The Political Economy of Energy

1. The Political Economy of Energy From Concept to Realization

2. Thought To Start The Semester • Climate change is difficult for people to evaluate dispassionately because it entails deep political and industrial implications, and because it arises from the core processes of our civilization’s success. This means that, as we seek to address this problem, winners and losers will be created. The stakes are high, and this has led to a proliferation of misleading stories as special interest groups argue their case. • (Flannery, 2005, page 4.)

3. http://ses.nau.edu/ • The mission of the Sustainable Energy  Solutions (SES) Group is to provide society with broadly educated energy experts and new technologies, as well as to help shape energy decision-making in both the private and public sectors while increasing the public's energy literacy.

4. Dr. Dean Smith • Texas A&M Ph.D • Big Oil School • Western States Petroleum Association • Spatial Pricing of Gasoline • Western Regional Air Partnership • Renewable Energy on Indian Lands • Energy Efficiency on Indian Lands • Sustainable Energy Solutions • The TED Team

5. Dr. Dean Smith • First taught Global Warming in 1991 • Might possibly be something to worry about • Environmental Economics • 1992 • Navajo Electrification Project

6. Smith et al. on Energy • Smith, D. H., Acker, T., & Jones, C. (2006).  Energy Planning for Indian Nations within the WRAP: A Field Guide. American Indian Culture and Research Journal, 30 (4). • Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2006).  Recommendations for Reducing Energy Consumption and Improving Air Quality through Energy Efficiency On Native American Lands. Energy Sources, Part B (1), 223-234. • Smith, D. H. & Greenhut, J. (2006).  HETEROGENEOUS SPACE IN REGIONAL ECONOMICS AND BEYOND. Pacific Economic Review, 11 (4), 431-448. • Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2005).  Economic Analysis of Energy Efficiency Measures: Tribal Case Studies with The Confederated Salish and Kootenai Tribes of the Flathead Reservation, The Pascua Yaqui Tribe, and The Yurok Tribe. American Indian Culture and Research Journal, 29 (1), 79-96. • Smith, D. H. & Ratliff, N. (2005).  Renewable Energy Electricity State Level Policies in the WRAP Region: What, Why and Maybe How. Energy Sources, 27 (5), 431-44. • Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., Turek, J., Lisa Majure, (2004).  Navajo Electrification for Sustainable Development: The Potential Economic and Social Benefits. American Indian Culture and Research Journal, 28 (2), 45-58. • Smith, D. H., Acker, T., LaRoche, D., Masayesva, V., Duque, E., William Jeffery, William Auberle, (2003).  Implications of the Regional Haze Rule on Renewable and Wind Energy Development on Native American Lands in the West. Wind Energy, 6 (4), 347-54. • Smith, D. H., Acker, T., & Jones, C. (2005).  Energy Planning For Indian Nations Within The WRAP: A Field Guide. CBA Working Papers. • Smith, D. H. & Tallman, G. (2005).  Investing In Your Future: With Current Arizona Policy A Solar Panel Is A Good Investment. CBA Working Papers. • Smith, D. H. (2005).  The Basic Economics Of A Disaster. CBA Working Papers. • Smith, D. H., Larson, D., & Smith, J. (2004).  Analysis Concerning The Disaster Of The Forest. CBA Working Papers. • Smith, D. H., Acker, T., Auberle, W., LaRoche, D., & Eastwood, J. (2004).  Economic Analysis Of Energy Efficiency Measures: Tribal Case Studies With The Confederated Salish And Kootenai Tribes Of The Flathead Reservation, The Pascua Yaqui Tribe, And The Yurok Tribe. CBA Working Papers. • Smith, D. H. (2004).  Identification And Implementation Of Potential Energy Efficiency Programs In Indian Country. CBA Working Papers. • Smith, D. H. (2004).  Recommendations For Reducing Energy Consumption And Improving Air Quality Through Energy Efficiency In Indian Country. CBA Working Papers. • Smith, D. H. (2003).  Renewable Good - Fossil Bad. CBA Working Papers. • Smith, D. H., Acker, T., Auberle, W., Duque, E., & Jeffery, W. (2002).  The Implications Of The Regional Haze Rule On Renewable And Wind Energy Development On Native American Lands In The West. CBA Working Papers. • Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., & Majure, L. (2002).  Economic And Social Development Stemming From The Electrification Of The Housing Stock On The Navajo Nation. CBA Working Papers. • Smith, D. H. & Ratliff, N. (2002).  Renewable Energy Electricity Generation In Arizona: What, Why And Maybe How. CBA Working Papers. • Smith, D. H. (2001).  Gasoline Pricing Policy Proposals: Good Economics Or Politicians' Gas? CBA Working Papers. • Smith, D. H. (2001).  Gasoline Zone Pricing: Good Management Or A Politician's Opportunity For Good Press. CBA Working Papers. • Smith, D. H. (2000).  If Dogs Run Free, Then Why Not We? CBA Working Papers.

7. Class Website • http://www.franke.nau.edu/faculty/course.asp?facultyid=57&courseid=428

8. Google Fun • 28,100,000 for energyeconomics. • 98,100,000 for energypolicy • 42,500,000 for Windenergy. • 35,000,000 for solarenergy. • 2,120,000 for geothermalenergy • 40,600,000 for gasoline • 3,960,000 for gasolineprices Now Go Do Your Homework!

9. Nuclear Energy

10. What is energy? • Scientists define energy as the ability to do work. People have learned how to change energy from one form to another so that we can do work more easily and live more comfortably. • Your body is like a machine, and the fuel for your machine is food. Food gives you the energy to move, breathe, and think. But your body isn’t very efficient at converting food into useful work. Your body is less than twenty percent efficient most of the time. The rest of the energy is lost as heat. You can really feel that heat when you exercise!

11. More on Energy Basics • Work means moving something, lifting something, warming something, lighting something. All these are a few of the various types of work. • To scientists, conservation of energy is not saving energy. The law of conservation of energy says that energy is neither created nor destroyed. When we use energy, it doesn’t disappear. We change it from one form of energy into another.

12. So Our Topic is: • Energy Conversion • How do humans modify one energy source into useful energy for work? • The Second Law of Thermodynamics • Entropy • Please define this engineering students! • Basically: energy becomes less useful as it is converted • Coal to light bulb

13. Mainstream Global Society • Uranium tailings • Global warming • Loss of biodiversity • Air and water pollution • Ozone depletion

14. Loss of Compatibility

15. Our Changing World • “The transiting from old nature or the natural environment as our host of life for human habitation into a technological milieu into mass technology as the environment of life.” • Godfrey Reggio • So What Are You Going to do About It?

16. Social Decision Making • How do we create efficiency? • How do we produce what we want? • Paul Berman: What did we learn? • Economy: Regulated Market System • Polity: Liberal Democracy

17. Markets • How can greedy money-grubbing business people be good for society? • The quest for profits within a regulated market economy is beneficial for society. This quest forces firms to be efficient. It also leads creative minds to recognize the potential uses of unemployed resources. Thus, the quest for profit by individual firms pushes society

18. Markets A regulated market economy is self-adjusting. When the PPF moves or society’s preferred combination changes, the market forces producers to move toward the new preferred point. In other words, a regulated market economy allows for mistakes. If a firm is being inefficient or is producing the wrong stuff, it will be forced to either correct its mistake or go out of business.

19. Profits are good • If it goes out of business and resources become unemployed, someone will come along and realize a profit potential for those resources. • This is a vital aspect for any production system: allow for mistakes. • The quest for new and better energy conversion technologies will lead to many mistakes.

20. Some Mistakes are Good • Experiments are good: Welfare, light bulbs, zip drives. • What works and what doesn’t? • “If we know the answer, we don’t have a job.” • Profits weed out the mistakes • The cost of resources is worth the investment • The Auberle argument!!!!!!!

21. Some Mistakes are Bad • Uranium tailings • Global warming • Loss of biodiversity • Air and water pollution • Ozone depletion

22. Markets Can’t Fix All Mistakes • Regulated Markets • A regulated market economy is one where individual producers make their own decisions within the scope of various regulations and restrictions. The government does not tell the individual producer what to produce or how to produce the output. No one tells anyone how to produce what.

23. The regulations or restrictions may limit: • how items are produced by restricting certain labor practices, such as minimum wage and child labor laws, or environmental actions, such as the Clean Air and Clean Water Acts. • what can be produced. For instance, you couldn’t start building nuclear bombs in your basement. • who can produce various goods and services. For instance, you have to meet certain qualifications before you start selling your services as a heart surgeon. • where certain items are produced. For instance, liquor stores cannot be located next to schools.

24. Political Economy • Understanding the combination and interaction of the economy and the polity • Mistakes have happened and will occur • Political economists try to understand what mistakes happened and why those mistakes caused problems and what to do about them • The BIG OOPS

25. Pricing or Pricing • Externalities • An externality is an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interests were not taken into account. • Energy Conversion is fraught with external costs • Full pricing

26. ECO 325 • Markets are efficient when pricing properly and completely reflects the costs to society • Policy and regulations are necessary to properly identify the full price of activity or products

27. Energy Conversion Externalities • Pollution • Health • Visibility • Climate Weirding • Ecosystems • Water Quality • Soil Pollution • Population migration

28. If Dogs Run Free,Then Why Not We? So if dogs run free, then why not we? Well, in most industrial societies with high population densities, dogs don’t run free. Socially determined regulations concerning leashes and fences limit the freedom of dogs. In the same manner, regulations and restrictions limit human behavior. But as long as the dogs stay within their fenced areas, they can chase butterflies as the wind blows. The same is true for humans living with the combination of a liberal democracy and a regulated market economy: creativity and entrepreneurial activity stimulates efficiency and socially desirable results.

29. So What Will You Do About It?

30. Weekend Assignment • It is a long weekend and not much has really started with the semester • Have fun and/or work as we celebrate one of our true leaders • Having read the Thinking Energetically chapter, spend some time thinking about your personal interaction with energy

31. Or Will You Do Nothing?