The Government's "Green" Jobs

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Jonathan A. Lester, president of Continental Economics Inc., has written an insightful critique of artificial stimulus to wind power and the like (“Gresham’s Law of Green Energy,” in the Cato Institute’s journal Regulation, Winter 2010–2011, pp. 12–18). Like similar critiques, however, it could benefit from better placement of emphasis.

Lester laments the wasteful diversion of resources into uses that would otherwise not pay (waste, that is, barring untypically sound “externality” arguments). Furthermore, as for jobs created by subsidy- or regulation-based spending on green energy, the money so spent would have to come from somewhere. It would necessarily be diverted from spending on other public or private activities, where jobs otherwise created or maintained would be lost.

Such arguments put too much emphasis on spending itself relative to the allocation of real resources, including labor. Would the workers newly drawn into green jobs come from elsewhere, or would they have otherwise remained unemployed? Do green subsidies, tax breaks, and regulations really remedy economy-wide unemployment exceeding the frictional unemployment of normal times?

Unemployment in a recession reflects discoordination. Mutually advantageous transactions among workers, employers, and consumers are somehow frustrated. That is what needs attention. Putting emphasis on spending and its destinations is superficial. As W.H. Hutt used to say, spending is a measure of transactions accomplished; it is not what drives transactions.

Now, what impedes transactions in a recession? Usually or often it is a deficient quantity of money in relation to desires to hold it at the prevailing price and wage level. Sometimes (as now, apparently) the demand to hold money has increased, even if only passively or by default, because individuals and firms are especially uncertain about what transactions would be worthwhile. Adding to the usual uncertainty about business is uncertainty about taxation, government deficits and debt, complicated and costly regulations, and other government interventions, including unintended consequences of earlier ones.  This is what needs attention, not the allocation of spending between green and other employments.

Recession is not something to be remedied by shifting resources around. Besides channeling resources into relatively inefficient uses, artificially favoring green energy obscures the true nature of recession.




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Your Recovery Dollars at Work

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About three months ago, a curious sign appeared at one end of my street. It reads, “Putting America to Work. Project Funded by the American Recovery and Reinvestment Act.” It depicts a hard-hat-wearing stick figure digging into a pile of dirt — as if this jaunty cartoon of a “shovel-ready” project would soothe my anger at the wealth confiscation that funds such ridiculous endeavors.

Not much goes on in my small, East Coast rural enclave. The acquisition of “city” sewage by the nearest two towns was a big deal around here. So the government sign was the talk of our street. There was no explanation of why the sign appeared, no explanation of what project was in the offing. This was strange.

Then, roughly two weeks after the sign was erected, road crews appeared on both ends of our street and started tearing up the asphalt. The re-paving project was completed two weeks later.

Some neighbors speculated that the project was inflicted on us to predispose us to vote Democratic in the upcoming local election. But elections here are the smallest of small potatoes. It wasn't logical that federal funds would be spent to influence local voting. One neighbor speculated that the road was being prepared for a utility development set to occur in the next few years; but another road is slated to be built specifically for that purpose, at the opposite end of the nearest big town. None of us could come up with a reasonable answer. I suppose I could have attended a township meeting to divine the reasons behind this project, but I don’t have the time to waste and it’s highly unlikely that the simple folk, and by that I mean simpletons, who make up the township committee would have a credible answer.

As I said, this is a rural area. Roads need only be passable  — pickup trucks and tractors do just fine. Given that my street is only one section of a decently long through road, this paving project does not qualify as a “road to nowhere”; but it is very strange that the project was limited to one section of the road. Even stranger, there was nothing wrong with this part of the road in the first place. Nary a pothole! There is no meaningful difference between the street in its pre-recovery- dollars condition and the street in its post-recovery-dollars state. The road is now black. It used to be to gray.

In short, the project was a colossal waste of money. The dollars devoted to it should not have been printed, let alone spent. The workers involved in it did not achieve sustainable employment; they simply received unemployment subsidies by another name. No one was “put to work” in the sense that the designers of the Recovery Act intended the populace to believe.

Increased employment results from increased demand for goods and services. Allowing taxpayers to keep the majority of our dollars is the best option for “Recovery and Reinvestment” in all areas. Greater disposable income spurs demand as well as mitigating the risk of investment in small ventures. A person can spend his or her own dollars on any number of goods or endeavors that would contribute to sustained economic activity. More dollars in the hands of the citizenry will “put more people to work” than dollars in the hands of government ever will.

The first step to an actual recovery is limiting government spending. How do we achieve this?

We can apply my friend’s sound advice on dealing with young children: give them only very limited options. For example, instead of asking, “Where would you like to go for your birthday dinner?” ask, “For your birthday dinner, would you like to go to Friendly’s or McDonald’s?” Young children are ill-equipped to handle unlimited discretion. Governments are too.

With the country in its present mood, severely limiting government’s spending discretion is an attractive and realizable goal. We already have the set of tools necessary to do this. It’s called the Constitution.




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