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Lecture 5

What determines which energy technologies are in use?
Durable capital
Replace something that is capital intensive to another thing that is capital intensive

Technically best choices from technologies available?

Probably not: different rich countries make different choices – French nuclear, EU v. US rail & transit systems

Surely incomplete: What determines rate/direction of innovation and thus the set of available technologies at any time?

People make choices – individual & collective – not always “optimal”; the market just coordinates

History: culture shapes individual & collective choices

Chinese failure to exploit massive advantages in many areas

Dutch/Danish decision to retain reliance on bicycles

Main focus today: three ways past energy decisions shape future ones -- versions of path dependence

Cost of durable capital is important in many energy technologies/systems

Big changes in policy regimes often very disruptive – hence rare

  • Rational policy inertia (decades)  inertia in technologies used
    • Architecture of clean air act unchanged since 1970s; not up for debate absent serious problems

Ag price supports, tax subsidies for oil drilling seem immortal
London pre-WWI electricity system
Gawande on health care reform: different universal health care systems because of inertia, different prior regimes:
UK: government ran health care during WWII (US ran many industries, but not health), easy to continue post-war
France: chaos post-WWII; built system on pre-war funds
Swiss: only had private insurance; universal system simply required purchase, subsidized low-income
US: got employer subsidies to get around WWII wage controls; tax-exemption an economic mistake, but immortal
MA: built on employer-based system, no change for most

Early choices can fix later path because of +interactions on the path
Classic definition (Mahoney): initial choice, not inevitable (“contingent”), fixes later path – for a while
Classic example: QWERTY keyboard chosen to minimize jamming on old mechanical typewriters
Some say endured beyond technology even though inferior to Dvorak because of mass training, value of standard; hard to change
Evidence of inferiority weak, and could buy Dvorak keyboards for a while – arbitrary choice can persist if performs OK, change hard
Second example: Swiss watch-making, started early on because Swiss farmers had time in the winter
Over time built up design expertise, pool of skilled workers, training centers, distribution channels – tough to dislodge
Initial location somewhat arbitrary (why not Danish farmers?), but once set, advantages build, tough to dislodge
Path dependance

Energy Examples of +Interactions: Institutions & Physical Systems
Caveat: Unruh has good framework but over-states – DC not superior to AC early; electric cars weak
Gasoline autos:
R&D, training Jobs
Road network
Culture adapts
Policy supports
Driving taxes
Firm-level rigidities – companies tend to focus on getting better at what they are good at, not leaps (Palm, BlackBerry, GM)
“Historically derived subjective modeling of the issues” – autos as central to “the American lifestyle,” shapes debates
More examples of +interactions in energy systems – not all pro-carbon
Appliances, Training, Jobs, Habits, Air travel (planes, airports, training, legislation, jobs, Natural gas for heating (wells, pipelines, laws, regs)
Broadly, US on an energy-intensive path v. other countries with equivalent education, health, etc.
But bicycles in Amsterdam?
Subway in London?

Has been done, can be done, despite clear “lock-in” effects
Sometimes just takes R&D – sail to steam, gas to electric lights, coal to diesel locomotives
Sometimes takes changes in policy – interstate highway system, limited liability for nukes, environmental policy hitting coal generation
Often new systems face chicken-egg problems: lights for electricity, roads for cars, stations for natural gas cars