March 24, 2014

GOVERNMENT IS REALLY BAD AT PICKING WINNERS, BUT...:

Light Touch : How smart regulation and technological innovation ruined a perfectly good conservative crusade against government. (Rachel Cohen, April/May 2014, Washington Monthly)

Yet the frustration of shoppers and the whining on Fox News has died down considerably in recent months. The reason is a new kind of household bulb that started hitting store shelves en masse late last year. These are bulbs made up of light-emitting diodes, or LEDs--the ubiquitous little indicator lights you see on computers and other electronic devices. The new household LED bulbs are essentially comprised of hundreds of little LEDs of different colors that together emit a white light that is softer and more pleasant than that of compact fluorescents. They cost about the same as the latter, but their prices are falling fast. They last about twenty-five times longer than incandescents and three times longer than compact fluorescents--up to 25,000 hours of light per bulb. They don't break easily or come with aggravating health concerns. Best of all, they are up to 80 percent more efficient than traditional incandescents, which means significantly cheaper energy bills for consumers.

The coming (and staying) of LED bulbs is a case study in how government policy, rightly done, can spur private-sector innovation. While small LEDs were being sold for use in electronics as far back as the early 1960s, the technology to deploy them in household light bulbs was still fairly far off when Congress passed the EISA in 2007. In 2009 the New York Times reported on LED bulbs that exceeded $100 a piece and suffered from "performance problems," adding that they "may not displace incumbent technologies" anytime soon. But the new market for energy-efficient bulbs that was scheduled to open up in 2012--and even earlier in Europe, thanks to European Union regulations similar to the EISA--gave lighting manufacturers an enormous incentive to step up development. The EISA also contained another inducement: a $10 million cash prize to the company that could develop the best high-quality alternative to the 60-watt incandescent. Philips won the competition in 2011 for an LED product that amounted to an 83 percent energy savings. But the bulbs weren't cheap: when they first hit the U.S. market, they cost $50 a piece.

Meanwhile, conservatives began to rally hard against the forthcoming light bulb standards. Redstate.com editor Erik Erickson launched the attack in late 2010 with an open letter to the GOP congressional leaders who were about to take control of the House: "If you do only one thing in your time in Washington, and frankly I hope you do only one thing given your propensity to expand government ... it is this: SAVE THE LIGHT BULB." In January 2011, Texas Republican Representative Joe Barton introduced the Better Use of Light Bulbs Act, a bill designed to repeal the energy-efficiency light bulb standards. Michele Bachmann soon followed suit with her Light Bulb Freedom of Choice Act. "Thomas Edison did a pretty patriotic thing for this country by inventing the light bulb. If you want to buy Thomas Edison's wonderful invention, you should be able to!" Bachmann told a group of supporters in 2011. "The government has no business telling an individual what kind of light bulb to buy."

When January 1, 2012, rolled around, lighting companies, thanks to the EISA, stopped making new 100-watt incandescents. With compact fluorescents the only real alternative on the market at the time, the mainstream press had a field day, highlighting miserable and indignant shoppers furious with the law and the federal government--a story that perfectly fit the Tea Party backlash narrative of the moment. Even Mitt Romney, despite having supported energy-efficient light bulbs as governor of Massachusetts, hopped onto the bandwagon. In front of a Chicago crowd in 2012, Romney declared, "And the government would have banned Thomas Edison's light bulb. Oh yeah, Obama's regulators actually did just that."

On January 1, 2014, the new EISA-mandated standards for 40- and 60-watt bulbs--which comprise 80 percent of the residential lighting market--were to kick in. That too might have been a boon to conservatives, had prices for LEDs remained high. Indeed, the U.S. Department of Energy had predicted in 2011 that 60-watt LED bulbs wouldn't fall to $10 until 2015. But to almost everyone's surprise, the industry hit that target two years early. By the end of 2013, you could head into Home Depot or Walmart and purchase LED bulbs for under $10. Their cost plummeted more than 85 percent between 2008 and in 2012 alone, and experts anticipate that prices will continue to fall steadily as retailers compete to be the leading LED bulb provider.


...outstanding at forcing losers.  The trick is not to care what wins after that.
Posted by at March 24, 2014 4:40 AM
  
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