One
of my little ‘work in progress’ side projects is an epistolary called Letters
To Troubled Youth. It’s a mix of good cop, bad cop letter writing, aimed at the
younger generation, warning them about all the highly damaging nonsense they
are letting in to their souls, and encouraging them of the greater rewards
found in more rigorous truthseeking. I might share the occasional excerpt as a
blog post on its own stranding.
Excerpt 2 – taken from Letter 17: Climate Extremism: A Waste of Energy
“Let's go back to basics in economics. For any quantity of a good or service, there is a demand price and a supply price. The demand price is the price at which consumers want to consume, and the supply price is the price at which suppliers want to sell. There is only one quantity for which the demand price and the supply price are in equilibrium. If external forces are acting so that consumers are paying less than the demand price, competition among consumers will bid up the price; or if suppliers are receiving more than the supply price, competition among suppliers will push down the price. For that one quantity of good or service whereby the demand price and the supply price are in equilibrium, competitive forces must be acting optimally with no external interference in the price system. When the quantity is lower than equal, the demand price will be higher than the supply price; when the quantity is higher than equal, the demand price will be lower than the supply price.
Lots of external factors contribute to or act upon the price system to offset the logic outlined above - taxes, price controls, subsidies, queues, shortages, over-consumption, social costs, product waste, and so forth - and it is only a relatively free trade and competitive forces that ensure that suppliers receive the desired supply price and demanders pay the desired demand price (remember, this optimal measurement is measured at the margin). The important corollary here is that when the above conditions are met, the quantity is the only unique quantity at which the demand and supply prices are optimally set at the equilibrium.
If you understand the logic behind why optimal prices are contingent upon supply and demand, you also understand that prices act as vital information signals, and that they are all inextricably connected to each other. The price of chocolate biscuits for supplier A is driven by what suppliers B, C and D sell them for, but also by the price of jam doughnuts, cream cakes, fruit and cereal. The price of your cinema ticket, your railway ticket, your blue suit, your Asus laptop, and so forth, is driven by the millions of substitutes (of the same kind and different alternatives) available in the marketplace. And if you understand all those things, you can apply the same logic to other areas of human incentives and behaviour.
If all the above is making sense, we can turn this on to the subject of climate change. For the past 150 years, humans have seen a progression-explosion in terms of material wealth and increased living standards, and that has been primarily driven by capitalism and science. The engine that has fuelled this great enrichment has been the harnessing of cheap, affordable energy. Globally, the predominant cheap, affordable energy has been fossil fuels, and it still will be for the foreseeable future. Pretty much everything that drives the economy and helps prices stay close to equilibrium involves fossil fuels (either directly or indirectly). It will be good when we have found alternatives to fossil fuels (or offsetting techniques) that meet all the criteria for optimality I laid out earlier, and we are doing that, and will do it at an even more expansive rate in the future - but right now, we are not advanced enough to dispense with all fossil fuels or reach the point of so-called 'net zero'.
