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Obama-backed electric car battery-maker files for bankruptcy

teamosil said:
Just for background in case I'm using terms people aren't familiar with:

What an externality is is a cost or benefit from something a company or person does that they don't pay or get. There are negative externalities and positive externalities. A negative externality is a cost that a company foists on others, a positive externality is a benefit that the company gives others that it can't charge for. In short, externalities are the things that the market doesn't take account of.

An example of a negative externality would be a corporation that is manufacturing widgets. It has two options for how to make the widget. One process costs $10, but involves dumping waste in the lake. That waste causes $10 worth of damage to fishermen, property values around the lake and water treatment plant costs. So really it is costing $20 for every widget they make, even though the company only pays $10. The other option is a process where they could make it for $15, but not dump waste in the lake. Left to it's own devices, the company will just do the $10 process, but that is actually the less efficient way to make the widgets. So, government has to step in. It can either forbid dumping waste in the lake or it can make the company pay $10 per widget to pay for cleaning it up, which has the same effect.

A positive externality is, for example, a shipping company decides they need a lighthouse on a particular rock. That benefits all the other shipping companies too, but there is no way to make them chip in, so the company that builds the lighthouse is unable to recoup the whole benefit of their work.

Every economist alive, going all the way back to Adam Smith himself, has agreed that government needs to regulate externalities. Otherwise it is just inefficient. The market doesn't account for them in any way, so the market just acts like they don't exist.
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I know what an externality is. What "positive externalities" does "green" energy produce?

Brian
 
Free_Radical said:
I know what an externality is. What "positive externalities" does "green" energy produce?

Brian
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There are a lot of externalities in green technology, but the problem with Obama is that he is not looking at the negatives as well as the positives, in regard to invividual companies. In the case of Solyndra, they had a process of producing solar technology that was not competitive with other companies in the same market, and thus doomed to failure.

What Obama is doing is much like throwing crap against a wall. Some of it will stick, but a lot of it will fall to the floor and be lost. Except Obama is not doing this with crap, but with OUR MONEY......... Well, after a few more years, crap might be worth more. LOL.
 
Free_Radical said:
Yes, they are investing capital in speculative enterprises with the expectation of generating a return, in this case, "capturing positive externalities". How is that different from a venture capital firm?
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It's different because positive externalities don't necessarily align with success in the market. You can measure how wisely a vc firm invested by looking at how well the companies they invest in do on the market, but you can't when you're looking to boost up companies that create positive externalities rather than profit.

Free_Radical said:
Please quote Adam Smith and every "capitalist economist" as saying, "Helping companies capture positive externalities (or pay for negative ones they create) is a fundamental role of government in a capitalist society."
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Honestly, that's just basic economics. It isn't something controversial. What is controversial sometimes is whether a particular externality really exists, whether government should limit itself to the most extreme externalities only, etc. But everybody agrees that it needs to make companies internalize the costs of negative externalities and help them capture the benefits of positive externalities. For example, patent law is a way that the government helps companies capture the benefits of positive externalities.
 
danarhea said:
There are a lot of externalities in green technology, but the problem with Obama is that he is not looking at the negatives as well as the positives, in regard to invividual companies. In the case of Solyndra, they had a process of producing solar technology that was not competitive with other companies in the same market, and thus doomed to failure.
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Hindsight is always 20-20. Certainly there were some people that claimed that before the government invested in them, but there were also lots of people that thought it was a very solid technology. In hindsight Fox and whatnot spam the comments made by people that didn't believe in it of course, but that doesn't mean that would have been clear in advance. Some VC firms in high tech industries aim for a 5% success rate. Meaning that only 1 in 20 companies they invest in makes it. You can't really expect that government will see 100% success. Especially since VC firms' goals are precisely aligned with market success where the government's goals are not.
 
teamosil said:
Green technology has huge positive externalities. Reducing global warming...
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Totally speculative.

...positioning the US to lead the coming boom in green tech...
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Speculative.

...reducing oil dependency...
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This only creates a "positive externality" if the benefits outweigh the cost. Perhaps on a very, very long time scale, this will be the case, but in the short to medium term, it has cost us billions and hasn't reduced our dependency one bit. Moreover, oil and natural gas are versatile, cheap, and relatively abundant, so there is no pressing need to transition away from them at this point. The amount of capital we're wasting on "green energy" could be put to better use developing the extraction of shale deposits in our country, and when you factor in this opportunity cost, the investment in green energy arguably creates a negative externality in the form of higher energy prices and greater scarcity.

...preparing us for when oil starts to run short, etc.
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Seems like you already covered that with "reducing oil dependence", and that won't be for a very long time.

All the benefits created by these companies that they can't capture- that they can't charge for- are positive externalities.
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The benefits you cite are mostly speculative. At present, we have numerous viable energy sources (two of them domestic) that we should be exploiting aggressively. The opportunity cost associated with green energy investment, in my opinion, creates a negative externality in the form of higher energy prices and slower economic growth.

Brian
 
teamosil said:
It's different because positive externalities don't necessarily align with success in the market. You can measure how wisely a vc firm invested by looking at how well the companies they invest in do on the market, but you can't when you're looking to boost up companies that create positive externalities rather than profit.
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Just because the return on investment is nonmonetary does not mean they are behaving differently from a venture capital firm. Fundamentally, it's the same means to the same end, i.e., investing capital in speculative enterprises with the expectation of a return on investment.

Honestly, that's just basic economics. It isn't something controversial. What is controversial sometimes is whether a particular externality really exists, whether government should limit itself to the most extreme externalities only, etc. But everybody agrees that it needs to make companies internalize the costs of negative externalities and help them capture the benefits of positive externalities. For example, patent law is a way that the government helps companies capture the benefits of positive externalities.
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If it's "just basic economics", then you shouldn't have a problem producing those quotes.

Brian
 
teamosil said:
Green technology has huge positive externalities. Reducing global warming, positioning the US to lead the coming boom in green tech, reducing oil dependency, preparing us for when oil starts to run short, etc. All the benefits created by these companies that they can't capture- that they can't charge for- are positive externalities.
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I don't necessarily disagree with government grants for the development of technology, but investing that money into a company without looking at the marketability of that company is a waste of those funds which would have been better spent as research grants for universities and such. If the company closes shop, there's no benefit at all and the money is totally wasted.

All too often, the decisions on which companies to support in this manner are not based entirely on logical assessments, but include a certain degree of "You're my pal so I'll help you out."
 
danarhea said:
There are a lot of externalities in green technology...
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Such as?

...but the problem with Obama is that he is not looking at the negatives as well as the positives, in regard to invividual companies. In the case of Solyndra, they had a process of producing solar technology that was not competitive with other companies in the same market, and thus doomed to failure.

What Obama is doing is much like throwing crap against a wall. Some of it will stick, but a lot of it will fall to the floor and be lost. Except Obama is not doing this with crap, but with OUR MONEY......... Well, after a few more years, crap might be worth more. LOL.
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I prefer to look at it in terms of net gain or loss. At present, the opportunity cost of investing in an economically and technologically nonviable enterprise like green energy creates a net loss for society in the form of higher energy costs, slower economic growth, and larger deficits.

Brian
 
Free_Radical said:
Totally speculative.
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This is why we rely on scientists, not right wing political pundits, to make scientific determinations. The scientists are absolutely clear on it. 97% of climatologists say that AGW has been scientifically proven. The fact that Limbaugh or Boehner or Exxon or whoever claims the jury is still out doesn't carry any weight at all.

Free_Radical said:
Seems like you already covered that with "reducing oil dependence", and that won't be for a very long time.
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Sorry, I wasn't clear. I mean dependence on foreign oil. Getting dragged into wars over oil, having our hands tied in foreign affairs, ramping up the stakes of international conflicts, etc. are all problems of dependence on foreign oil. Green tech mitigates those.

Free_Radical said:
in the short to medium term, it has cost us billions and hasn't reduced our dependency one bit
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Completely false. We are already coming up on generating 1/3 of our nation's power with non-fossil fuel sources. Nuclear is already 19%, hydro is already 7%, and both are growing steadily. Solar is still very small, but growing much more rapidly, particularly as people start deploying it on the roofs of their homes and businesses. Wind is 1% and that's growing too.
 
teamosil said:
It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".
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Besides, based on the OP article it's Chapter 13 bankruptcy (restructuring their finances) not Chapter 7 (total liquidation of debt and assets). Frankly, I wish folks would consider the type of bankruptcy filing before flying off the handle everytime the come across a bankruptcy headline concerning one of these "green energy" companies under the Obama Administration. I'd much rather the company go through restructuring than liquidation.

Besides, wasn't this part of the GM/bank bailout argument? That failing companies should file bankruptcy vice running to the government with their hand out?

Again, bankruptcy to "restructure debt and present revised business plan/structure" versus "total bankruptcy liquidation WHERE NOBODY WINS" including taxpayers. I'll take Chapter 13 for a couple million in solvency debt, an improved market strategy and reorganization, Alex!
 
teamosil said:
Hindsight is always 20-20. Certainly there were some people that claimed that before the government invested in them, but there were also lots of people that thought it was a very solid technology . In hindsight Fox and whatnot spam the comments made by people that didn't believe in it of course, but that doesn't mean that would have been clear in advance. Some VC firms in high tech industries aim for a 5% success rate. Meaning that only 1 in 20 companies they invest in makes it. You can't really expect that government will see 100% success. Especially since VC firms' goals are precisely aligned with market success where the government's goals are not.
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I'll have to note that this (bolded above) is an entirely different arguement than Solyndra could succeed. Great, if there are large numbers who think the technology is viable, invest in research that would help further it. Don't put money into something everyone agree's is going to fail.
 
Free_Radical said:
Just because the return on investment is nonmonetary does not mean they are behaving differently from a venture capital firm. Fundamentally, it's the same means to the same end, i.e., investing capital in speculative enterprises with the expectation of a return on investment.
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Just to be clear, it isn't that the return is non-monetary, it is that the benefit isn't captured by the producer. It could be either monetary or non-monetary.

The difference is exactly that- the company they're investing in doesn't capture the benefit- they can't charge for it. So that means they're more likely to go out of business.

Free_Radical said:
If it's "just basic economics", then you shouldn't have a problem producing those quotes.
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Just google "positive externality" if you want to learn more about them. Here are some links to get you started:

Market Failures and Externalities - positive & negative externalities, solutions, Coase theorem
Positive Externality - Economics
Tutor2u - what are positive externalities?
Positive Externalities - Economics Help
Externalities: The Concise Encyclopedia of Economics | Library of Economics and Liberty
 
teamosil said:
This is why we rely on scientists, not right wing political pundits, to make scientific determinations.
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I can cite dozens of eminent scientists who do not support the prevailing hypothesis concerning man's role in global warming. And please refrain from silly partisan comments. I do not listen to "right wing political pundits".

The scientists are absolutely clear on it. 97% of climatologists say that AGW has been scientifically proven.
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First of all, the study to which you are referring is not meant to be a comprehensive representation of the climate science community. They only sampled about 1,400 (if memory serves) "climate scientists".

Secondly, "climatologists" are only a small subsection of the scientific community. Basically, they are nothing more than glorified physicists, and among physicists, chemists, biologists, engineers, etc., there is no such overwhelming consensus, and much of the physics underlying atmospheric dynamics is unsettled at this point.

The fact that Limbaugh or Boehner or Exxon or whoever claims the jury is still out doesn't carry any weight at all.
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I would put my science education up against yours any day.

Sorry, I wasn't clear. I mean dependence on foreign oil. Getting dragged into wars over oil, having our hands tied in foreign affairs, ramping up the stakes of international conflicts, etc. are all problems of dependence on foreign oil. Green tech mitigates those.
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So does exploiting domestic hydrocarbons.

Completely false. We are already coming up on generating 1/3 of our nation's power with non-fossil fuel sources. Nuclear is already 19%, hydro is already 7%, and both are growing steadily. Solar is still very small, but growing much more rapidly, particularly as people start deploying it on the roofs of their homes and businesses. Wind is 1% and that's growing too.
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If you consider nuclear "green energy"...

As for the rest, I agree that is a positive development, but you cannot attribute that entirely to government "investments" in green technology.

Brian
 
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teamosil said:
Just to be clear, it isn't that the return is non-monetary, it is that the benefit isn't captured by the producer. It could be either monetary or non-monetary.

The difference is exactly that- the company they're investing in doesn't capture the benefit- they can't charge for it. So that means they're more likely to go out of business.
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I don't see how this addresses my point. The government is investing capital (tax dollars) in speculative enterprises (green technology) with the expectation of producing a return (positive externalities). How is this fundamentally any different from venture capitalism?

Just google "positive externality" if you want to learn more about them. Here are some links to get you started:

Market Failures and Externalities - positive & negative externalities, solutions, Coase theorem
Positive Externality - Economics
Tutor2u - what are positive externalities?
Positive Externalities - Economics Help
Externalities: The Concise Encyclopedia of Economics | Library of Economics and Liberty
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I've taken dozens of economics courses. I don't need Google to educate me.

What I'm asking for is a quote which would substantiate your earlier claim concerning Adam Smith and every other capitalist economist. Since you cannot produce such a quote - especially from Smith - I will assume you were just making things up.

Brian
 
Free_Radical said:
First of all, the study to which you are referring is not meant to be a comprehensive representation of the climate science community. They only sampled about 1,400 (if memory serves) "climate scientists".
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No, they sent it to 10,000 scientists. Every single scientist on record with a university or government institution as being any kind of earth scientists. It is, by far, the biggest survey every completed of scientists on the topic. If we don't go with the results from that, what is the alternative? Just making things up willy nilly?

http://tigger.uic.edu/~pdoran/012009_Doran_final.pdf

Free_Radical said:
Secondly, "climatologists" are only a small subsection of the scientific community. Basically, they are nothing more than glorified physicists, and among physicists, chemists, biologists, engineers, etc., there is no such overwhelming consensus, and much of the physics underlying atmospheric dynamics is unsettled at this point.
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Yeah, they're the subsection that studies the climate.

Free_Radical said:
If you consider nuclear "green energy"...
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I do. As does the Obama administration. Dr. Chu- the secretary of energy- is focused on a plan to convert over to primarily nuclear over the course of the next 50 years. The problem is that it isn't really totally ready for primetime yet safetywise and it takes forever to deploy plants and they're really expensive. So, he wants to fill in the gap with alternative energy. I think that's about right.

Free_Radical said:
As for the rest, I agree that is a positive development, but you cannot attribute that entirely to government "investments" in green technology.
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No doubt.
 
teamosil said:
It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".
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1 First and foremost, our government needs to focus on growing the economy. No, I'm not talking about dumping money into businesses, I'm talking about making it easy to run a profitable business...

2 It has been proven time and time again that the private sector can produce 2-3 times more return on a dollar invested/used, than does the government when it is taken in taxes.

3 If the private sector does not *see a return and all indicators are pointing towards a crappy deal then why pursue it?
 
1Perry said:
I'll have to note that this (bolded above) is an entirely different arguement than Solyndra could succeed. Great, if there are large numbers who think the technology is viable, invest in research that would help further it. Don't put money into something everyone agree's is going to fail.
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If there are “large numbers who think the technology is viable”, let them invest their own money in research that would help further it. Government has no business investing taxpayer money in high-risk ventures.
 
Bob Blaylock said:
If there are “large numbers who think the technology is viable”, let them invest their own money in research that would help further it. Government has no business investing taxpayer money in high-risk ventures.
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It's what we did to go to the moon. I hope I'm being followed here.
 
ric27 said:
1 First and foremost, our government needs to focus on growing the economy. No, I'm not talking about dumping money into businesses, I'm talking about making it easy to run a profitable business...

2 It has been proven time and time again that the private sector can produce 2-3 times more return on a dollar invested/used, than does the government when it is taken in taxes.

3 If the private sector does not *see a return and all indicators are pointing towards a crappy deal then why pursue it?
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The government isn't trying to just invest in profitable companies to make a profit, it is trying to boost up companies that produce positive externalities.
 
Bob Blaylock said:
If there are “large numbers who think the technology is viable”, let them invest their own money in research that would help further it. Government has no business investing taxpayer money in high-risk ventures.
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A generational leap in battery technology is going to be worth trillions of dollars. Finding that technology will inevitably involve some lines of development and research that dead-end.

Would you prefer America or China figure it out first?
 
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Rhapsody1447 said:
Obama-backed electric car battery-maker files for bankruptcy


Obama-backed electric car battery-maker files for bankruptcy - The Hill's E2-Wire

More evidence that the DOE should not be blowing taxpayer money just because the investment has the potential to be "green". When will the government learn it can't sustain a capital-destructive industry by mis-allocating taxpayer money for good intentions? Two board members, including the Chairman, were former GM executives. I'm interested to see if company officials were former campaign donors like the previous disaster.
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Let these companies raise their money through venture capitalists and stock offerings. They certainly shouldn't be getting any taxpayer money. Borrowing from venture capitalists and going public requires a whole lot more scrutiny than our government has given. Quite obviously.
 
teamosil said:
It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".
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What a bizarre concept! The measure of success is found in the number of government-directed businesses going bankrupt. The more bankruptcies and lose of public funds, the more successful the program is? That really is straining to defend what cannot be defended.

There is no defense for stupidity in subsidizing what turns out to be total economic failures. Your view of it is the effort that counts is exactly wrong. Anyone can do stupid things and make stupid decisions. Thus there is no reason to congratulate failure nor defend it.

The other problem is that it all is a huge graft scam and theft of public funds in return for a small percentage as partisan political contributions. There are already electric cars made entirely without subsidy. Thus, the subsidies were entirely unnecessary for anything other than as a method of obtaining political graft payoffs.
 
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Deuce said:
A generational leap in battery technology is going to be worth trillions of dollars. Finding that technology will inevitably involve some lines of development and research that dead-end.

Would you prefer America or China figure it out first?
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First to the moon? NASA or Haliburton?
 
joko104 said:
What a bizarre concept! The measure of success is found in the number of government-directed businesses going bankrupt. The more bankruptcies and lose of public funds, the more successful the program is? That really is straining to defend what cannot be defended.
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What? No, I didn't say that...

The measure of success is the positive externalities generated. The issue is that you guys are trying to measure it's success based on success in the market. That's the wrong measure. Certainly, the company needs to survive to generate positive externalities, but it could be that only 1 in 100 companies survive, but that one invents a kind of solar cell that produces twice as much electricity, and then it would all be way worth it.

Even private venture capital firms in high tech industries shoot for something like 5% success in their investments. To try to pretend that the whole program must be a failure because a couple companies go bankrupt is ridiculous.

joko104 said:
The other problem is that it all is a huge graft scam and theft of public funds in return for a small percentage as partisan political contributions.
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Yes, yes... So right wing pundits blather all the time...

joko104 said:
There are already electric cars made entirely without subsidy. Thus, the subsidies were entirely unnecessary for anything other than as a method of obtaining political graft payoffs.
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Obviously that doesn't make sense.... It isn't like you just invent the electric car and then that's that, no more need to develop them any further... That attitude would have left us driving Model T's still...
 
teamosil said:
You don't understand. The government isn't just trying to pick winners. They aren't trying to make money by investing in the stock market or something. They're trying to increase and speed up the development of green technology.

Are you familiar with the concept of a positive externality? When an economic endeavor would create positive externalities, then the role of government is to help companies capture some of those externalities. That's what they're doing here, not day trading.
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Money is the root of it all.
If the product is to be viable, and so very few if any are actually developing the technology... once said technology is developed those with a monopoly on this type of product would stand to make lots of money.

Which means, why wouldn't private companies invest in this? Might it be because it isn't all that viable, and won't be all that profitable?

If the government's examples are any proof..... those who would have otherwise invested in these sort of businesses are sitting back thinking about how fortunate they are that they didn't get involved.
 
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