Last week ALEC, the free market acolyte organization, enjoyed a real experience in the power of market forces. Two of its major financial backers, Google and Facebook, joined Microsoft in withdrawing their backing of ALEC because of the group’s opposition to clean energy policies and action on climate change.
ALEC (the American Legislative Exchange Council) has set out to turn back decades of bipartisan progress at the state level on energy efficiency and wind and solar power. Bankrolled in part by the Koch brothers and some of the biggest polluters in the country, ALEC has most recently mobilized conservative state legislators in dozens of states to attack sensible and successful requirements for renewable electricity. These standards were interfering with what the free market would do on its own, an intolerable offense according to ALEC.
ALEC has had mixed results with their pro-pollution agenda, losing attempts to repeal renewable energy standards in Kansas of all places, while winning a victory most recently in Ohio. Where they exist, renewable electricity standards have been credited with creating jobs and reducing pollution, making them quite popular with the public. The fight for renewable energy in the states will continue.
But ALEC’s denial of the threat of climate change was finally too much for the free market titan Google, which cancelled its dues-paying membership. Thereafter, ALEC offered an interesting denial of their denialism – they weren’t denying that climate change was happening per se, just disingenuously arguing that renewable energy as a solution should only be allowed to grow “according to consumer demand.”
If you believe that humans are contributing to climate change, it’s dumbfounding to think that letting the free market do whatever it wants could possibly be the answer. That’s how we got in this situation to begin with. It’s especially sad when a free market advocate gets a basic market principle like this so wrong. In fact economic experts even have a term for when the market outcome it not the right one for society – it’s called a negative externality.
A negative externality occurs when one person makes money off of imposing the cost of that action on someone else. But don’t take my word for it. Here’s how Investopedia, owned by Forbes, Inc., says in its definition of externality:
“Pollution emitted by a factory that spoils the environment and affects the health of nearby residents is an example of a negative externality.”
This is a free market outcome, but certainly not a desirable one. Where pollution is concerned, letting industry freely decide what is the right amount to reduce is like leaving it up to kids to decide how many vegetables to eat. Fortunately society can actually use market mechanisms such as tax credits or cap and trade programs to harness the market to provide solutions. Setting renewable electricity standards is another way of fixing the polluting externalities of fossil fuels.
How can anyone trust the task of educating politicians about the free market to an organization that doesn’t understand freshman economics concepts? Saying that every market outcomes is by definition the correct one is not a scientific position based in economic theory but is a political position based on self-interest.
Smart people are as dumb as they want to be, and ALEC has millions of dollars worth of reasons to play dumb on the need to act on climate change. But saying there shouldn’t be action on climate because the free market doesn’t want to do it certainly qualifies as willful climate denial. Thank goodness some powerful business leaders have exercised their marketplace freedom of choice in calling out ALEC on this issue.