Coyote Blog

It is interesting watching a group of folks sink into mass hypnosis.  Specifically, much of the left is working really hard to convince itself that obsoleting much of the current energy and transportation infrastructure and raising the price of electricity and fuel will result in net jobs growth.  And, that despite 100 years of failure in countries too numerous to name, the government will suddenly become able to successfully plan and manage investment to the greatest economic benefit.  Here is just one example:

My meditation comes in the wake of reading an article about green jobs. Obama and (other) progressives have been making a case for government spending to develop a green energy infrastructure. As Van Jones said in his powerful speech at GreenFest, that's how we got the highway system and the space program that, to some extent, fueled the prosperity of the 50s.

The article makes the point that when the government picks favorites, it sometimes picks wrong, terribly wrong, as is the case with ethanol. That had me scratching my head for a minute, but then I remembered some key differences:

• Ethanol was an invention, lock stock and barrel, of the agribusiness lobby. It wasn't promoted by scientists as a good source of energy, as solar power is.
• The government already picks winners. It gives huge subsidies and incentives to the fossil fuel industry.
• If solar power turns out to be a boondoggle like ethanol, we should push the government to dump its incentives.

However, it seems unlikely that solar power will be such a dud, given that it's already boosting the economy as a sole sector of growth in these bleak economic times, according to the L.A. Times article.

Here was my response (with some links and additional thoughts added) from his comments section:

With your ethanol statement, aren't you contradicting your point about the government's ability to make sensible energy choices?  I agree that ethanol is a bad energy and environmental strategy, and that most scientists who were not industry shills thought it a break-even proposition at best.  But the fact is that Congresses and Administrations of both parties have backed tens of billions of subsidies for ethanol.  No matter what the rhetoric, when the rubber hits the road, politicians make political, not sensible, decisions.

The study you cited a while back about job gains is just silly - most economists laughed it off.  The study claimed 1.5 million net job gains from California electricity and energy efficiency regulations.  Based on October job numbers, this would mean 9.8% of Californians in October would not have had a job if these regulations hadn't been passed.  Really?  Does this pass any kind of smell test?  These regulations created a few visible jobs and killed some invisible jobs, which is how politicians always manipulate these numbers in their favor.

California has low per capita electricity consumptions primarily for three reasons:  1) it has the mildest climate in the country (when weighted for population location) 2) it has among the ten highest state-average electricity prices in the country and 3) its regulatory regime has driven a disproportionate number of heavy industrial electricity users out of the state (as demonstrated by manufacturing job losses higher than the national average and a low percentage of industrial electricity use vs. other states).

One may believe all of these things are a good thing from an environmental standpoint, but they certainly don't add up to net job gains.  Since you often drape yourself in the scientific mantle when responding to climate skeptics, I will do the same -- economics a science, and it is just as bad to willfully ignore this science as any other.  Claiming that being forced, by CO2 concerns, to obsolete current energy infrastructure and rebuild it in a different form is a gain to the economy is falling into Bastiat's broken window fallacy.

But here is the real argument for not letting the government pick winners -- any small body of people, no matter how smart, has too little information to do such planning on a national scale.  The better alternative is simply to raise the price (ie via a carbon tax) of the fuel or electricity that is viewed to have a high environmental cost (the tax can be made less regressive by offsetting the tax with a reduction in payroll taxes).

When prices rise due to the tax, you don't have a few hundred folks in government trying to figure out how to reduce demand, you have 300 million people trying to figure out how to reduce their consumption  (or start a business to help others reduce their consumption), all with their own knowledge of the opportunities they see around them.  Technocrats hate this kind of solution -- its too anarchic, its not "controlled" or "planned" -- but the fact is that it works.  In a large sense, since you are the environmental guy, I will say that it's more like nature.  Nature isn't planned or controlled from above - order and behaviors emerge bottom up from the responses of individual living things to stimulus.