Category — Green jobs
The broken window…. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction.
- Henry Hazlitt, Economics in One Lesson, chapter 4.
Henry Hazlitt (1894–1993) was a journalist turned economist and philosopher and overall giant of free-market thought. He was best known for his regular Newsweek column, “Business Tides” (1946–66), but also wrote for The Wall Street Journal, Nation, American Mercury, and New York Times, among other publications.
His list of books is impressive, and he became a great economist in his own right with the single work, The Failure of the ‘New’ Economics: An Analysis of the Keynesian Fallacies, a book which influenced this writer greatly in college.
For more description of Hazlitt’s career, which spanned a very dark time for classical liberalism, see here.
The Fallacy Explained
March 18, 2011 4 Comments
“Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.”
- Franklin D. Roosevelt (1933)
“[The 1930s Great Depression and today's Great Recession] were preceded by extraordinary expansions of bank credit, which fueled run-up’s in stock prices and real estate values…. The two economic crises also elicited similar (and equally counterproductive ) fiscal policy responses, combining substantial increases in federal spending, financed primarily by bollorwing, with higher taxes and more regulatory controls on the private sector.”
- William Shughard II, “The New Deal and Modern Memory,” Southern Economic Journal 2011, 77(3), p. 517.
The Green Jobs mantra coming from the White House is history in rhyme. FDR’s government jobs “to stimulate and reorganize the use of natural resources” is now government subsidies and mandates for more wind turbines and more solar panels. FDR expanded government jobs, taking resources away from the private sector to do it; Obama is fostering bubble industries ready to collapse when the public monies behind them do. (But is NOT all Obama: Texas Gov. George W. Bush helped the ailing U.S. wind industry more than anyone by signing the Enron Wind Corp.-sponsored state renewables manadate in 1989.)
FDR’s New Deal, and Hoover’s own ‘New Deal’ (Smoot-Hawley tariff, tax increases, high-wage guidelines), turned a depression into the Great Depression. And Bush/Obama, like Hoover/FDR eighty years before, has turned the recession into the Great Recession.
Obama is trying to pin an industrial renaissance and recovery on dilute energies that consumers have perennially rejected on grounds of extravagant cost and substandard reliability. The energy services from fossil fuels are what consumers demand, not that from wind, solar, and biofuels that are inferior in virtually every way. Energy density is an environment good–oil, gas, and coal win here too.
Worst still, Obama’s Energy Plan is Enron’s Energy Plan. Cap-and-trade, wind, solar, and engineering-over-economics energy efficiency: Ken Lay’s Enron did all of those things and lost money every year in each area. Yet this is the President’s “green’ dream for America today.
Here is Franklin D. Roosevelt’s inaugural address given in Washington, D.C. on March 4, 1933. [Read more →]
February 18, 2011 4 Comments
(with Luciano Lavecchia)
Mr Lavecchia is a fellow and Dr. Stagnaro the research and studies director at Istituto Bruno Leoni. This post follows the release of their recent analysis for Italy showing that for every ‘green’ job created by government, 4.8 ‘gray’ jobs are lost in the private sector.
Tradeoffs: if you chose this, you can’t chose that. In economics this is called opportunity cost, which is the next-best alternative to what is actually chosen.
The proverb in popular culture for this is “you can’t have the cake and eat it, too.” The Italian translation is “you can’t have a full barrel and a drunk wife.”
Apparently, politicians are less familiar with such a everyday-life concept. To some extent, they are right: they can get a full barrel and a drunk wife at the same time, provided that taxpayers and/or future generations will pay for it. Yet, even politicians are subject to constraints. That is particularly true in a period of crisis like now: shrinking public budgets and a slowing economy force even the politicians to make choices.
This brings us to the crisis of climate politics in Europe where most EU countries are considering cuts to the green subsidies.
The Socialist government in Spain dwarfed its support to solar power, causing a collapse in investments and thousands people to lose their jobs. In Germany, the conservative chancellor Angela Merkel proposed a similar reduction and is facing a huge Parliamentary opposition.
Italy decided as well to pare green incentives. How is that possible? After all, virtually every official EU document claims that the “green deal” will make us not just more sustainable, but also economically better off.
We will not deal with the environmental side of the issue in this post, leaving it to the wise words of Dr Gwyn Prins, for example, and perhaps a future post.
But what about the claim that renewable energy sources (RES) are good for the economy?
There is no spaghetti on this plate. If green sources are really cheaper than fossil fuels, there is no need to subsidize them, because households and businesses would have a built-in economic incentive to rely on RES, rather than on supposedly dirty, more expensive, energies. [Read more →]
June 11, 2010 4 Comments
Over the past few weeks, with more dents accumulating in the armor of warmism, a new battle line is taking shape: ” The U.S. economy is ill, energy is important, green jobs will save us, promote green jobs, give us your money.” Or something like that.
In fact, the shock troops of the green job army are now promoting the phrase “global weirding” to replacing global warming. There is also terminological retreat on the green jobs side. You see green tech is not actually going to do much positive for the economy, you should think of it rather as a form of “insurance,” against global weirding, I suppose.
As we limp into our second year of crony capitalism under Barack Obama, with small businesses loath to risk their funds in what is increasingly a rigged crapshoot, and the importance of having friends in Washington all the more vital, government-backed green jobs appear to many as the only way out.
Indeed, as the skirmish lines have formed up the green jobs proponents have tried to imbue the subject with the same kind of political insulation that AGW theory previously enjoyed. Criticizing money spent on green jobs is tantamount to rooting for America to fail. Don’t believe me, here’s Tom Friedman of the New York Times, chief cheerleader for government-backed (coerced?) green technology promotion quoting Joe Romm approvingly: “China is going to eat our lunch and take our jobs on clean energy — an industry that we largely invented — and they are going to do it with a managed economy we don’t have and don’t want,” And then there’s Tom Friedman’s approach to international economic competition: “Mr. Wen, I just have one thing to say to you: We are going all in on clean tech. I’m going home and I’m going to get through the U.S. Senate a cap-and-trade bill, a carbon price, a carbon tax, whatever it is that will trigger massive scale investment in clean tech in America. And please take this message back to China: We will bury you. We are going to bury you in clean tech.”
This will be the first trade war in history over insurance. [Read more →]
February 19, 2010 6 Comments
[Editor note: The post is a slightly revised version of what was posted at the Institute for Energy Research website on September 17. The primary author was Daniel R. Simmons, director of state energy affairs. Next week, Michael Giberson will evaluate IER's defense of the Danish study at MasterResource in light of his own first impressions.]
Energy is critical for our economy and our future, and the real issues deserve to be debated. That is why we appreciated the initial response on the American Wind Energy Association’s website to the recent study, Wind Energy: The Case of Denmark. It appears that AWEA actually read the study and raised some questions related to energy.
The same cannot be said of other responses, such as this blog post from NRDC. But then, of course, AWEA’s Senior Vice President for Public Policy couldn’t help himself and resorted to the same innuendo and ad hominem attacks against any effort that gets the facts out about the true costs of wind energy production.
Before we discuss AWEA’s disagreements with IER and the Danish wind study, it is important to note what AWEA did not disagree with.
- Wind is heavily subsidized;
- Wind power is an inefficient way to reduce carbon dioxide emissions. (The Danish wind study, for example, found that it costs on average $124 per ton of carbon dioxide reduced); and
- Subsidizing wind power is a very inefficient way to create jobs. (The Danish wind study found that, optimistically, “the subsidy per job created is 600,000-900,000 DKK per year ($90,000 – $140,000 USD). This subsidy constitutes around 175-250% of the average pay per worker in the Danish manufacturing industry.”)
The AWEA, however, disagreed, with a few other issues which we discuss below. [Read more →]
September 19, 2009 7 Comments
Houston Chronicle's Loren Steffy on Waxman-Markey (can this straight shooter be added to the newspaper's editorial board?)
The Houston Chronicle editorials have long been a bastion of climate alarmism and policy activism (see here and here), positions that must be so dear to the paper’s senior management (and owners?) that they have created badwill in the Houston community and no doubt a loss of readership.
One could call this courageous and a good thing if this position was well vetted and intellectually sound. A good paper should lead, not only follow, its audience.
But sadly, this is not the case. The case for regulating carbon dioxide (CO2) is quite questionable on purely physical scientific grounds (examine the empirical data; understand the debate over feedback effects regarding climate models). The balance of evidence is certainly not toward the high end of the Intergovernmental Panel on Climate Change (IPCC) temperature range, and it is, in fact, trending at the low end of this range with a decade of temperature quiet. The low end is where the problem not only fades but where little temperature reversal can occur no matter how capped global emissions are.
Given, the scientific debate is complicated, and recent data has been trending away from long-held views of alarmism. But on economic cost/benefit grounds, the case for policy activism falls apart, for leading economists have been unable to justify pricing CO2 via government mandates without assuming perfect knowledge (William Nordhaus’s “environmental pope“) where we have:
- Infallible knowledge about the problem (the “market failure”);
- Infallible knowledge about the solution (what to do policy-wise); and
- Perfect implementation of the solution (no political imperfections, or what is called “government failure”).
And then there comes the political animal called Waxman-Markey, a bill that was called a “monstrosity” by James Hansen at 648 pages–and is now more than double that in size.
So the debate is not only about market failure from unregulated greenhouse gas (GHG) emissions, as the Chronicle editorial board sees it. It is about analytic failure and government failure.
A second look at the paper’s editorial support of Waxman-Markey is called for. This is a bill that hardly resembles what economists and political scientists would call focused, rational public policy, even from a climate activism viewpoint. And a good place to start such a rethinking is with the piece published yesterday by the Chronicle’s ace business columnist/editorialist Loren Steffy. Steffy’s position on energy has clashed with the editorial slant before, and he has once again added a needed perspective in the energy/climate debate for Houston’s newspaper of record.
June 27, 2009 6 Comments
Buried within the controversial Waxman-Markey “cap and trade” bill to reduce greenhouse gas emissions (formally known as HR 2454, “The American Clean Energy and Security Act”) – a bill that may well reach the House floor for a vote before the July 4th recess – is another fairly arresting proposal: the creation of a federal “clean energy bank.” The idea (found in subtitle J, addressing “Nuclear and Advanced Technologies”) is to use federal tax dollars to provide subsidies (in particular, direct loans, letters of credit, loan guarantees, and insurance products or other credit enhancements or debt instruments) to private business in order to “promote access to affordable financing for accelerated and widespread deployment” of clean energy, energy infrastructure, energy efficiency, and manufacturing technologies.
The Senate is considering similar legislation in the form of S 949, “The 21st Century Energy Technology and Deployment Act,” but it would go further and also allow indirect subsidies as well, including securitization, indirect credit support, the acquisition or selling of debt or interest in the debt; and secondary market support through lending on the security of debt. That bill will likely be passed by the Senate Energy Committee this week as part of a larger energy bill titled ”The American Clean Energy Leadership Act.” [Read more →]
June 8, 2009 5 Comments
My wife and I (like many other residents) chose a retirement home in Grey Highlands because it is one of the scenic treasures of southwestern Ontario, dominated by the Niagara Escarpment, Beaver Valley, Lake Eugenia, the Saugeen River, and rolling rural countryside, woodlands, and wetlands. Now, however, the residents of Grey Highlands and the many tourists and visitors it attracts (major drivers of the local economy) are threatened with the prospect that its landscape will be blighted by 400-foot, 35-story-high industrial wind turbines that cause documented health and environmental risks, dramatically lower property values and impact one’s quality of life.
The Green Energy Act (Bill 150), now before the Ontario Legislature, is designed to expedite this process by taking planning responsibilities away from local municipalities like ours and remitting key decisions to subsequent ministerial regulations, leaving local residents no say in matters that will dramatically impact their lives and those of future generations. While we are obviously personally affected by this legislation, the following comments reflect a professional career studying economic regulation, including a year as Research Director of the Ontario Government’s Electricity Market Design Committee (1998). I have four major objections to the legislation. [Read more →]
April 16, 2009 5 Comments
As many of us have argued for some time, simple economic theory suggests that the government’s push to create “green jobs” will ultimately kill more jobs on net. While the theoretical argument is fully compelling, however, it’s nice to have hard data to show people that this particular theory plays out in reality.
That’s why this study, from the Universidad Rey Juan Carlos in Spain should be kept handy (the report is in English).
After examining Spain’s experience with an aggressive wind-power program, the researchers concluded: [Read more →]
April 10, 2009 14 Comments
A key element of the current administration’s approach to recovery from our current economic and financial crises is a fundamental reorientation of the kinds of work performed in our economy. But a proposed shift to “green” jobs in the name of well-paying, high-impact employment that cannot be outsourced overlooks the essential nature of how human labor fosters economic well-being.
Simply put, the key to prosperity is high productivity per worker. There is simply no other way to be rich unless you sit on top of a gold mine (or oil well) and have few mouths that need to feed off that source of wealth.
Discarding the vain hope that a nation of 300 million can live well off a raw materials-based economy, we are left with productivity as the wellspring of affluence. If work is productive then it adds value to the raw materials and machinery used, whether these are oil molecules, computer keyboards, wind currents, or trainloads of corn. [Read more →]
April 6, 2009 5 Comments