Barack Obama

Creating 5 Million "Green Jobs" by Destroying Millions of Non-Green Jobs

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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?

Whole op/ed here. A longer analysis can be found here.  

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  1. There’re other criticisms that can be made, but I’m not sure you can say that this is the “broken window” scenario. You’d have to establish that (a) it’s going to be a zero-sum game, (b) those old jobs weren’t going to go away, anyway.

  2. But the window Obama wants to break is an evil one that destroys the environment!

  3. Obama’s claim that these jobs “can’t be outsourced” is dubious. Was “electric cars” one of the areas where he made that claim? Why can’t manufacturing of electric cars be outsourced? It’s likely a lot of it would be.

  4. five million new green jobs that pay well, can’t be outsourced and help end our dependence on foreign oil.

    Rickshaws!

  5. Broken windows fallacy doesn’t require zero-sum. It is basically a summation of opportunity costs and how most people do not take them into account.

  6. There’re other criticisms that can be made, but I’m not sure you can say that this is the “broken window” scenario.

    It is absolutely a broken window scenario. The article isn’t clear on it because the author chose to talk solely about ungreen jobs rather than talk about the economy as a whole.

    The economy as a whole has undepreciated capital investments in ungreen energy. Regulations, subsidies, etc., push the economy toward green energy faster than the market would on its own, which forces the replacement of the old ungreen capital before it needs to be replaced. The money used to replace working capital with new green capital is not available to spend on more valuable choices. In effect, present ungreen capital investments are the windows. Forcing them to be replaced early is the breaking.

  7. Except that no one is claiming that the environmental destruction that neccesitates these kind of investments was “not that bad”. In fact we’ve been warned for many years now (fossil fuel industry sposored climate denial notwithstanding)that continue as we’ve been doing is an invitation to disaster. Those dirty industry jobs still exist in large part because government has not set a price on pollution, leading to a distorted “market” that does not factor in the true costs of transactions. Fallacious thinking indeed!

  8. This is the most inept invocation of Bastiat that I’ve ever seen.

    The “Broken Windows” fallacy is a great argument (I believe Bastiat gets at the idea of “war is good for the economy” — I mean, he shows why it seems to be but is not). And Obama’s Green Jobs Machine deserves a great counter-argument.

    But this ain’t it.

  9. Why can’t manufacturing of electric cars be outsourced?

    Because the federal govt will own all the car companies, silly.

  10. Obama’s claim that these jobs “can’t be outsourced” is dubious. Was “electric cars” one of the areas where he made that claim? Why can’t manufacturing of electric cars be outsourced? It’s likely a lot of it would be.

    It’s not that they can’t be outsourced, I think he means that they won’t be allowed to be outsourced. Obama has already made it pretty clear that he’s a protectionist through and through.

  11. This is just the same ol’ Keynesian bullshit that we’ve dealt with since the New Deal.

  12. Any broken window proponents consider that the shopkeeper might respond to the broken window by fixing the broken window AND investing the same amount of money in his shop by working harder to generate the extra income needed?

  13. classwarrior,

    Perhaps you missed this from the article…

    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.

    You may add “Pollution has long been subsidized” if you like.

    No one is saying — at least on this thread — “Because the green jobs claim is exercising the broken windows fallacy, green jobs are a bad idea.” They are saying, “Because the green jobs claim is exercising the broken windows fallacy, jobs qua jobs is not a valid argument for green jobs. Some other justification is required.”

  14. I would also like to know where these “green jobs” will go and how they plan on staffing them. It’s not like there are hoards of unemployed wind turbine specialists and solar panel technicians in soup lines just waiting for an opening. They will either have to cannabalize other industries that aren’t necessarily a one to one fit. Or they are going to have to take people with general degrees straight out of college and train them up. Either way your talking about a lot of inexperience and a lot of train up time. All of which wil be expensive. An expense you wouldn’t have to bother with if you just let the energy industry run it’s coarse.

  15. AEI? Seriously? Are they ever right about anything?

  16. z,

    If I rob you and steal the money you were going to use to pay rent, so you have to get a second job to pay the rent, are you better off? Is society better off?

  17. It’s funny/pathetic that he even bothers mentioning the automobile industry. It’s by no means clear that those jobs will be around no matter what Obama does.

    Also, I wonder how many of the ‘ungreen’ jobs and industries have been fortified by government subsidies over the years.

  18. Ken Green explains …

  19. “Unfortunately, the idea of government “job creation” is a classic example of the broken window fallacy, which was explained by French economist Fr?d?ric 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.”

    Oh they understand it all right – but they don’t really care.

    The politicians are essentially con men (or women) whose primary objective is to increase their own power and wealth.

    They have been promising free luches to people ever since the first election was ever held. As long as there are enough people stupid enough to believe such a thing exists, they’ll keep on doing so.

  20. Any broken window proponents consider that the shopkeeper might respond to the broken window by fixing the broken window AND investing the same amount of money in his shop by working harder to generate the extra income needed?

    In either case, the shopkeeper bears the cost. No diff.

    Those dirty industry jobs still exist in large part because government has not set a price on pollution, leading to a distorted “market” that does not factor in the true costs of transactions.

    The same ol’ externalities fallacy. If you are going to require that the cost of every single negative externality be borne by the producer, then you need to let them capture the benefit of every single positive externality as well.

  21. I saw, not so long ago, a claim that the average age of technical support personnel in electric generation and distribution was somewhere in the mid- to late-fifties. We haven’t even been doing a very good job of replacing the people we need to keep our existing infrastrucure functioning properly.

    Hopey better have a really big hat to pull this stuff out of.

  22. Any broken window proponents consider that the shopkeeper might respond to the broken window by fixing the broken window AND investing the same amount of money in his shop by working harder to generate the extra income needed?

    If that’s the case, then he could have worked harder even without the broken window and invested double the amount.

  23. The article isn’t clear on it because the author chose to talk solely about ungreen jobs rather than talk about the economy as a whole.

    Agreed. That would have been a better angle to take in the article.

  24. Does bailing out ethanol producers count?

  25. Shush up now Ron……

    Can’t have you or Ken getting all logical on the whole green thing. After all, it FEELS like the right thing to do, so therefore, it must be the right thing to do.
    (snark off)

    (Takes sip of coffee, shakes head and wonders if the lefties in this country can ever think through a problem using first principals.)

  26. Of course if a substantial number of those jobs are lost in other countries like Saudi Arabia, Venezuela, Russia, etc then we might have some marginal gain.

    Plus, it may very well be that the transition from old tech to new tech will require a big increase in employment — at least temporarily — as all the green infrastructure is built.

    Just sayin’

  27. Mitch, good questions. Maybe to both. But yes to this: the GDP is up if I get a second job. The key point is that my ability to produce is not fixed, it can go up and down based on need and incentives.

  28. I think this post’s poor explanation of the applicability of the broken windows fallacy to Obama’s jobs argument is skewing the comments section debate.

    All that really needed to be said is this:

    Obama is essentially arguing that adding regulations to the economy creates jobs, because complying with those regulations will require additional labor inputs.

    Don’t get caught up in the minutaie of which jobs are which and which industries will be most effected, and whether those jobs would have survived anyway, blah blah blah blah.

    Condensed to its most basic, Obama is arguing that the regulations he plans to impose on the private sector will create good jobs. If you can see that this would be a foolish argument if the regulation involved was to Futurama-style simply assign bureaucrats to each individual business and order the business owners to pay them “good” salaries, then you should be able to see that it’s a foolish argument when the burden is generalized to consumers and businesses as a whole and the beneficiaries are concentrated at solar panel companies and the like.

    And any hope we may have entertained that Obama will not be a complete jackass economically went out the window today, when he declared that he thinks BankAmerica should be obligated to continue to lend money to a failing company so that company can pay its workers for long enough to comply with the plant closing notification law. Jack. Ass.

  29. “Condensed to its most basic, Obama is arguing that the regulations he plans to impose on the private sector will create good jobs.”

    This assumes he only acts through negative regulation and not through incentives.

  30. “This assumes he only acts through negative regulation and not through incentives.”

    And how would that be any better?

  31. This assumes he only acts through negative regulation and not through incentives.

    Please provide an example of how he would provide incentives without imposing a cost on some other system participant.

  32. Is hope fungible?

  33. If I take a shard of the glass from the broken window and hold up an widow/orphan for their food stamps & welfare payments and buy crack aren’t I contributing to the underground economy? It must be my irrational exuberhance showing…

  34. There is a basic premise to the “broken window” argument that is assumed in this article, but never explained: how is it that creating “green” jobs destroys “dirty” jobs?

    Does anyone really think that global energy demands are going to remain constant or decline?

    So the coal that was otherwise burned to create electricity is now, in the US, replaced by wind trubines (for example) – is that going to mean the coal is no longer desired or demanded? I highly doubt it.

    If we are able to get more electric cars (for example) in the US, does that mean that there will be no place to sell US petroleum?

    At the very least wouldnt it be nice to reduce the amount of oil the US has to buy from OPEC countries whhile still buying oil produced in the US?

    In other words, I fail to see (and fully expect to be flamed for this “failure”) how building and staffing a wind turbine factory costs anybody anything (other than associated taxpayer incentives or the like), at least as far as US workers are concerned.

    Skallagrim

  35. And any hope we may have entertained that Obama will not be a complete jackass economically went out the window today

    Yeah, but did the window break? Maybe he helped the economy after all.

  36. As has been said, the issue here is not really which current energy jobs will disappear. After all, we’ll still need plenty of coal and oil power etc for the forseeable future, no matter how much we invest alternatives.

    The issue with government created jobs is, at base, the same as with all government spending. The government needs to take money from private individuals in order to finance its projects. What is seen is that some new jobs are created, but what is not seen is everything that private individuals would have used their own money for had the government not stolen it. Doubtless that money would have gone to create other jobs, been invested in varied new technologies or given to charity etc.

    It is difficult to say with any certainty which way produces the most utilitarian results (though clearly I beleive its best to let individuals decide). However, it is important to always keep in mind that the government cannot create wealth, only private individuals can do such. The best the government can do is shuffle the wealth that individuals have already created around.

  37. There is a basic premise to the “broken window” argument that is assumed in this article, but never explained: how is it that creating “green” jobs destroys “dirty” jobs?

    Yeah, the consensus here seems to be that the article botched the argument.

  38. There is a basic premise to the “broken window” argument that is assumed in this article, but never explained: how is it that creating “green” jobs destroys “dirty” jobs?

    There are a limited number of tools one can use to generate the green jobs:

    You can tax “dirty” energy until it’s as expensive per calorie as “clean” energy. This would make clean energy competitive. In effect, this would raise the cost of all energy to the current clean energy level, and it should not be hard to see how a broad-based rise in the cost of energy production would harm overall job creation.

    You can also subsidize “clean” energy to make up for its higher costs, to allow its producers to sell at a loss to be competitive. But those subsidies have to come from somewhere. The opportunity cost for those funds, and the people those funds are taken from, is the “shopkeeper” in the parable.

  39. So the coal that was otherwise burned to create electricity is now, in the US, replaced by wind trubines (for example) – is that going to mean the coal is no longer desired or demanded?

    You’re going to have to cast turbine housings. Smelters are green technology, aren’t they?

  40. There is a basic premise to the “broken window” argument that is assumed in this article, but never explained: how is it that creating “green” jobs destroys “dirty” jobs?

    By taking the market share that supports the dirty jobs.

    By taxing and regulating them out of existence.

    Geez, this isn’t rocket surgery.

  41. I saw, not so long ago, a claim that the average age of technical support personnel in electric generation and distribution was somewhere in the mid- to late-fifties. We haven’t even been doing a very good job of replacing the people we need to keep our existing infrastrucure functioning properly.

    And we power industry types will be relying on that since our retirements are in the crapper.

    Big oil, coal, and nuke are “baseload” anyway, they’re not going anywhere. There will have to be much “greening” of the supply side before the big plants can come off the grid as wide fluctations in power quality will increase brownouts.

  42. This is a great sentence:
    “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.”
    So we may be killing the planet and ourselves, funding repressive regimes and terrorist-enabling dictators, and the current energy business models may not be stable for the long-term, but, you know, whatever.

  43. As I said in the comment thread on Nick’s post about infrastructure spending, it’s a shame to see a great thinker like Bastiat being abused in this way, and his angry ghost will have his revenge.

  44. Green jobs are the Seen. What the extra cost of green energy would have bought instead is the Unseen.

    How is this an abuse of Bastiat?

  45. MikeP/Fluffy,

    The reason the broken window fallacy doesn’t apply is because in the analogy, the windows are functional windows that are broken. In upgrading the energy infrastructure, as Obama is suggesting, you are not breaking functional windows to replace them with newer windows, you are fixing broken windows…that are currently broken.

    I hope there is no need to go into how the current windows are broken, since MikeP has already listed some (a partial list) of the applicable problems with the current windows.

  46. 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.

    This is the key sentence in which the article falls apart.

    The “broken windows” are not the lost jobs.
    We have broken windows which let in weather (terrorism, say) and let out heat (money to the middle east, say) and let trash blow in off the street (environmental degradation). Obama wants to invest in the store (fix the windows) to get rid of the negative consequences that result from the current state of the stores windows (fix the energy infrastructure).

  47. This means that Obama is not proposing to break windows. And this is why the analogy is inapt.

    He is proposing investment to address an existing problem that will result in new jobs…not proposing that we create new problems in order to create new jobs.

  48. Ron Bailey never seems to get this broken window fallacy thing right…

  49. But the current windows in the analogy are not broken: they are merely less efficient than new windows.

    A single-pane window is not broken simply because someone invented a double-pane window. It is still functional, albeit at greater ongoing cost. If someone broke it, you’d likely replace it with a double-pane window. But if no one breaks it, you are better off paying the extra heating bill than paying for a new window.

    There are arguments about margins here: namely, at what point should ungreen energy investments be replaced. Perhaps if CO2 is so bad, it should be taxed so the margin is moved. There is plenty of room to debate how far that margin should be moved.

    But none of any of that debate has anything to do with green jobs being worthwhile qua green jobs! Arguing that some policy will create green jobs, and that is why it is good policy, is totally fallacious.

  50. He is proposing investment to address an existing problem that will result in new jobs…not proposing that we create new problems in order to create new jobs.

    And no other use of that money will result in new jobs? Is this some sort of magic money that creates jobs only when the government spends it, but magically fails to create jobs when private entities spend it?

    Again, you can argue that subsidizing green energy is good because it does this or that for the environment or for foreign relations or for domestic security. None of those are prima facie economic fallacies. Arguing that subsidizing green energy is good because it creates jobs is a prima facie economic fallacy.

  51. My big problem with this “green jobs” thing, (besides the broken window theory and that it assumes global warming cooling climate change is real and we need to do something about it) is that it assumes that if we can get all of our energy from alternative fuels, that we eliminate our dependance on foreign oil.

    I don’t have any exact statistics, but I know a lot of our crude oil intake is used for other things than just fuel for cars. To completely get rid of our dependance on foreign oil we will have to find new ways to make rubber, nylon, vinyl, aspirin ffs, just to name a few. The list is quite long.

  52. Neu: May I direct you to Bastiat’s explanation of the broken windows theory here?

  53. Your allegory to the Broken Window Fallacy is weak at best.

    At worst, it’s just idiotic.

  54. MikeP,

    Again, you can argue that subsidizing green energy is good because it does this or that for the environment or for foreign relations or for domestic security. None of those are prima facie economic fallacies. Arguing that subsidizing green energy is good because it creates jobs is a prima facie economic fallacy.

    Obama is starting with the premise that these things need to be done and pointing out that fixing them will also create jobs. He is arguing that IN ADDITION to being good for all kinds of other reasons, investing in these solutions to these problems will provide jobs…and he points out that since most of these jobs involve building infrastructure and what not, most of them can’t be outsourced to other countries.

    Ron Bailey: You are not informing me with that link. Like I said above, you don’t seem to understand the broken windows concept as it relates to investments to solve existing environmental problems.

  55. MikeP,

    But if no one breaks it, you are better off paying the extra heating bill than paying for a new window.

    Bullshit.
    Over the long term you are better off replacing it. This is why the broken windows fallacy does not apply in this situation.

  56. And no other use of that money will result in new jobs? Is this some sort of magic money that creates jobs only when the government spends it, but magically fails to create jobs when private entities spend it?

    Who said that? Obama’s argument is that investment in the US’s energy infrastructure will assure that those jobs are in the US rather than outsourced to other countries, not that the money would not create jobs somewhere.

    He is saying “if we invest the money this way to address this existing problem it will mean that the jobs created by the money will go to jobs in the US.”

  57. But if no one breaks it, you are better off paying the extra heating bill than paying for a new window.

    I just have to emphasize that this is why being an economist doesn’t lead to being a successful business owner. Successful business look for was to reduce marginal costs in the long run, even if there is an initial layout of cash. The more efficient business, the one not paying shit loads of money on heating, can reduces the cost of their product and over the long run kicks the competion’s ass.

  58. An example of the effect of ignoring your expensive single pane windows.

    The big 3 US auto makers.

  59. Ron Bailey,

    Society loses the value of things which are uselessly destroyed

    Assignment: A 500 word essay on the importance of this sentence to Bastiat’s explanation of the broken windows theory.

  60. Bullshit.
    Over the long term you are better off replacing it. This is why the broken windows fallacy does not apply in this situation.

    You are kidding, right? What if the cost in lost heat per window is 10 cents a year and the cost of replacing each window is $100? There is no way that that expenditure is justified.

    Similarly, are you really arguing that a one year old plant that fabricates solar panels using a process that includes burning natural gas must be retired if someone invents a plant that fabricates solar panels using an all electric process at twice the price?

    There are margins here! The windows are not broken. If you believe that they are worse than new windows, then they are in various stages of disrepair. The best way to deal with them is to raise the cost of the disrepair — say with a carbon tax — so the marginal windows get replaced yet the still useful windows don’t get replaced before they are depreciated away.

  61. Obama’s argument is that investment in the US’s energy infrastructure will assure that those jobs are in the US rather than outsourced to other countries, not that the money would not create jobs somewhere.

    This, however, is fallacious reasoning whether or not you believe the windows are broken.

    Do you really believe that government spending creates US jobs in toto? Do you really believe that outsourcing destroys US jobs in toto? Do you believe that such arguments are actually justification of anything?

    If the US were at 4% unemployment — 6 million people — do you believe that Obama’s green jobs program would leave only 1 million people unemployed?

    Back to Bastiat, from section V on Public Works…

    When a railroad or a bridge are of real utility, it is sufficient to mention this utility. But if it does not exist, what do they do? Recourse is had to this mystification: “We must find work for the workmen.”

    As a permanent, general, systematic measure, it is nothing else than a ruinous mystification, an impossibility, which shows a little excited labour which is seen, and bides a great deal of prevented labour which is not seen.

  62. MikeP,

    What if the cost in lost heat per window is 10 cents a year and the cost of replacing each window is $100?

    We can, of course, come up with hypothetical numbers that work in the other direction. I won’t bother pulling numbers out of my ass. The argument that is being put forward is that the costs are sufficient to justify the benefits of replacing the windows…iow, they are broken/in disrepair to a degree that the investment is worth it. Hence, we are not talking about breaking windows IN ORDER TO create jobs.

    If you believe that they are worse than new windows, then they are in various stages of disrepair. The best way to deal with them is to raise the cost of the disrepair — say with a carbon tax — so the marginal windows get replaced yet the still useful windows don’t get replaced before they are depreciated away.

    Fair enough…so you are saying that advocating for “regulations, subsidies, and renewable-power mandates” break windows, but a carbon tax doesn’t?

    Not sure how one gets a pass on the breaking windows thing.

    The point, of course, is that the jobs that are “lost” due to government policies do not align with the broken windows as is claimed in the article. Certainly not when discussing Obama’s argument, which is…public monies will be spent to replace the parts of the energy infrastructure which it would be beneficial to replace for reasons X, Y and Z.

    The policies are motivated not by jobs creation, but by X, Y and Z. Fixing the problem, however, will involving some number of workers.

    If the US were at 4% unemployment — 6 million people — do you believe that Obama’s green jobs program would leave only 1 million people unemployed?

    No. Of course, if successful, the more efficient energy infrastructure may, in the long run, result in a more competitive environment for business here in the US and result in a net increase in wealth over the long run. The assumption that the investment will have a negative impact is unwarranted.

    You are working under an assumption that all government activity is a drag on the economy. (It is one you have stated before). I haven’t seen a convincing case for that assumption presented.

  63. MikeP,

    Similarly, are you really arguing that a one year old plant that fabricates solar panels using a process that includes burning natural gas must be retired if someone invents a plant that fabricates solar panels using an all electric process at twice the price?

    No. Can you point to the part of Obama’s plan that would involve shutting down gas powered solar panel factories? I mean come on.

    Can you point to the part of Obama’s plan that would shut down a coal powered plant making wind turbines?

    In very real terms, Obama is suggesting things like replacing single pane windows with double pane windows to increase energy efficiency. With current technologies these types of changes quickly pay for themselves. And if properly implemented do not substantially increase upfront costs for new development. Retrofitting manufactoring plants to capture waste heat can reduce energy costs by 50 to 60% or more in some cases. We are not talking about saving 10c a year on heat.

  64. http://www.rmi.org/images/PDFs/Energy/E05-16_EnergyEndUseEff.pdf

    See Figure 3, in particular…

    Fig. 3. Optimizing whole systems for multiple benefits, rather than isolated components for single benefits, can often “tunnel through the cost barrier” directly to the lower-right destination, making very large energy savings cost less than small or no savings. This has been empirically demonstrated in a wide range of technical systems.

  65. Same article…better wording of the point…

    Among the most basic, most often skipped over, yet most simply resolved economic/ engineering disagreements is whether investing in end-use efficiency yields expanding or diminishing returns. Economic theory says diminishing-the more efficiency we buy, the more steeply the marginal cost of the next increment of savings rises, until it becomes too expensive (Figure 2). But engineering practice often says expanding-big savings can cost less than small or no savings (Figure 3)-if the engineering is done unconventionally but properly.

    One plant discussed reduced energy costs by 92% with lower capital costs, lower operating cost, better performance and did not even use different technologies…just better system design.

    In other words, the windows are broken.

  66. Yes, I was just reading about that 92% savings from better engineering.

    If it makes economic sense to the owner of the window to replace or reengineer the window he will. More power (hah!) to him.

    Don’t quite know what President Obama has to do with it though…

  67. In very real terms, Obama is suggesting things like replacing single pane windows with double pane windows to increase energy efficiency.

    Obama is free to suggest whatever he wants. Force, on the other hand, is the tool he seems inclined to use.

    With current technologies these types of changes quickly pay for themselves.

    In that case Obama should just give out RMI’s URL during the State of the Union and be happy for the job well done.

  68. Since you balked at my well-over-the-margin examples, I gather that you do in fact believe that there is a margin where retaining old windows makes sense. You simply think that everything that Obama plans to throw at the issue will fall on the broken-window side of that margin.

    Yes, a carbon tax does place some otherwise functional windows on the broken side of the margin. But if they really are going to harm humanity decades hence, then they are imposing costs that aren’t captured today. I prefer a carbon tax to a rent sought grab bag of “regulations, subsidies, and renewable-power mandates” because it is more transparent and addresses the actual problem directly.

    The policies are motivated not by jobs creation, but by X, Y and Z. Fixing the problem, however, will involving some number of workers.

    Well, then, he should spend his time on X, Y and Z and refrain from telling us how many green jobs it will make: That only foments economic illiteracy.

  69. Well, then, he should spend his time on X, Y and Z and refrain from telling us how many green jobs it will make: That only foments economic illiteracy.

    He is doing what is known as selling the program.

    If it makes economic sense to the owner of the window to replace or reengineer the window he will. More power (hah!) to him.

    This raises the question of the infrastructure that supports energy. Who is the owner. In most cases in the US there is a considerable public ownership in infrastructure. So, if Obama is the manager that the owners have hired, his decision to reengineer the window is an example of this.

    Obama is not the kid throwing rocks at the window.

  70. Don’t quite know what President Obama has to do with it though…

    It has to do with the concept that the biggest savings come from systemic changes rather than piece-meal changes. If the national energy infrastructure is in need of an upgrade, the most efficient changes are likely to involve system-level plans. The federal government may be a logical agent to implement these systemic changes.

    As I have said before, a tax reform/carbon tax is a good way to go. We agree on that point. I don’t discount that modifications to existing regulations may also help. I don’t discount other mechanisms as potential tools.

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