The Conspiracy Against Free Lunches

Every so often, Roger Ebert surprises me - this time, with his understanding of economics. In his review of "Chain Reaction," Ebert writes:

The water-to-energy project is being run by Shannon and Collier, but they don't want to reveal that it has been successful. Why not? Free energy, we are told, would lead to recession, unemployment and plummeting stock prices, But would it? It seems to me free energy would unleash the greatest era of prosperity in planetary history.

I often hear similar theories about the cure for cancer, alternatives to the internal-combustion engine, and other desirable technologies. According to these conspiracy theorists, the technical solutions exist, but they are suppressed because it isn't in the interests of those in power to release them to the public.

Here's a typical example [emphasis in the original]:

Electric sleep would allow people to get 8 hours of sleep in about 1 hour. Maybe the sleeping pill companies and/or the mattress manufacturers don't like it because then you wouldn't need a mattress (at least for sleep). Or maybe those in control want to repress anything that might give people more free time to enjoy life (such as it is). This technology has been around since at least 1905 (I found a book written on it from back then. See below)! Why isn't it being used? I saw a doctor on 'The Web' show's August 3rd 1997 episode that actually said that those in the medical profession don't have any secrets or hide things from the public. Puh-leaze!

David Friedman debunked one of these "repressed technologies" conspiracies in Price Theory:

It is sometimes argued that if a company with a monopoly of light bulbs invents a new bulb that lasts ten times as long as the old kind, the company will be better off suppressing the invention. After all, it is said, if the new bulb is introduced, the company can only sell one tenth as many bulbs as before, so its revenue and profit will be one tenth as great.

The mistake in this reasoning is the assumption that the company will sell the new bulb, if introduced, at the same price as the old. If consumers were willing to buy the old light bulbs for $1 each, they should be willing to buy the new ones for about $10 each. What they are really buying, after all, are light bulb hours, which are at the same price as before. If the company sells one tenth as many bulbs at ten times the price, its revenue is the same as before. Unless the new bulb costs at least ten times as much to produce as the old, costs are less than before and profits therefore are higher. It is worth introducing the new bulb.

The case of free energy may be different than the case of light bulbs, since the marginal cost of an additional unit of energy may be zero, and the patent may not last long enough to counter the loss in potential future revenue from the older energy sources. So Ebert is right to say that the movie's premise is flawed; no government (other than Saudi Arabia, perhaps) would try to suppress free energy out of fear that it would lead to recession, unemployment and plummeting stock prices. But it is conceivable that an energy company might try to suppress a new technology if the expected revenues from sales of the new technology are less than the expected revenues from the existing technology.

On the other hand, many other actors would have an interest in researching and releasing the new technology. Entrepreneurs who do not yet have a controlling interest in the energy industry; firms which use energy as an input to either their production process or as a complement to their finished goods; environmental organizations; non-profit research organizations - all of these groups would benefit from releasing a free energy alternative without the opportunity cost those in the energy industry must face.

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Micha, Every time something,

Micha,

Every time something, anything, changes in the economy, re-adjustment is required. The more interconnected, complex and optimized the economy is, the more re-adjustment is required. This almost always involves the destruction of a significant part of the value of existing specific capital.

If the President wakes up one morning and finds the blueprints for a universal source of free energy left overnight on the lawn by an alien landing craft, there should be little doubt that revealing this (either the blueprints themselves or their alien source) WILL result in major short and intermediate term disruptions to the economy, and maybe more important, put re-election at risk.

No matter how significant the improvement in the overall economy that the free energy can bring about in the long run, the economy must get much worse before it gets better. IF it were possible, a gradual introduction might well be the best path.

Regards, Don

No matter how significant

No matter how significant the improvement in the overall economy that the free energy can bring about in the long run, the economy must get much worse before it gets better. IF it were possible, a gradual introduction might well be the best path.

Does that mean there are conspiracies by companies to keep certain new technologies hidden?

Jonathan, "Does that mean

Jonathan,

"Does that mean there are conspiracies by companies to keep certain new technologies hidden?"

Who knows? If a single company comes up with an advance, it has to decide just how fast it needs to obsolete its current production.

Regards, Don

The other thing to remember

The other thing to remember is volume, both in the lightbulb and energy scenarios. Even if light bulbs lasted 10 times as long and sold for the same price, how many more bulbs would be sold because of a combination of a lower TCO and lower hassle (like in high ceilings, etc) for replacement?

As for energy, I think it is safe to assume there are other costs of energy than the raw materials in. There is the device that makes the energy. If there is no additional costs except the initial capital costs, how many more devices can there be that are suddenly cost effective? How many more uses for energy can we come up with? As the price goes down, 3rd world countries would be piling onto this technology. (At that point my concern would be waste heat.)

There's one more thing

There's one more thing that's always mystified me about these crackpot theories of suppressed technologies: total disregard for "whistleblowers".

In these paranoid fantasies, it seems an implicit assumption that the technology exists only on a blueprint or in a prototype and that is locked up in the CEO's safe never to see the light of day. In the REAL world technologies spring from the minds of scientists, plural, and there's no way you could get all of them on board for a grand conspiracy to maintain the status quo. The incentives facing each of them to go public with this tech, NDA's and corporate espionage charges be damned, are simply too great. In order to keep such a thing quiet the Evil Executives would have to buy off a hell of a lot of scientists with billion dollar retirement packages or have them all shot, neither of which is good for business OR easy to hide.

"In order to keep such a

"In order to keep such a thing quiet the Evil Executives would have to buy off a hell of a lot of scientists with billion dollar retirement packages or have them all shot, neither of which is good for business OR easy to hide."

Or ridicule them as crackpots. Just a thought.

A crackpot is a crackpot

A crackpot is a crackpot only if their theory doesn't work. With the openness of American society, and more importantly, the credulity of wealthy individuals looking to 'invest' their money in all sorts of weird things, I doubt that a ridiculed researcher would long lack for funds to try and prove the principle. And since, in the paranoiac fantasy, the technology is already proven and exists it would be a foregone conclusion that said ridiculed crackpot would prove himself correct.

"But it is conceivable that

"But it is conceivable that an energy company might try to suppress a new technology if the expected revenues from sales of the new technology are less than the expected revenues from the existing technology."

If the expected revenues from the new technology would be lower than the expected revenues from the old technology, then why would a firm try to supress it? Wouldn't it be considered useless? Or am I missing something...?

Ecodude, You are missing

Ecodude,

You are missing something. I intend to write a follow-up post on this issue. For now, think about the effect the introduction of fax machines has on the postal "industry."

Incumbent firms may not try

Incumbent firms may not try to suppress emerging technologies, but they often ignore them (much to their deteriment.) Examples include the integrated steel companies (didn't pay sufficient attention to minimill technology) and vacuum-tube-based electronics manufacturers (didn't pay enough attention to transistors). This phenomenon is well explored in Clayton Christensen's new book "The Innovator's Sollution" (reviewed at my blog)