Unintended Consequences

Consider the tax credits for alternative fuels such as ethanol and biomass that were rolled into the 2005 Transportation Law to encourage energy independence. At the same time, re-consider the law of unintended consequences, enshrined in Adam Smith’s notion that the unregulated behavior of capitalists gives rise to an invisible hand “to promote an end which was no part of their intention.”

The tax law included a fifty-cent-a-gallon credit for the use of fuel mixtures that combined "alternative fuel" with a "taxable fuel" such as diesel or gasoline.

This ill-conceived legislation is now producing an $8 billion windfall for the nation’s paper companies that, in order to qualify for the subsides, began adding diesel fuel to a paper-making process that required none.

Paper has been produced in basically the same way since the 1930s, when scientists learned how to leach cellulose from wood chemically. The chemical reaction produces a sludge containing lignin, which is so rich in carbon that the paper makers use it as fuel in the process that transforms the pulp into paper. It's wonderfully efficient, and allows the nation’s paper companies to operate largely without foreign oil. But not, however, with subsides. That’s why the companies added diesel fuel to the lignin, effectively replacing a green technology with one that is dependent on foreign oil.

The road to hell, as Adam Smith’s contemporary Samuel Johnson ironically observed, is paved with good intentions. But one can arrive there just as easily with bad intentions and bad faith.


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Sometimes, we experience to

Sometimes, we experience to get involved in a situation that we do not intend to. We might want to get out of it but it’s too late. A lot of people want to establish a business for themselves; a drive to establish business for one's own gain is what America is all about. The first step is to get it off the ground, be it through a home business, which won't cost as much, or opening up your own small shop. Opening up your own shop might take some installment loans, to get the space, utilities and equipment you need. Next, you want to do everything you can to reduce business costs. The lower your operating costs are, the better your chances of making some cash. Every enormous firm needed installment loans to establish business at one point.

Alternative Fuels

I can't think of anyone better to dissect the unintended consequences of energy policy than Tim Koranda. The rocket scientists who contrive these counterproductive financial plays--the so-called "best and brightest" who just have to have those sky-high compensation schemes or they won't work--have met their match, someone who understands both the math and the Wall St. mind.