Is energy our friend or our enemy? In their personal lives, most people regard energy as an essential friend. It powers our computers, warms our homes in the winter, fuels our cars and planes, and provides a necessary input to produce virtually everything we use. Modern life would be inconceivable without the friendly side of energy.

But in recent decades, energy has also become an enemy. Presidents have lamented our “addiction to oil,” we have gone to war to protect oil fields from hostile powers, and air pollution from fossil fuels kills tens of thousands of people every year. Perhaps most worrisome, the accumulation of greenhouse gases such as carbon dioxide threatens to change the earth’s climate in ways that are unpredictable and potentially dangerous.

The two faces of energy are the primary reason why energy policy is so controversial and tangled. We need national policies that address the enemies of pollution and global warming. But because energy is such a large part of consumer budgets and so central to our advanced economies, people are reluctant to allow energy prices to reflect the true social costs of energy consumption. We see this tradeoff play out in energy and environmental policy year in and year out.

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The tangled history of energy policy is admirably described in the new book by legal scholar Michael Graetz, The End of Energy. Graetz is a professor of tax law at Columbia University and a major thinker about the design of our current tax system. He was at the Yale Law School for almost twenty-five years before that. He also was deputy assistant secretary of the Treasury for tax policy in 1990–1991. His earlier works include proposals to simplify the tax system and an influential book on the inheritance tax.1

Graetz’s new book is primarily a description of the development of energy policy in the United States from Nixon through Obama. His summary judgment gives his basic theme:

This book is about the problems, policies, and politics of energy in America…. It is about all the major forms of energy…and how our government’s attempts to control and decontrol, subsidize and command, legislate and repeal over the past four decades have produced a system and economy of energy production and consumption that fails to well serve our needs or those of our environment. The book is, then, in one sense a story of failure….

As will be clear, I largely agree with Graetz’s analysis and conclusions.

The first major book on energy economics was an elegy to energy our friend. This was The Coal Question, written by William Stanley Jevons in 1865. Jevons was one of the most brilliant economists of…