Coal is a dead man walking

                                      -Kevin Parker (Deutsche Bank Executive)

Well, I don’t know about that, Kevin. On a billboard greeting travellers at the airport in Ranchi (India), the capital of the Indian state of Jharkhand, ‘Welcome to the Land of Coal’ is present in block letters, and in case you are seriously curious you will not have any difficulty finding someone influential in that country to proclaim that coal is the way to go, and such will be the case for many years in the future. India needs more coal, and apparently will continue to need it in order to maintain the momentum of economic development. Moreover, in the International Energy Agency (IEA) World Energy Outlook for 2011, it was easy for my students to detect and comment on a pronounced failure of aggregate coal  output to match the accelerating demand.

In the film ‘The Formula’, Marlon Brando informs a Swiss colleague that, “Today it’s coal. In ten years it will be gold”. As owner of a large part of the hard coal deposits in the U.S., as well as a superior process for producing synthetic oil from coal, the Brando character may well have known what he was talking about. Of course his time frame was very likely wrong: it wouldn’t be ten years, but several decades before the billions of dollars started to roll in, although in terms of historical time it hardly makes a difference. Besides, in showing that they know something meaningful about the future importance and use of coal, the writers, directors, producers, and maybe even the actors involved with this film gave the impression that they were better informed about coal than many (and perhaps most) energy economists.

I’m sure that my opinion of Hollywood is similar to that often expressed by Mr Brando in his more articulate off-screen moments, but one thing the movie decision-makers must be given credit for is that they understand the way that some political and industrial celebrities take care of real business:  hypocrisy, public relations, bribes and taking advantage of the naiveté of drowsy voters. If you study game theory, an introductory course might emphasize players, payoffs, and strategy, but more comprehensive game theory literature pays particular attention to information, and in particular incomplete information, which is a condition in which some players can have access to very important information which is not in the public domain. As David Lloyd-George, prime minister of England during the First World War, said of the general public at one particularly traumatic point during that struggle: “Of course they don’t know – how could they know.” What he didn’t say was that this arrangement suited him perfectly.

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