Government efforts to employ “demand-side management” in North Carolina energy, transportation, land-use, and water policies are inconsistent with the principles of a free society. That’s the conclusion the John Locke Foundation‘s top economist reaches in a new Spotlight report.

“If nothing else, the advocates of so-called demand-side management are bold,” said report author Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “They tend to be quite clear in making their goals of social engineering and the rearrangement of lifestyles explicit. They often refer to ‘behavior modification’ and ‘restraining and restricting’ certain activities or lifestyle choices.”

This DSM model of public policy has “crept” in to the state of North Carolina’s approach to state and local regulation over the past decade, Cordato said.

“This approach dominates some of the state’s most important decisions today,” he said. “But no one has asked whether the philosophy behind this approach is appropriate in a free society — a society in which government is supposed to be the servant, not the master.”

Understanding DSM requires a basic knowledge about supply and demand, said Cordato, a Ph.D. economist. “Demand refers to people’s decisions about what and how much of a particular product or service to purchase and consume,” he explained. “Supply refers to producers’ decisions regarding what and how much to produce. Demand is manifested in human behavior and choices, and the act of supplying is an attempt to accommodate those choices.”

Free markets are dominated by what might be called consumers’ “supply-side management,” Cordato added. “If those operating on the supply side of markets do not strive to provide what demanders want, they go out of business. In a free society, government should take this same perspective.”

Demand-side management takes the opposite approach, Cordato said. “Advocates of DSM turn the supply-and-demand relationship on its head,” he explained. “Demand is not something to be responded to; it is there to be managed by government officials. The idea is to use public policy and government force to control purchases and consumption habits. In other words, government should control citizens’ behavior and choices.”

While this approach can cover a range of topics — including the location, density, and size of homes — Cordato focuses his attention on energy and transportation policies.

A prime example of energy demand management is the N.C. General Assembly’s Senate Bill 3, approved in 2007. “This bill’s energy-efficiency standard mandates an overall reduction in electricity consumption of 5.5 percent,” Cordato said. “It calls for central control of North Carolina citizens’ energy use.”

“But S.B. 3 was put in place with no discussion of what the right amount of energy usage is — the amount that accommodates North Carolinians’ demonstrated wants and lifestyles,” Cordato added. “Instead, the idea that supply should respond to demand was thrown out and replaced with the idea that electricity demand should be shaped by ‘visionaries’ in Raleigh who are somehow able to divine the correct amount of energy that citizens should be consuming.”

On the transportation side, demand management is a planning tool meant to advance so-called “sustainable” growth or development, Cordato said. “From the perspective of sustainability, transportation is seen as an umbrella issue,” he said. “It encompasses not only human mobility, but also land-use planning, energy-use management, air quality, zoning, and lifestyle management.”

Much of transportation demand management targets cars, Cordato said. “The primary goal is to manipulate people out of their cars and onto forms of mass transit,” he said. “TDM advocates acknowledge that highway construction — which would accommodate people’s real transportation desires — would reduce the need for the government manipulation.”

In reality, demand-management advocates simply want to dictate how other people live, Cordato said.

“There’s a lot of talk about ‘livable communities’ and creating ‘visually attractive public spaces,'” he said. “There is no recognition that these concepts are subjective. The idea is that state and local bureaucrats will define what is ‘livable’ and ‘attractive’ and then manipulate people’s choices by designing a transportation system that accommodates the government bureaucrats’ vision.”

Elected leaders and bureaucrats have avoided a key part of the debate, Cordato said. “The idea that demand-side management might be inconsistent with a free society — where the role of government is to accommodate people’s choices rather than manipulate them — is not considered or recognized,” he said. “Demand-side management is not about the environment, or transportation, or energy use. It is about the proper role of government in a free society. Unfortunately, it is very unlikely that its advocates will ever engage in a debate on this fundamental issue of principle.”