Too much conservation is economically harmful

At least that's what Cato senior fellow Jerry Taylor is saying in today's New York Post:

Should the government mandate even more conservation? No, "too much" conservation is as economically harmful as "too little." Just consider the economic harm that would be delivered by, say, capping speed limits at 30 miles per hour, or banning recreational long-distance travel. Both would save gobs of energy - but at the cost of doing more harm than good.

The only thing government should do on this front is ensure that prices are "right" - that is, that they reflect total costs. That's mainly an issue for electricity, where retail power prices typically bear little relation to wholesale prices. State governments need to encourage real-time pricing of electricity - so that consumers will get the signal to, for example, run the clothes dryer at night, when power is cheaper.

(Incidentally, those who argue that gas and diesel prices don't reflect important "external" environmental and national-security costs are simply wrong - at best, those added costs are trivial on a per-gallon basis.)

But there's a fair bit to do on the supply side. Congress could take four positive steps - if it really wants to bring prices down.

There's some validity to Taylor's argument, especially since "US Treasury Secretary Henry M. Paulson Jr. said Sunday that there was no quick fix to high oil prices, which he called an issue of supply and demand," reports The Washington Post. "Paulson said inflation in the Persian Gulf is "significant but suggested that Gulf countries pegging their currencies to the weak dollar was not the only reason for it."

Anyway, regardless of all the musings coming from a host of international speculators, I know that high prices will keep me away from unnecessary trips in my car, like the one I took yesterday where I blew an extra 50 bucks on gas touring from Sackville to Shediac to Moncton and back to Dorchester/Sackville. Although, I guess I did help the local economy out by buying four large clams dinners at Fred's Restaurant in Cap-Pelé. Trust me, it was worth every penny.

Tomorrow: my views on Jack Mintz' "carbon tax" proposal in the green paper.