Wednesday, February 29, 2012

Matt Ridley on How Expensive Green Energy Destroys Jobs, While Cheap Shale Gas Creates Jobs

Matt Ridley masterfully applies Bastiat's "broken-window fallacy" to green energy jobs, writing last December in City AM, a UK financial newspaper:

"When is a job not a job? Answer: when it is a green job. Jobs in an industry that raises the price of energy effectively destroy jobs elsewhere; jobs in an industry that cuts the cost of energy create extra jobs elsewhere.

The entire argument for green jobs is a version of Frederic Bastiat’s broken-window fallacy. The great nineteenth century French economist pointed out that breaking a window may provide work for the glazier, but takes work from the tailor, because the window owner has to postpone ordering a new suit because he has to pay for the window.

You will hear claims from Chris Huhne, the U.K.'s anti-energy secretary [he was recently forced to resign and faces criminal charges], and the green-greed brigade that trousers his subsidies for their wind and solar farms, about how many jobs they are creating in renewable energy. But since every one of these jobs is subsidized by higher electricity bills and extra taxes, the creation of those jobs is a cost to the rest of us. The anti-carbon and renewable agenda is not only killing jobs by closing steel mills, aluminium smelters and power stations, but preventing the creation of new jobs at hairdressers, restaurants and electricians by putting up their costs and taking money from their customers’ pockets.

Contrast that with news from the United States that, according to a report from IHS Global Insight, the cheap shale gas revolution now in full flow has created 148,000 jobs directly within the gas industry and – by making energy cheaper – has created at least another 450,000 jobs elsewhere in the economy. By 2015, the total impact of shale gas will be 870,000 new jobs, says the report.

Back in 1800, Britain was becoming the richest country in the world with the fastest economic growth and the fastest job creation – the China of its day. That was not because we had suddenly become cleverer than everybody else at inventing things. It was because we had stumbled upon limitless, dense and above all cheap energy in the form of coal, and harnessed it to mechanize industry, cheaply amplifying the labor productivity of each person so much that he could be paid high wages.

That lesson – that cheap energy is an employment multiplier, while costly energy is an employment divider – has been forgotten. Please let us recall it before the green jobs myth causes more unemployment."

HT: Warren Smith

18 Comments:

At 2/29/2012 4:07 PM, Blogger Paul said...

No matter. Today Obama's Energy Secretary declared they are not interested in lowering gas prices.

 
At 2/29/2012 4:07 PM, Blogger Jon Murphy said...

After reading The Rational Optimist, I have huge respect for Matt Ridley.

 
At 2/29/2012 4:18 PM, Blogger morganovich said...

spain saw this very clearly.

every green job created cost 2.2 jobs elsewhere.

http://www.american.com/archive/2011/april/on-green-energy-plainly-not-helping-spain

• Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.

 
At 2/29/2012 5:04 PM, Blogger Benjamin said...

I agree with the sentiments of this post, but we must also remember that the price signal does not capture the cost of pollution.

If you can excrete and pass the cost onto the public. you will win.

To the extent that green jobs reduce the cost of pollution, then they create jobs or wealth. In other words, if you pay someone $50k a year, but they reduce $100k a year in pollution costs, then that is a win.

Tricky issue.

Milton Friedman said to tax pollution, and in general I go along with that. The free market fails when it comes to pollution.

 
At 2/29/2012 5:23 PM, Blogger Paul said...

"To the extent that green jobs reduce the cost of pollution, then they create jobs or wealth. In other words, if you pay someone $50k a year, but they reduce $100k a year in pollution costs, then that is a win."

WHat does that have to do with your boyfriend's green jobs swindle?

 
At 2/29/2012 8:31 PM, Blogger Benjamin said...

Obama's green jobs swindle is a perversion of what the federal government should do---as is the much larger and annual and evidently permanent perversion called "ethanol," a GOP-boner rural pink-o "jobs" program.

When it comes to subsidies for "green" jobs, no one even comes close to Grifters On Parade----the GOP.

 
At 2/29/2012 9:03 PM, Blogger VangelV said...

I agree about the green jobs. But shale gas is not cheap. The jobs created were the result of terms in leases that forced companies to drill at a time when the product that they sold was selling for far less than it cost them to produce.

 
At 2/29/2012 9:09 PM, Blogger Paul said...

"..a GOP-boner rural pink-o "jobs" program. "

So you're back to that nonsense. Unbelievable.

 
At 2/29/2012 10:52 PM, Blogger juandos said...

"If you can excrete and pass the cost onto the public. you will win"...

You liberals just live to say something stupid, don't you pseudo benny?

Excrete?!?! The public is purchasing the energy so its the public that's doing the 'excreting' you clown...

No wonder California is such a mess...

 
At 2/29/2012 11:00 PM, Blogger clean energy dude said...

We currently have two different options.

We either take responsibility now and ween our society off fossil fuels through the use of renewable technologies.

Or we can kick the can down the road for another 100 years and ride the cheap natural gas train until it runs out.

Than what?

 
At 3/01/2012 2:06 AM, Blogger Ron H. said...

Paul

"So you're back to that nonsense. Unbelievable."

...way up there in the top 5 - or bottom 5 as the case may be.

 
At 3/01/2012 2:27 AM, Blogger Methinks said...

Or we can kick the can down the road for another 100 years and ride the cheap natural gas train until it runs out.

Than what?


Get on your bike and figure out an alternative. I can't even calculate how rich you'd be if you cold find a fuel as efficient as hydrocarbon.

Of course, it'll be worth your investment. Way worth it. You won't need government subsidy because you'll have no shortage of investors.

There's no such investment to be had, alas. All we have is government burning money in the green energy crony subsidy pit - money that could eventually be used to fund a really worthy invention when it appears. And when it appears, enough private money will recognize it that it won't need subsidy.

But, that's if there is such a thing as peak oil. The peak oilers have been screaming about the falling sky for a long time. It's a myth.

 
At 3/01/2012 10:14 AM, Blogger juandos said...

clean engery dude says: "Or we can kick the can down the road for another 100 years and ride the cheap natural gas train until it runs out"...

What do you care? You'll be dead of old age before then...

 
At 3/01/2012 10:51 AM, Blogger morganovich said...

clean energy dude-

that's a completely false choice.

what we can, and should, do is let the market figure it out.

if fossil fuels start to become scarce, price will rise encouraging investment in new technologies.

this things happen all by themselves. we need no do anything. the market will take care of it.

what we most decidedly do NOT need to do is force conversion to expensive and unreliable technologies now. that does immense harm as the green crowd in europe is discovering so poignantly.

they led with the same false choice you lay out, and have fallen on their faces and done great economic harm as a result.

 
At 3/01/2012 11:59 AM, Blogger morganovich said...

worth noting benji-

the 2005 energy policy act received majority support from democrats as well. obama voted for it. mccain voted against it.

the coburn bill (ending subsidies) got bipartisan support, but more dems voted against it than gop.

your grasp of history on this seems a bit flawed.

 
At 3/01/2012 5:32 PM, Blogger Paul said...

Morganovich,

I've pointed out the same facts to Benji many times. Obama championed ethanol during his time in the Senate, and even flew around ADM corporate jets during the 2008 campaign. NO matter, he continues to insist ethanol is 100 % GOP blameworthy. He's an idiot.

 
At 3/01/2012 5:53 PM, Blogger morganovich said...

paul-

if only he were a quiet idiot or at least not so repetitive.

it's like arguing with a sock monkey that only has 6 phrases and no ability to change them based on input.

 
At 3/01/2012 8:50 PM, Blogger Ken said...

We either take responsibility now and ween our society off fossil fuels through the use of renewable technologies.

Green energy dude, along with Chu, Obama, and the rest of the greenies are taking on the responsibility to hike up energy prices to destroy our economy and reduce our wealth.

And why is it all, I mean at all, "responsible" to "ween our society off fossil fuels"? This is just taken as an article of faith by enviros, greenies, and the left, but I really don't see how this is responsible in any way.

 

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