Government Needs a "Light Bulb Moment"

Next year, a government ban on the incandescent light bulb will come into effect. This is a misguided piece of regulation.

There are some areas in which governments should regulate with bans, but these are rare. In most areas, governments should seek to improve upon market outcomes by identifying and regulating externalities. There are some behaviors that a democratic society decides are unacceptable at any price. You cannot open a McDonald’s in the Grand Canyon or build a nuclear reactor in Manhattan, even if you compensate everyone who would suffer.

On January 1, 2012, incandescent light bulbs will become like a McDonald’s in the Grand Canyon — unavailable at any price.

The problem with incandescent light bulbs is simple: They are an inefficient source of light which waste electricity, therefore producing more greenhouse gases than other bulbs. But light bulbs are, of course, far from the only inefficient appliance or the only way in which we chose to produce greenhouse gases.

Conor Friedesdorf, an editor at The Atlantic, has voiced his complaints; largely, he is worried about the ugliness of the light from alternative bulbs. But, he also raises a larger issue about the fairness of singling out incandescent light bulbs. This is a real problem.

In most cases, the role of government regulation should be to internalize externalities and fix markets where they perform imperfectly. Efforts to fix markets can focus on each individual market — i.e. the market for private air travel —  or on the much larger market for goods and services that result in negative externalities impacting common resources, like the planet’s capacity to regulate its temperature.

A focus on each individual market leads to regulations like the ban on light bulbs and, by the same logic, could be extended to bans on all sorts of wasteful practices, like air-conditioning one’s home. This kind of regulation distorts prices and incentives, puts the government in the uncomfortable position of picking winners and losers, and unfairly punishes people who happen to like or depend on the one thing that has been singled out. For these reasons, this type of regulation should be used as sparingly as possible.

Instead, regulation should focus on as broad a swath of activity as possible. A focus on the larger market for goods and services that lead to GHG emissions leads to a carbon market and a price for carbon. Without a carbon market (unlikely in America), governments should focus regulatory efforts on behaviors that do not punish some consumers at the expense of others. On this metric, renewable portfolio standards (RPS), which set goals for states’ utilities to diversify in renewables, score well; they do not punish any given consumer’s choices, but produce incentives for an entire state to reduce its impact on the climate.

Treating incandescent light bulbs like a McDonalds in the Grand Canyon does not make any sense. Regulation should not seek to ban important parts of people’s daily lives, but to shift incentives so that people take account of the full cost – both private and social – of their choices.  

Photo Credit: Wikimedia Commons