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BOOK REVIEW: ‘Regulating to Disaster’

- - Tuesday, November 27, 2012

REGULATING TO DISASTER: HOW GREEN JOBS POLICIES ARE DAMAGING AMERICA'S ECONOMY
By Diana Furchtgott-Roth
Encounter Books, $23.99, 295 pages

President Obama's re-election has put a new spring in the step of environmentalists, renewing hope not just for more aggressive climate-change policy but for continued emphasis on "green" energy despite the spectacular failure and serial bankruptcies of Solyndra and other green-energy darlings. As of this writing, renewals of lavish subsidies for wind power -- and perhaps even a carbon tax to level the playing field with hydrocarbon energy -- suddenly are back in the mix of side deals that may be part of a congressional package to avoid the "fiscal cliff."

Green energy and "green" jobs have evolved quickly into the leading shibboleth of free-lunch economics, and we can thank Diana Furchtgott-Roth for her painstaking analysis of the economic illiteracy behind the green-energy-green-jobs crusade in her new book, "Regulating to Disaster."

Back at the time of the first energy shocks of the 1970s, we were sold on the need to subsidize "renewable" energy because hydrocarbon energy (oil, natural gas and coal) was scarce, expensive and sourced from unstable regions overseas. Hydrocarbon energy also generated prodigious amounts of air pollution. In the decades since the gas lines, technology has reduced air pollution. (In fact, it eventually will eliminate it.) Seemingly all of a sudden, conventional domestic hydrocarbon energy has become abundant again despite persistent federal hostility. The global-warming crusade is still hanging onto its dreams of political relevance but has lost its mojo -- if it ever had any. Why do we need "green" energy again?

Now that the old arguments have become obsolete, we're told that green energy is the golden road to prosperity. Somehow the strategy of forcing higher-cost energy sources on consumers and propping them up with taxpayer subsidies (so everyone pays twice) is thought to be immune from the laws of economics. As a premier example of this thinking, Ms. Furchtgott-Roth quotes the wisdom of the irrepressible Rep. Edward J. Markey, Massachusetts Democrat, co-author of the failed 2009 Waxman-Markey cap-and-trade bill to regulate greenhouse gas emissions. He actually believes that cap-and-trade would "create jobs by the millions, save money by the billions, and unleash energy investment by the trillions." When William F. Buckley Jr. used to speak of "invincible ignorance," he had no idea of the possibilities afforded by "green jobs."

To be sure, if the government subsidizes and mandates any form of economic activity, it will "create jobs." However, as Ms. Furchtgott-Roth patiently explains, this kind of reasoning ignores the famous lesson of Frederic Bastiat about what is unseen: "What is seen according to Bastiat, are the jobs directly created by the government, and what is not seen are the workers displaced by the effects of increased taxes, tariffs and government regulation."

Fans of Bastiat (Ronald Reagan was one) recognize this logic as the ultimate example of the "broken-window fallacy" -- a rock through a window will create a job for the glazier, but at the cost of a job elsewhere in the economy. The unseen loss of economic activity in other sectors as a result of the mania for green jobs never enters the calculations of the Markeys of the world. Study after study shows that the economy suffers a net loss of total jobs when the government adopts Mr. Markey's malarkey.

The idea might be slightly more plausible if we actually got some of the green jobs. In fact, new employment in green-energy technologies has been scant and very expensive -- sometimes approaching nearly $1 million per job created. So the advocates simply have cheated, counting as "green jobs" such positions as janitors at solar-power facilities, museum docents, drivers of natural-gas-powered buses, home insulation installers and anyone who works at a bike shop. Even the Green Bay Packers could get counted under some schemes.

In other words, the green jobbers are simply reclassifying traditional occupations in order to inflate their numbers. In the financial world, this is called fraud. Ms. Furchtgott-Roth concludes that green jobs cannot be defined rigorously: "No one knows what green jobs are." We do know there aren't very many of them. Most of the new manufacturing jobs for low-energy light bulbs, solar panels and windmills have occurred in China.

As Ms. Furchtgott-Roth makes clear, despite the flimflam about the green road to prosperity, the green-jobs mania is not a matter of economics, but near-religious faith. Actually, Ms. Furchtgott-Roth points out, you can skip the "near." The "Theology of Green Job virtue," as she calls it, is immune to economic argument: "[W]e have a green energy policy based primarily on moral superiority." If we could harness the presumed moral superiority of the green jobbers, we'd have unlimited cheap energy forever.

When you strip away the true-believing theology and economic illiteracy, what remains is the perfect cover for crony capitalism. "Between bankruptcy and corporate welfare," Ms. Furchtgott-Roth asks, "is there even one Energy Department loan that makes any sense?" Indeed, the same day the Obama-backed A123 Systems lithium-ion battery manufacturer filed for bankruptcy, it received a check from the federal government for nearly $1 million.

"Regulating to Disaster" is a good and thorough reminder that the only true "green" job is the kind that makes the old-fashioned kind of green: a profit. Today in the energy sector, it means oil and gas, where employment is soaring.

Steven F. Hayward is the Thomas Smith Distinguished Fellow at the Ashbrook Center at Ashland University and author of the "Almanac of Environmental Trends" (Pacific Research Institute, 2011).