Saturday, November 8

Myth of More Green More Jobs

It is the old broken window fallacy:

As appealing as the repackaging seems on the surface (lots of high–paid, high–tech workers in lab coats), the support for these claims collapses once it is examined. A little thought experiment helps give perspective.

Fuzzy Math

Suppose Jones used 1,000 kilowatt–hours (kW–h) when the price of electricity was $0.10 per kW–h. He spent $100 on electricity (1,000 kW–h x $0.10 = $100). Now suppose the price rises to $0.15 per kW–h. Responding to the higher price, Jones cuts his electricity consumption to 700 kW–h. How much better off is Jones with the higher price? Most would say, since he is now spending $105 for less electricity (700 kW–h x $0.15 = $105), he is worse off.

However, those promoting restrictions on CO2 turn economics, logic, and math upside down. In their world, the answer is: Jones consumes 300 kW–h less and, at $0.15 per kW–h, he saves $45 (300 kW–h x $0.15 = $45). Then he spends this "extra" money and creates jobs.

Everybody else correctly thinks that since Jones now spends $105 for 30 percent less electricity, he is $5 poorer and has to get by with less energy. He has less to spend, not more. Thus there will be less employment, not more. This is especially true since one of the ways Jones cuts energy consumption is to use more expensive energy–conserving products, making his loss greater than $5