James Pethokoukis

Politics and policy from inside Washington

Does the BP oil spill mean the West should get poorer?

June 2, 2010

Economist Kenneth Rogoff sees a comparison between the Gulf oil spill and the financial meltdown:

The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them. The parallels between the oil spill and the recent financial crisis are all too painful: the promise of innovation, unfathomable complexity, and lack of transparency (scientists estimate that we know only a very small fraction of what goes on at the oceans’ depths.) Wealthy and politically powerful lobbies put enormous pressure on even the most robust governance structures. … The oil technology story, like the one for exotic financial instruments, was very compelling and seductive. Oil executives bragged that they could drill a couple of kilometers down, then a kilometer across, and hit their target within a few meters. Suddenly, instead of a world of “peak oil” with ever-depleting resources, technology offered the promise of extending supplies for another generation.

That is fine as far as it goes, but then he adds this:

If ever there were a wake-up call for Western society to rethink its dependence on ever-accelerating technological innovation for ever-expanding fuel consumption, surely the BP oil spill should be it. … The advanced countries, which can best afford to restrain long-term growth, must lead by example. The balance of technology, complexity, and regulation is without doubt one of the greatest challenges that the world must face in twenty-first century. We can ill afford to keep getting it wrong.

Me: All the more reason, then, to look beyond oil for next-generation power sources. But the oil spill is no reason to go wobbly on pursuing technology — nanotechnology, genetic engineering — that would help allow living standards in America, and the rest of the world, to continue to rise. This sounds like Rogoff, a fine economist, is veering dangerously close to advocating the neo-Luddite Precautionary Principle. As Rogoff well knows, the world faces a huge debt problem and will need snappy growth to get out of the trap. Technological innovation will need to be a big part of that.

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