Tuesday, December 09, 2008

Al Gore and the Broken Window Fallacy

One of the things that drives me nuts (admittedly, there are a lot right now) is the constant insistance among environmentalists and politicians that "alternative energy" will "create jobs", somehow justifying large government expenditures to pay companies to do things which they would not normally waste money on. As Obama said when he met Al Gore today:

"We all believe what the scientists have been telling us for years now, that this is a matter of urgency and national security, and it has to be dealt with in a serious way," Obama said. "We have the opportunity now to make jobs all across this country, in all 50 states, to repower America. ... We are not going to miss this opportunity," he said.

OK, now if you want to argue that "green energy" has some sort of positive externalities in regards to the environment or national defense, you might have an argument, I am not saying it would be a good one, but you could at least make it, but to argue that it is an economic benefit in that it provides jobs, is a fallacy. Under no circumstances is it an economic benefit to subsidize people to do things in a manner which are a less efficient application of resources than they would otherwise. If solar power costs $20 per megawatt, and coal costs $10 a megawatt, it is never an economic benefit to pay someone $20 extra per megawatt in order to get them to put up solar cells. You might as well just use coal and pay them $10 to surf the Internet for Carrie Underwood videos.

This tactic, commonly used by politicians is a variation of the Broken Window Fallacy, by which you argue an economic benefit to smashing windows in order to employ window repairman, but at a loss to society as a whole.


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James B. said...

I am not sure how you come to that conclusion.

Lonnie Bruner said...


I am a bit confused about green energy creating jobs as well. How? Solar panel plants? LED manufacturing? Maybe.

I'm working on a business project right now to make poultry houses more "green" -- ie, energy efficient. The leader of the project is actually an old-school Republican from Mississippi. It would run all lighting in the house on LEDs and solar off lead-acid batteries. The pursuit is for pure profit of course, and I think this is where the real push from green energy should be taking place in this country.

However, having said that, the government can play an important role. For example, we have gotten funding from several local universities who're giving us grants to do testing. It may not be able to be done without it. R & D is expensive.

So by just this one example, it's not to say that government has no role to play in our green energy future, but the idea-driven projects should -- and will -- come from the private sector.