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More Expensive Energy Won't Make America Richer

Lee Lane

In a recent speech, President Obama defended his costly subsidies to “clean energy,” yet, except for a reference to “green jobs,” he offered no clear reason for treating these items as sacrosanct. So why does he cling so tenaciously to these programs?

One thing is clear: His subsidies to clean energy production and use are not a plausible answer to climate change. For instance, one major thrust of these programs is to mix corn-based ethanol with gasoline. But that effort shrinks global food supplies.

As the world struggles to replace the corn that is going into U.S. gas tanks, demand for land on which to plant food crops grows.

The pressure to fell tropical rain forests rises with it. Such forests store carbon dioxide, a major warming gas, and cutting them down releases the CO2. Thus, if using corn ethanol as fuel lowers warming emissions a bit at home, it also raises them abroad. The net effect on the rate of climate change can only be trivial. And the president has never shown that this or any of his other big subsidy schemes would have a discernible direct impact on global climate.

In fact, these days the president stays largely mum about climate change; instead, “green jobs” has become his mantra. He claims that he can boost jobs by using the taxpayers’ money to favor more costly energy sources over cheaper ones.

Such schemes, though, will force businesses to invest some of their assets in just making do with less energy. In that case, each worker will command less energy; further, the capital that supports him will become less productive. His labor, therefore, will produce less than it otherwise would have; hence, green jobs, on average, will be less productive than real private-sector jobs. Because they are, they must pay less.

This conclusion should surprise no one. In the early 19th century, French political economist Frederick Bastiat described, and satirized, the logic behind green jobs: “… what we should wish for, clearly, is that each hectare of land produce little wheat, and that each kernel of wheat contain little sustenance — in other words, that our land should be unfruitful; … one could even say that job opportunities would be in direct proportion to this unfruitfulness.”

Substitute “BTU of energy” for “hectare of land,” and put “gallon of gasoline” in place of “kernel of wheat.” It will then be clear that Obama’s plan for green jobs rests on the same economic sophism that Bastiat mocked in 1845.

The theory is that low productivity, caused in this case by self-inflicted energy scarcity, requires more labor. Obama’s scheme for creating “green jobs” is merely another way to ensure that “our land should be unfruitful.”

The president’s politics may be better than his economics. In his book “The Myth of the Rational Voter,” Bryan Caplan uses survey data to show that most American voters still believe the truth of the fallacy that scarcity is good for us.

The president, then, may find many voters disposed to credit his green jobs “vision.” Then too, all those corn growers, wind farmers, and peddlers of unwanted light bulbs are likely to find the costs of even hefty campaign donations to be a real bargain compared to those of putting their sundry “green products” to a market test. Green jobs may indeed “win the future,” if “the future” means 2012. If so, its success will attest to the economic illiteracy of the voting public.

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