campaigns that link technological progress to a national revitalization
  4. influence of technocratic ideology on policy decisions
  5. subordination of challenges to political authority
  6. low levels of civic activism

Looking at this list, parallels can be made to a few modern regimes that have had large amounts of growth in the past 40 years.

Sovacool and Valentine also found that in that during the middle of the century, the nuclear energy industry in the United States became more decentralized, along with the energy sector, and certain aspects of the industry became politicized. This, coupled with a move of the industry away from its secretive military laboratories and into the public eye, allowed for challenges to political authority and high levels of civic activism to influence the future of the domestic industry. Collective and public actions undertaken considering these increased degrees of freedom allow for more institutional controls to be placed on the nuclear industry in line with public opinion. Therefore, decreased public acceptance of nuclear can be correlated with an increase of the social and political costs of nuclear operations, leading to an increase in monetary costs due additional regulations, ordinances, insurance, and etc.

However, South Korea has an opposite trend in costs. While costs for nuclear power generation have been increasing in the US since Three Mile Island, costs in South Korea have been steadily decreasing. I don’t have cost projections for China, but I have little reason to believe that costs are facing an upward projection given the rate of reactors being built. China also has an incentive to switch to nuclear given their air pollution issues.

France, and later on Eastern powers, found that by subverting public intervention and focusing large sums of capital towards one end goal they could achieve significant technological progress, and even energy security as an additional bonus. France has 58 reactors and produces 75% of its electrical output with nuclear. They produce this energy with practically zero carbon cost– that is not “net carbon costs” but actual. (Link to a future blog post explaining the difference.)

My question is: “At what cost?” When can governments subvert public opinion for public interest? How can they know difference? I am a strong advocate for nuclear power in a carbon constrained world, but can things be forced on citizens for the greater good? In the current American political atmosphere, I think both sides would say yes; though, they might have different ideas as to what “the greater good” might be.

The economist in me says that we should let the market take control and the most efficient outcome will be produced; however, as long as there continues to be regulations affecting costs, the outcome will be biased and possibly inefficient given other possibilities. Note that if it was a purely a market process, many renewables would have faltered from the start. I think basic research is a necessary component of any growing economy and for the advancement of scientific progress. There continues to be a lot of unknowns.



Author: Deric Tilson

I am a classically-trained economist and doctoral student at George Mason. I'm an ecopragmatist and interested in the cross-section where economics, ecology, and ethology meet. I hope to work for non-for-profits specializing in economic development and eventually moving to either the public sector or a think tank. My research interests include the political economy of war, resource economics, the applications of complexity theory, the mitigation of risk by impoverished individuals, and global water scarcity.

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