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The Heat Is On!

Mises Daily: Friday, June 03, 2011 by

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[An MP3 audio file of this article, narrated by the author, is available for download.]

With summer upon us and temperatures rising, we should stop and thank our lucky stars for air conditioning — and wish upon the same stars that government won't destroy it, because it seems to be trying to do so.

Willis Haviland Carrier invented the modern air conditioner in 1902. Thomas Midgley Jr. created the first chlorofluorocarbon gas, Freon, in 1928. America got its first exposure to air conditioning at the movie theater in the 1930s during the heyday of motion pictures. After the Hoover/Roosevelt Depression and WWII were over, Americans indulged in the new technology and applied it to factories, office buildings, homes, and eventually automobiles. It was quickly noticed that air conditioning significantly increased worker productivity.

The technology and all the products based on it had a transformative effect on American life and society. Not only does air conditioning provide comfort; it also provides new possibilities in architecture, manufacturing, transportation, and agriculture. It permits good living conditions in areas that would otherwise be intolerably hot and humid, such as Dallas, Houston, and Orlando.

In architecture, buildings can be larger and thicker because window ventilation is unnecessary. We can also build higher because window ventilation is impracticable at skyscraper heights. These advantages allow us to conserve on land and live in denser concentrations. Air conditioning also allows for new styles of architecture, because windows are no longer required. Museums can be built anywhere that will effectively conserve our treasures and art for many generations longer. Prior to air conditioning, museums and libraries could not be located in hot and humid areas without risking weather-related degradation to its holdings.

Modern air conditioning was invented for the purpose of providing the correct temperature and humidity for advanced printing technology. Air conditioning was also important for improving textile production, hospital surgeries, plant and animal breeding, power plants, and of course the clean rooms used in the production of computer chips, pharmaceuticals, and bioengineering. The data centers that we all depend on are only possible because of air conditioning.

Most forms of transportation also rely on air conditioning. Air-conditioned cars and trucks allow us to travel on highways at high speeds with little net energy consumption and keep our cool. Passenger travel by planes and high-speed trains are also only possible because of air conditioning. We can go farther and faster, all in comfort, thanks to air conditioning.

Want Clean Air? Try Air Conditioning.

AC has been a boon to our health. Not only is it important for eliminating germs and viruses in surgical rooms; it also reduces infant mortality, improves recovery times, and has reduced the number of heat-related deaths in big cities. In fact the first attempt to invent the modern air conditioner was by a physician from Apalachicola, Florida, who wanted to be able to provide relief for his patients from the high heat and humidity.

Remarkably, the cost of air conditioning plummeted over the decades. The cost of air conditioning units declined, and they became increasingly reliable, safe, and efficient in turning electricity into relief from heat and humidity.

That is until recently. Twenty years ago I had an air-conditioning system (i.e., heat pump, HVAC system) installed in a house that was almost 1,000 square feet for $1,600. I just got the preliminary estimate, not an actual bid, to replace a system on a similarly sized house for $11,000. Not surprisingly, this is the reason for this article.

EH.net provides you with six ways to compare dollar values in the past to dollar values in the present. The lowest estimate for $1,600 (1991 dollars) was $2,670 the high was $4,040. Two other anecdotes from friends indicate a doubling or tripling of the overall cost of heat-pump systems in nominal terms over the same time period.

The Quotable Mises
"The Heat is on!"
–  Former Eagle Glenn Fry, 1984

Naturally, my first instinct was that the government had somehow fouled up this market like everything else. Or as Glenn Fry wrote in his 1984 hit song, "The shadows are on the darker side. Behind those doors, it's a wilder ride." In this case, it is government bureaucrats and environmentalists behind this door, in the shadows, on the dark side. I suspect some manufacturers and patent holders probably played some role along with the dealers and installers' associations.

In 2006, the Department of Energy required that heat pumps and central air conditioners meet an efficiency rating of 13 SEER or about a 60 percent increase over existing equipment. Equipment that is rated 13 SEER is also much larger and heavier than previously existing equipment so that most homes require substantial and costly modifications to the coil, electrical, gas lines, line sets, concrete pads, stands, plenum, transitions, valves, and more. This newly designed equipment is naturally thought to be less reliable, and to have a shorter life expectancy, than existing technologies.

Starting in 2010, the government began phasing out the preferred refrigerant, Freon R-22, in order to meet its obligations under the Montreal Protocol. Freon R-22 was the most efficient refrigerant for many years. Ironically, the transition from Freon to subsequent refrigerants coincided roughly with the expiration of DuPont's patent on Freon and the establishment of their new patents on replacement refrigerants.[1] The justification for replacing Freon R-22 is that it is thought by some to harm the ozone layer and contribute to global warming.

Having bigger, more complicated machines running on a less efficient refrigerant is a recipe for inefficiency. For example, every additional pound the machines weigh requires a lot of energy. It takes 6.2 kWh (kilowatt hours) of electricity to turn alumina into one pound of aluminum (just the smelting process) and of course it take lots of energy to turn bauxite into alumina, to mine and transport the bauxite, and to ship the aluminum to market. Even though much of the aluminum we use today is recycled, the production of aluminum still uses more than 1 percent of America's electricity.

In summary, the government has taken a wonderful product of the market that produced a highly positive transformation on human life — a product that was becoming safer, cheaper, and much more efficient over time — and turned it into something that is more expensive and less efficient overall.

Just think: if the Fed had not caused a housing bubble, there would be millions of fewer homes to heat and cool. Most of those excess homes were built bigger than ever, way out in the suburbs in precisely those places that absolutely require air conditioning, like central California, Nevada, Arizona, Georgia, and Florida.

With summer temperatures headed higher, air-conditioning systems will be failing across the country. Poor people and people who have lost their jobs in the Bush/Obama depression are unlikely to be able to pay for these very expensive systems in the event that theirs break down. For them it will be one giant 80-year step back in history to the time before air conditioning, the Great Depression.

Notes

[1] Smith, B. "Ethics of Du Pont's CFC Strategy 1975–1995," Journal of Business Ethics, Volume 17, Number 5, April 1998, pp. 557–568.