Economics and politics don’t really have much in common. While it is the job of politicians to decide what is fair and what is not, students are taught in economics 101 that economics is not concerned with fairness and distribution. The main job of economists is to help grow the pie, and the main job of politicians is to share it out. Last week’s review of the Renewable Energy Target (RET) chaired by Dick Warburton provides a textbook example of just how incompatible economic and political logic can be.
Dick Warburton is proud to call himself a climate sceptic. And like many people with no expertise in the energy market, his starting point was the assumption that the RET was a source of upward pressure on electricity prices. Unfortunately for Mr Warburton however, the modelling conducted for his inquiry soon showed that the opposite was the case. Indeed, Mr Warburton spent hundreds of thousands of taxpayers’ dollars on modelling by ACIL Tasman that confirmed the conclusion of four other modelling exercises.