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Green Jobs Do Not Stimulate the Economy

September 21, 2009

Green Jobs Do Not Stimulate the Economy

New academic research explodes the myth that green technology is economically stimulative.

It's no doubt true that if we introduce legislation to encourage green technology, we will not only improve our environment, but we will stimulate some economic activity. But it doesn't logically follow that this activity will amount to NET new activity for the economy as a whole. In fact, green technology, encouraged by regulatory or tax policy, will impose an economic cost on our society. If a cleaner environment or less global warming is the goal, then we should be willing to pay for this, but green technology does not create net new jobs, so that's not a reason to embrace it.

Please don't get me wrong here. I am not saying that green technology isn't desirable. A better environment will be better for all of us. What I am saying is that when we do embrace green technology, we should recognize that there is a cost, and we need to be prepared to pay for it.

Why? Because, when we manipulate demand and supply artificially for some social purpose, with tax policies or regulations, we impose a frictional cost on the economy. Yes, some people will get jobs making green cars, but more people will lose jobs making SUVs. Yes, some people will get jobs making windmills, but many others will lose jobs hauling coal or refining oil. And when the price of energy increases because of environmental regulations, still other people will lose jobs in energy-intensive industries, from microchip manufacturing to aluminum smelting, as these industries become less profitable. And this doesn't even count the cost of enforcing the regulations in the first place. Every thousand dollars spent on a government bureaucrat charged with overseeing such regulations represents more than a thousand dollars in private employment income lost to the economy.

So please, don't tell me that fixing the environment will be good for the economy. It may be the right thing to do, but it's going to be tough, not easy.

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