Green jobs

by on October 19, 2009 at 7:33 am in Economics | Permalink

Here is a report from Gabriel Calzada Alvarez, on green jobs:

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

And this:

The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.

You can quibble with those numbers for a long time but when you admit opportunity cost basically he has the right idea.  This topic came up a few times in Edmonton and in the U.S. there is a guy named Bracken Hendricks pushing the "green jobs" argument.  To be sure, there are very real benefits from limiting climate change.  But if it takes more jobs to produce "green energy," that is a net cost to the economy, not a benefit.  Hendricks notes:

We estimate this sustained expansion in clean-energy investments
triggered by the economic stimulus program and the potential
implementation of Federal climate and clean-energy legislation, can
generate a net increase of about 1.7 million jobs nationally.

We're dealing now with something beyond the Keynesian short run and so those extra jobs are a drain of resources from elsewhere.  If you wish, sub out the word "energy" and sub in the word "agriculture" and then reevaluate the sentence from the vantage point of 1900.  Would it truly create net jobs — much less good jobs — to trash tractors and industrial fertilizer?  The ideal situation would be a technology where very few jobs were required to create and distribute the nation's energy supply.  Remember Bastiat's candlemakers' petition against the sun?  It's turning out to be a better hypothetical example than Bastiat himself ever realized.

Bill October 19, 2009 at 7:58 am

Here is a citation to a US Department of Energy critique to the Alvarez report:

http://www.nrel.gov/docs/fy09osti/46261.pdf

It is always fun to Google articles to see what others have said about a study.

mk October 19, 2009 at 8:17 am

The study calculates that since 2000 Spain spent €571,138 to create each “green job†, including subsidies of more than €1 million per wind industry job.

I always get antsy when I see numbers like this. Obviously the subsidy is purchasing a package which includes many things (e.g., renewable-energy infrastructure) besides employment. So the above quote would be sort of like saying “After looking around the Honda parking lot I see it costs approximately $25,000 to purchase each carburetor.” Well, it costs $25,000 to buy a car, and a car has a carburetor [in the 80's anyway], but really, that’s not the most accurate calculation, right? (I’ll admit I haven’t looked closely at the article so maybe it’s calculating things differently)

Bill October 19, 2009 at 9:04 am

Following up on other google critques of this study, in addition to the DOE study cited above, are the following

1. A report that it used incorrect data and methodology: http://greeneconomypost.com/debunk-spanish-study-green-jobs-1582.htm

2. Another analysis debunking same http://www.grist.org/article/2009-08-24-conservative-studies-on-clean-energy-jobs-miss-mark

What bothers me more are the conclusions of the DOE critique which is that the unpeered and draft report did not follow standards used to measure job effects.

Tyler Cowen October 19, 2009 at 10:00 am

You can poke holes in the study’s numbers plenty, but start by admitting that the basic point is correct.

sam October 19, 2009 at 10:25 am

Tyler: I am confused as to why in the current environment of 9.8% unemployment the idea that limiting climate change would require more jobs, not less, is a bad thing?

In the current employment environment where the loss of manufacturing and construction jobs are the hardest hit, why wouldn’t we want the displaced workers to switch it up to green jobs?

Shouldn’t full employment be the goal of the government?

Highgamma October 19, 2009 at 10:28 am

As an aside, Bastiat was brilliant and his writings, even as translations, make a clear and insightful case for free trade. I’ve used the “petition” as the basis for exam questions. It’s neat to see students chuckle during an exam.

rpl October 19, 2009 at 11:11 am

Mike Huben,

The “basic point” is that when you unpack the “Green Jobs” argument, what politicians are saying is that requiring more workers to produce the same number of kilowatt-hours is by itself a boon to the economy. This proposition is, to put it mildly, nonsense. The study Tyler cited attempts to quantify the economic costs of green jobs initiatives, and some people want to quibble with the numbers and methodologies, which is reasonable enough. The qualitative conclusion, however, that reducing productivity in the energy sector is an economic cost, not an economic benefit, is so obvious that it shouldn’t even be a matter of dispute. That it is a matter of dispute is due to politics, not any serious scientific study that supports the other side.

John Dewey October 19, 2009 at 12:10 pm

hibikir: “Spain’s investment in this technology is an upfront cost, an investment to eventually become an energy exporter, instead of an importer.”

Why should that be a goal for Spain? or the U.S.? or any nation?

hibikir: “The fact that it is green energy is just mandatory for a country like Spain,”

Why is it “mandatory”? A number of nations on this globe lack marketable oil and coal reserves, yet are able to achieve higher per capita GDP than Spain.

liberty October 19, 2009 at 12:20 pm

hibikir: “Spain’s investment in this technology is an upfront cost, an investment to eventually become an energy exporter, instead of an importer. … It’s the same question a CEO faces when starting a new division after a few years of losses. ”

But is a country just like a firm? If it was, then it would make sense for any government to determine all the investments of the country — just as any CEO of a firm decides the investments for that firm. In fact, the CEO decides all the pay for the workers, what they produce and what price to sell it at.

However, with the exception of the experiment with socialism, the consensus has been that a country is not like a firm, should not be organized hierarchically as firms are, and should not decide investments centrally, by the government.

How can the government know if it should be an energy “exporter” or “importer”? Trade is beneficial for both sides due to comparative advantage and specialization — Spain can know that it should be an “importer” if it is costly to create energy at home and cheaper to import. Trying to “create jobs” and “invest in Spain’s future” by centrally investing in a technology that it would be cheaper to import is counter-productive and nonsensical.

Tony October 19, 2009 at 12:36 pm

>We’re dealing now with something beyond the Keynesian short run and so those extra jobs are a drain of resources from elsewhere

From where? Mortgage backed securities? Credit default swaps?

That argument about the government picking winners is a bit of a straw man, don’t you think? This is a case of the government identifying things that aren’t good (dependence on oil, pollution, global warming) and trying to steer away from that.

libert October 19, 2009 at 12:46 pm

As far as I can tell, Tyler’s main points are:

1) According to the Alvarez study, climate policy will result in fewer jobs on net.

2) Contrary to popular belief, we should interpret more jobs as a cost, rather than a benefit.

From the logical corollary of the second point, there is an interesting implication of these two arguments together.

Seward October 19, 2009 at 1:28 pm

Ahh yes, make work programs. Lovely. Those have never been problematic, waste or corrupt.

Seward October 19, 2009 at 2:10 pm

John Dewey,

You know, we are also “dependent” on imported water. ;)

Bill October 19, 2009 at 5:25 pm

Let me ask a question of Trust. If you knew that “You can poke holes in the study’s numbers plenty,” why was it posted without that disclosure that there were holes in it?

It is not good enough to say you should “start by admitting that the basic point is correct.” How can anyone start from admitting a basic point is correct when this is supposed to be a research paper.

Have I missed something about the scientific method and academic integrity?

What I am concerned about is the quality of what gets in the stream of public discourse. Today it is very easy to “publish” something picked up from someone else. You trust, or you want to trust, the person who selected it.

I think this is a fine website. I like it when it focuses on micro. But, I have the feeling that economists like Levitt, and now this site, want to be cult leaders. I don’t want to be a cult follower, or at least not one that is unaware that he is following some poor research.

I think I liked economics more when it was the dismal science, not the pop science. Give me some more dismal.

Bob Murphy October 19, 2009 at 6:48 pm

For those interested, we at IER wrote a “response to the response” analysis of the DOE’s critique here.

Odograph and others, who say the Spanish experience is totally irrelevant to the US: When President Obama and others were pointing to Spain as an example of the success of green jobs initiatives, did you post comments at other blogs saying that Obama was being silly?

Eric H October 19, 2009 at 11:35 pm

TC: To be sure, there are very real benefits from limiting climate change.

MH: The basic point here seems to be uncritical pushing of conservative/libertarian propaganda.

Damn right-wing environmentalists.

Oh, did you have something else in mind as the “propaganda”? Could you be specific please?

John Dewey October 20, 2009 at 8:40 am

Steven W.: “First, it is the easiest thing we can do to increase more job openings.”

Sorry, but I think you are mistaken. The easiest way to create more jobs is to increase demand for consumer goods. The easiest way to increase demand for consumer goods is to sharply cut personal income tax withholding. Of course, allowing private citizens to decide where to spend their money does nothing to increase the power of elected officials. So our elected officials – who are elected to represent our interests – will instead derive schemes to increase their power – and increase the campaign contributions from those who feed at the public trough.

John Dewey October 20, 2009 at 12:55 pm

Just to clarify my last comment, when I wrote:

“The easiest way to create more jobs is to increase demand for consumer goods.”

I was referring to the general economic meaning of the term consumer goods, which includes consumer services.

sam October 21, 2009 at 1:08 pm

HEY ECON GENIUSES, WHY WON’T ANY ADDRESS THE ISSUE AS TO WHY HIGHER EMPLOYMENT RATES VIA GREEN JOBS IS A BAD THING? IN MICHIGAN, REAL UNEMPLOYMENT RATE IS LIKELY OVER 20%. THE IDEA THAT SUBSIDIES COULD CREATE JOBS, YET THAT IS A BAD THING, IS FUCKING STUPID.

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