During the campaign, President-elect Barack Obama promised, "We'll invest $15 billion a year over the next decade in renewable energy, creating five million new green jobs that pay well, can't be outsourced and help end our dependence on foreign oil."
Green jobs like building windmills, solar power plants, electric cars, and weatherizing houses. But won't those new green jobs come at the expense of a bunch of non-green jobs, say, jobs in legacy auto companies, coal mining, oil drilling & refining, and so forth? As American Enterprise Institute resident scholar (and former Reason Foundation environmental director) Ken Green explains, Obama is indulging in an economic fallacy:
Unfortunately, the idea of government "job creation" is a classic example of the broken window fallacy, which was explained by French economist Frédéric Bastiat way back in 1850. It is discouraging to think that nearly 160 years later, politicians still do not understand Bastiat's basic economic insight.
He explained the fallacy as follows: Imagine some shopkeepers get their windows broken by a rock-throwing child. At first, people sympathize with the shopkeepers, until someone claims that the broken windows really are not that bad. After all, they "create work" for the glassmaker, who might then be able to buy more food, benefiting the grocer, or buy more clothes, benefiting the tailor. If enough windows are broken, the glassmaker might even hire an assistant, creating a job.
Did the child therefore do a public service by breaking the windows? No. We must also consider what the shopkeepers would have done with the money they used to fix their windows had those windows not been broken. Most likely, the shopkeepers would have plowed that money back into their store: perhaps they would have bought more stock from their suppliers, or maybe they would have hired new employees. Before the windows were broken, the shopkeepers had intact windows and the money to purchase more goods or hire new workers. After the windows were broken, they had to use that money to repair the windows and thus were unable to expand their businesses.
Now consider Obama's "green jobs" plan, which includes regulations, subsidies, and renewable-power mandates. The "broken windows" in this case would be lost jobs and lost capital in the coal, oil, gas, nuclear, and automobile industries. Currently, these industries directly employ more than 1 million people. Conventional power plants would be closed, and massive amounts of energy infrastructure would be dismantled. After breaking these windows, the Obama plan would then create new jobs in the renewable energy sector. The costs of replacing those windows would ultimately be passed on to taxpayers and energy consumers.
In short, the Obama plan reflects fallacious thinking of the first order. There may be sound reasons to switch from existing energy sources to renewables, including the need to slash greenhouse gas emissions, the need to reduce our dependence on Middle Eastern oil, and the need to meet growing energy demand. If Americans wish to pay for a wholesale transformation of the energy industry, that is their choice. But let us not lie about the costs, and let us not espouse an economic fallacy that is nearly 160 years old. Obama's "green jobs" plan would indeed create jobs, but it would do so by killing other jobs. Is that really the type of energy policy Americans want?