But the most persuasive argument about Solyndra I’ve seen actually comes from a critic: Andrew Samwick, the (relatively) conservative economist from Dartmouth. He agrees that the price of carbon fails to capture its negative externality, discouraging investment in alternatives. But the proper solution to that, he says, is to raise the price of carbon – i.e., with some kind of tax – rather than invest in the alternatives. (Actually, I think McArdle agrees with this, too.)
He’s probably right. The problem is that raising the price of carbon isn’t politically feasible — not right now and, quite likely, not anytime in the near future. That necessarily reduces our options to policies that are not optimal.
Maybe direct government loans are a second-best solution to the undervaluing of alternative energy. But second-best is still better than nothing.
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