Several good articles have recently challenged the political promise of “green jobs” — the supposed five million jobs the new energy industry is going to create.
Politicians always promise that their programs will create jobs. It’s used to justify building palatial sports stadiums for wealthy team owners. Alaska Rep. Don Young claimed the infamous “bridge to nowhere” would create jobs. The fallacy is the same in every case: Even if the program creates jobs building bridges or windmills, it necessarily prevents other jobs from being created. This is because government spending merely diverts money from private projects to government projects.
Governments create no wealth. They only move it around while taking a cut for their trouble. So any jobs created over here come at the expense of jobs that would have been created over there. Overlooking this fact is known as the broken-window fallacy. The French economist Frederic Bastiat pointed out that a broken shop window will create work for a glassmaker, but that work comes only at the expense of the cook or tailor the shopkeeper would have patronized if he didn’t have to replace the window.
Creating jobs is not difficult for government officials. Pharaohs created thousands of jobs by building pyramids. Our government could create jobs by paying people to dig holes and then fill them up. Would actual wealth be created? Of course not. It would be destroyed. It’s like arguing the hurricanes create jobs. After all, the destruction is followed by rebuilding. But does anyone seriously believe that replacing destroyed buildings creates wealth?
The Broken Window Fallacy is an apt one here. As Beutler notes:
At some point the question was raised: are liberals and environmentalists being honest when they say green jobs will offset the jobs lost when the fossil fuel industry is forced to downsize, and, if so, why are labor leaders so reluctant to support climate change policies? My own view on this is that it’s an extremely narrow, hazy, and unanswerable question. Nobody really knows what sorts of advancements investment in alternative energy projects will yield in the coming years, or how labor intensive the production of a kilowatt-hour will prove to be a decade or five from now. If a green energy revolution does in fact mean a net job loss in the energy sector, nobody really knows how many jobs will be created when people (who will eventually be saving on energy costs) have more money to toss around in other markets. And nobody really knows if the economic impact of that displacement will be worse than the economic impacts of climate change.
It is not clear at all that switching to green energy will be better for the economy or for jobs. The reason to transform our energy industry is to combat climate change and lessen our dependence on fossil fuels. We have to accept that this be a net negative for our economy.
Listening to all these politicians was rhapsodic about green jobs and feed the frenzy for alternative energy alarms me. It’s alarms me because I’ve heard it before.
I’m going to make a prediction right now. We’ve endured a .com bubble and a housing bubble. Bubbles are, unfortunately, inevitable in a free market.
I predict that the next big bubble is going to be alternative energy. Billions of dollars are going to be sunk into untenable technologies. Millions of jobs will be wasted on useless endeavors. There’s nothing wrong with this — so long as it’s the private sector and not the government — creating the bubble. But when governments doing it, we will get a catastrophe on par with the housing crash we’re experiencing now.
The best thing about capitalism is that it allows failure — what economists call creative destruction. That’s how we make progress. The automobile was only able to replace dirty, disease-spreading horses because of the myriad failures of entreprenuers trying to find the right technology and business model. The airplane was only able to transport people all over the globe because of the spectacular and hilarious failures of aviation pioneers. The internet has only become a blowtorch of commerce because of the amazing failures of the .com bust. If we are going to revolutionize our energy industry, we need to fail a hell of a lot. The Engine of Progress run on the fuel of failure.
And government is bad at failure. It’s bad because government programs are never allowed to fail. From the War on Drugs to the War on Poverty to our education system, their failure is inevitably attributed to underfunding or a need for “reform”. And this reflexive defense of all things government can only get worse in the multi-trillion dollar stakes of energy. If it turns out, for example, that wind power is completely impractical on an industrial scale, the government will just keep funding it. Billions will be wasted, artificial fortunes will be built and Americans will spend years in what amount to make-work “green jobs”. We’ve already seen this phenomenon writ small in the Synfuels Corporation, in ethanol and in mass transit.
Even worse will be the opportunity cost. Forcing people to invest in politically-correct technologies that fail will siphon capital and labor away from the technologies that work.
The current paradigm is frankly a disaster waiting to happen. It has government fully entrenched in the energy industry, tightening every screw and wiring every capacitor. It singles out technologies for subsidies and mandates — hydrogen cars, hybrids, clean coal, electric cars, solar power, wind power, nuclear power — because of political perception, not physical or industrial practicality. I can guarantee that at least one — and possibly all — of the technologies listed above will fail. In the private sector, those failures will move capital and labor to better technologies. In the public sector, it will just result in more money being flushed down the toilet.
Frankly, who do our politicians think they are? To be able to predict the future of energy, a man would have to be an engineer, a physicist, a chemist, an industrialist and an economist. Where the hell do a bunch of lawyers (and one former POW) get off claiming such expertise? The only place that expertise exists in the collective minds and hands of 300 million Americans. And the only way to access it is to turn them loose through the engine of capitalism.
We need to keep our energy policy simple. A carbon tax to make fossil fuels less palatable. Perhaps a broad tax break for any and all alternative energies to make them more palatable. A corporate flat tax to give American industry the flexibility to change. Small nudges to the industry, not grand sweeping gestures. And certainly not command-and-control mandates and subsidies.
It’s this simple: Our energy future is too important to stake on government. We’ve already seen it fail with Synfuels and ethanol. New York State has funded windmills to provide alternative energy and they’re having to shut them down because they didn’t build the power lines to carry the electricity to the cities. These are not glitches. These are not anomalies. These are the results of the way government does things.
Do we really need more of that?
Many have talked of an “Apollo Program” for energy. This is a phenomenally bad idea. It will become nothing but a pork program disguised as an energy program. Billions will be larded out to connected interests on will-o-the-wisp technologies and big promises. And nothing will happen. Contrary to what Barack Obama says, that is what we’ve been doing for thirty years. And it will fail to fail — to generate the creative destruction on which true progress depends.
Additional funding for Department of Energy programs — programs judged by scientists and engineers and funded to research institutions — would be a reasonable idea. The one thing government can do is waste money. And if it wastes billions of dollars on programs that fail but produces one program that works, it will be worth it. So long as they are allowed to fail by the peer reviewers controlling the purse-strings.
The silver lining of our gas price cloud has been that millions of Americans have cut back their driving, shortened their commutes and bought more fuel efficient cars. As long as the price of gas stays relatively high — and it probably will — we will have all the incentive we need to innovate.
The way to a bright energy future is clear. Turn America loose. The engine of capitalism has invented cars and airplanes, computers and microwaves, vaccines and antibiotics. All without any government supervision or advice. My cell phone can communicate with anyone in the world, log onto the internet, take video and play music. No politician ever predicted or promised that. They simply deregulated the industry and let capitalism work its magic.