TCS Daily


Thoughts on Green Jobs

By Pete Geddes - January 28, 2009 12:00 AM

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." -F.A. Hayek, The Fatal Conceit

On a family trip to Nicaragua we saw workers digging a multi-mile ditch in preparation for laying communication lines. The workers were using picks and shovels; we saw but a single John Deere backhoe. "Imagine how much more productive these workers would be if they had access to more of Deere's machinery," I commented. "But then many of them would be out of work," one of my boys responded. I replied, "If the point is to provide maximum employment, why not replace the picks and shovels with spoons?"

I am reminded of this as I read about President Obama's plans to create five million "green jobs." They include making houses more energy-efficient, constructing wind-turbines, building greener buildings, and upgrading the electrical grid. But this promise is made without mentioning the cost (i.e., the loss of jobs in other sectors) or considering what else these folks might productively do had they not been lured into the green jobs.

The American Wind Energy Association claims wind power creates the most jobs per kilowatt-hour of energy generated—27 percent more than coal generation and 66 percent more than natural gas. Buried in this is the presumption that labor has a very low value. Only if you're using prisoners, whose opportunity cost is zero, could this make sense. Following my Nicaragua example, if maximum employment is the goal, why not have people digging the footings for wind turbines by hand? This would create far more jobs per kilowatt-hour.

Productivity is the amount of output per unit of input. It is a basic indicator of economic health. Why? Because producing the same good with less input not only makes it more affordable, but also frees human and physical resources for use in other areas. "It can be said without exaggeration that in the long run probably nothing is as important for economic welfare as...productivity growth," wrote Princeton economist William J. Baumol.

The jobs lost in our dynamic economy are normally replaced by new and different jobs. For example, a quarter of all Americans now work in jobs that didn't even exist in the Census Bureau's occupation codes in 1967. In 1900, one-half of adult Americans worked on farms. Today, it's fewer than 2 percent. Despite lower farm employment, American farm productivity is the highest in the world.

The idea of government "job creation," green or otherwise, is an example of the broken window fallacy. The French economist Frédéric Bastiat explained this in 1850. Here's Bastiat's basic economic insight as described by Ken Green of AEI.

"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 aren't 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. As Bastiat explained 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 ploughed that money into their store: perhaps they would have bought more stock from their suppliers, or maybe they would have hired new employees. Before the windows broke, the shopkeepers had intact windows and the money to purchase more goods or hire new workers. After the windows broke, they had to use that money to repair the windows, and thus were unable to expand their business."

In the Great Depression the opportunity cost for labor approached zero. When this occurs it is reasonable and prudent for the government to create employment and educational programs like the CCC and WPA. But job creation fundamentally comes from the private sector. Every public dollar spent on green jobs comes at the expense of taxpayers and business owners who would have spent the money in ways we can't imagine.


Pete Geddes is Executive Vice President of FREE.
This article first appeared on FREE-ECO.org.
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104 Comments

And, since taxes are in the same vein as the window breakers
Think how much more could be done if taxes were at the minimum needed for the federal government to only is Constitutionally mandated duties.

Idle hands are the Devil's tools
With too much productivity, people have too much idle time to waste on frivolity.

The Protestant work ethic made the USA wealthy by 1)valuing labor and wealth creation and 2) living modestly.

Morality and virtue ARE important for a free and prosperous society.

"But, “wherever riches have increased, the essence of religion has decreased in the same proportion,” Wesley observed, and subsequently pride and greed are growing more common, he complained."

http://www.realclearmarkets.com/articles/2009/01/can_free_markets_survive_in_a.html

Look at how the new rich act with their wealth: bling, tricked out cars, parties, ......

There goes Marjon AGAIN; Injecting Religion into mundane discussions
What the he!! is the essence of Religion and what has it got to do with Morality and Virtue?

Creating the Commonwealth
Read this book and discover how the Protestant work ethic created a prosperous USA.

http://books.google.com/books?id=9XUKUkulSkIC&dq=creating+the+commonwealth&printsec=frontcover&source=bn&hl=en&sa=X&oi=book_result&resnum=4&ct=result

You're like Pavlov's dogs, say 'religion' and you bark.

Victoria Secrets and Fling web pages pop up and replace tcs.
I only have this problem on TCSdaily and on multiple computers.

Whoa
What has religion to do with morality and virtue?

I sure hope that line was tongue in cheek.

I have the same problem
When I open a new page, I often get a system generated warning about a malware page being blocked. If I back up once, I can then see the page that I originally clicked on.

Religion, Morality and Virtue
Everything.

Ask residents of the Third Reich & Soviet Union.

Or ask the not-for-profits whose 990's relect contributions from religious folks.

And yes, I know there's religious types that are awful. Generally speaking however-they never go quite as far as to run death camps and gulags.



I'm thinking the site has been hacked
Might be part of the left's cyber war

He is serious.

At least the pictures are nice. They could be of BHO.

Bastiat's Fallacy
I've been waiting for someone to bring up this old saw. Bastiat's Fallacy was created by an economist. No one who had ever repaired a broken window for pay would ever make this mistake.

Poor health is just a form of broken window. And the entire medical industry is just devoted to repairing that adverse condition. So it follows then that the medical sector does not actually contribute anything to the economy. Right?

Hunger is another broken window. It's merely a temporary defect in that wonderful instrument, the human body. So agriculture, likewise, doesn't do anything but repair an adverse condition. Right?

Why should we add such things to our economic measurements? It's not like they compare to the production of manufactured goods, is it?

But wait a minute.. we actually manufacture less and less. It's exported to us by our worker bees. All we do is act as retail clerks, transferring this wealth of consumer product to the users. So in essence much of our employment sector just redistributes wealth. Right?

Take it from a guy who's replaced a few broken windows. The homeowner asks that a service be provided, and it is. In the process, a pane of glass is manufactured, purchased and installed. Which is in fact precisely what happens in the construction of a new home.

The pay received gets spent on things like haircuts, gas for the truck, the pane of glass itself, food and taxes. Thus all benefit from the transaction.

The circulation of money gets increased, and society does better than it would if things did not get old and break, homes and cars get worn out and replaced, people get old and ill, or merely hungry and require more food. That kind of thing is what makes the non-economist's world go round.

We do have in our midst a certain kind of knave who says that if this is so, it would follow that waging a war would break lots and lots of windows. And thus would be to our benefit. These kinds of people should be taken out and hanged before they can cause more harm. The slings and arrows of ordinary outrageous fortune are quite enough to keep the fixers of broken windows in business forever.

And it's a good, useful and honorable business. Not just a benefit to the economy.

With enough spoons we can lick this thing
The author offers the thought that if the point is to provide jobs alone, we should replace the workers' shovels with spoons, not backhoes. And all I can say is it's a good thing he's not in charge of the planning.

The idea is to match the real needs of society (those "shovel ready" jobs) with the number of empty hands-- that's quite enough a task for job creation. And the second need to be met is to do so as economically as possible, so our fiscal resources aren't squandered.

So why then don't we pay all those working hands the minimum wage? That's very short sighted. Poorly paid people cost us all more than adequately paid ones. They don't lose their homes and bring the entire market down. They don't kill their spouses or rob stores, so legal and incarceration expenses are reduced. And just as importantly, THEY GET TO PAY TAXES.

So paying them a decent wage for their needed labors (that is, sufficient money to keep the wolf from the family door) saves us all money in the long run.

Paying for unnecessary work rarely makes economic sense. It's like giving a dollar to a bum-- just a humanitarian gesture. Fortunately, there's plenty of work now that needs to get done. And since the world is still clamoring to buy our debt, there's plenty of money available to pay for the work.

Psst... want some Ukrainian hotchicks?
It would appear that TCS isn't getting the normal revenue stream they're used to-- funding from right wing capitalists who want their point of view represented. I wonder why that would be?

Can it be that their advertising budget is shot? No, I don't think so. Probably more to the point, they think it's not doing any good. They don't even believe the capitalist line themselves any more.. they've seen it play out in a disastrous endgame that disproves their pet theories.

So if TCS plans on having adequate funding for their own future retirements, they have to go to the peddlers of Ukrainian hotchicks for backing. It only makes good business sense.

You durn tootin'
You're hitting your stride with this post:

"With too much productivity, people have too much idle time to waste on frivolity."

Let's hear it for frivolity. Not enough attention has been paid to this valuable pastime. For some reason, people think it's only for the young with their Game Boys and You Tubes and hip hopping. But it has valuable uses as an antidepressant.

"The Protestant work ethic made the USA wealthy by 1)valuing labor and wealth creation and 2) living modestly."

It's a good recipe. In fact that's what the Chinese have been doing. Working hard, selling their wares to us and living modestly. And look how rich they're getting. Still, like Jack, they seem a bunch of 'dull boys'.

"But, 'wherever riches have increased, the essence of religion has decreased in the same proportion,' Wesley observed, and subsequently pride and greed are growing more common, he complained."

Marx used to consider religion the opiate of the masses, to be doled out to them in lieu of wages. And in fact you can go to impoverished parts of the nation today, and what do you see? Lots and lots of towns with very little left other than storefront churches, full of apostolic holy deliverance. Dunn, NC has been a good example, since the denim company left.

More posts like this, marjon.

Roy just doesn't want to get it.
Roy actually believes that destroying property increases net wealth.

Either that, or Roy just care when someone else's property is stolen or destroyed, as long as he benefits.

Routine maintenance vs deliberate destruction
As you should know Bastiat referred to intentional breakage or destruction in order to make work.

If you are in the window repair business it is in your interest to hire people to secretly go about breaking windows to make work for your self.

Nature does a fine job of increasing entropy without assistance from anyone.

Wealth is created (entropy decreased) if you replace windows that save energy, broken or not.

What part of no don't you understand?
"I've been waiting for someone to bring up this old saw. Bastiat's Fallacy was created by an economist. No one who had ever repaired a broken window for pay would ever make this mistake."

So roy, you are arguing that the baker is able to pay for the new window, and still have the same amount of money he had before? The core of Bastiats theorem is that by paying to replace the window, the baker had to give up spending on something else. So the end result is no new economic activity, just changed economic activity. And that by it's nature, the change is less beneficial to all.

The opposite of what I said
"Roy actually believes that destroying property increases net wealth."

Reading for comprehension just isn't your forte. What I said was "We do have in our midst a certain kind of knave who says that if this is so, it would follow that waging a war would break lots and lots of windows. And thus would be to our benefit. These kinds of people should be taken out and hanged before they can cause more harm."

Repairing broken property does indeed increase net wealth. Just as surely as throwing it out and buying new stuff. Breaking property, on the other hand, decreases wealth.

A misconception
"If you are in the window repair business it is in your interest to hire people to secretly go about breaking windows to make work for your self."

Nope. If you're in just about any line of repair work, you've got more business than you can handle. It's not very glamorous, and there's usually more work to go around than there are repairmen.

Anyone trying to find work in a recession would be well advised to keep that in mind.

Did you hit your head or something?
You have just about the most cockeyed view imaginable.

By the same token, if the baker chooses to buy a new pair of shoes, or pay a parking ticket, or buy some Pick Six Lotto tickets with the money, he still has to forego fixing his broken window. Each of these acts improves his life in some way.. and so has worth. Even if he loses on the Lotto, playing still has worth to him.

Bastiat's thesis is that repairing broken things somehow confers less value for the money than buying something new, i.e. that it does not "add" value. And that's very clearly not true. A house with broken windows is both worth less to you and worth less on the market than one with windows intact. And so, by paying someone like me to do the job, a homeowner converts his property from a state of "less value" to one of "more value".

But if it's the words that are hanging you up, look at it as "installing new" window panes.

Your intentional misconception.
The point was intentional destruction to 'create' wealth.

"...how absurd it is to see a profit in destruction."
"Have you ever been witness to the fury of that solid citizen, James Goodfellow,*1 when his incorrigible son has happened to break a pane of glass? If you have been present at this spectacle, certainly you must also have observed that the onlookers, even if there are as many as thirty of them, seem with one accord to offer the unfortunate owner the selfsame consolation: "It's an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?"
1.7

Now, this formula of condolence contains a whole theory that it is a good idea for us to expose, flagrante delicto, in this very simple case, since it is exactly the same as that which, unfortunately, underlies most of our economic institutions. "

"But if, by way of deduction, you conclude, as happens only too often, that it is good to break windows, that it helps to circulate money, that it results in encouraging industry in general, I am obliged to cry out: That will never do! Your theory stops at what is seen. It does not take account of what is not seen."

"From which, by generalizing, we arrive at this unexpected conclusion: "Society loses the value of objects unnecessarily destroyed," and at this aphorism, which will make the hair of the protectionists stand on end: "To break, to destroy, to dissipate is not to encourage national employment," or more briefly: "Destruction is not profitable.""

"The reader must apply himself to observe that there are not only two people, but three, in the little drama that I have presented. The one, James Goodfellow, represents the consumer, reduced by destruction to one enjoyment instead of two. The other, under the figure of the glazier, shows us the producer whose industry the accident encourages. The third is the shoemaker (or any other manufacturer) whose industry is correspondingly discouraged by the same cause. It is this third person who is always in the shadow, and who, personifying what is not seen, is an essential element of the problem. It is he who makes us understand how absurd it is to see a profit in destruction. "

http://www.econlib.org/library/Bastiat/basEss1.html

Marjon REVERTs to ad hominem attacks in order to EVADE discussion
IF - as you once agreed, may be by mistake - Non-Religious people can also be Moral and Virtuous, and, since there are many instances of self-declared Religious people who are NEITHER Moral NOR Virtuous, why do you keep Injecting Religion into Moral discussions?

What's it that you hope to achieve, by promoting Irrationality and Subjectivism, which is what "Faith" is all about, in your own words?

If you promote Irrationality and Subjectivism, how do you propose to deal with people when there are disputes?

These are the questions you hope to EVADE, by resorting to ad hominem attacks.

It certainly WAS NOT tongue in cheek. See my reply to Marjon titled " Marjon REVERTs ...."
..

Point proven.

False Alternative, as your own statement - I know there's religious types that are awful - proves
If it's only a question of degree and numbers, then there is nothing to discuss.

And certainly, this is NOT an occasion to bring it (Religion) in.

That's NOT Bastiat's thesis; His thesis is "BREAKING things IN ORDER to REPAIR doesn’t ADD value"
Read the passage from the articel once AGAIN Roy.

But then, NOBODY can wake up a man who is pretending to be asleep.

BHO's Madoff scheme
How is the government 'bailout' any different than a Madoff scheme?

Bernie took money, paid off other investors, took his cut and spent it.

That is what the government wants to do, take money from others and spend it.

What is the difference?

NeaRNoaD is irrational regarding religion and faith.
I think he must worship Ayn Rand. She was just as irrational.

Once again, irrelevant blabber from Marjon to EVADE; YOU only said "Faith" is IRRATIONAL
.

See my post titled " Once again, irrelevant blabber from Marjon to EVADE ......"
..

You keep proving my point. Thank you.

Minimum wage kills jobs
To point out the absurdity of minimum wage, why not make the minimum wage $100/hr?

Minimum wage laws benefit capital industries by creating machines to replace workers. Japan's vending machine industry replaced high cost human workers. One can buy IPODS from vending machines in airports because the cost of a human employee is too high.
I suspect it has also stimulated the mini-backhoe industry, too. All sorts of small construction tractors are now available.
When the cost of a minimum wage exceeds the productivity return, that job disappears.

The "point" was a stupid and misleading one
The author's point was that we don't add to our collective wealth by breaking windows. And, as no one is advocating that we do, it's a straw man argument. The intent is to misdirect the easily led.

His closing argument is equally false: "But job creation fundamentally comes from the private sector. Every public dollar spent on green jobs comes at the expense of taxpayers and business owners who would have spent the money in ways we can't imagine."

No. PRIVATE job creation takes place in the private sector. The maintenance of public space occurs in the public sector. Jesus, what's the matter with you people? The government can't build a school or a road? You are a prisoner of your categories.

The investment money the government has been leaving in the hands of private investors in recent has been totally squandered. We have nothing whatsoever except a new Depression to show for all the trillions (around seven trillion) they have pumped into asset based securities and other bogus, unregulated hedges. Most especially, we have no new jobs.

It's time to try something new. Only a fool keeps doing the same thing, expecting different results.

Who broke all that glass, again?
Pauled.. maybe you can help me. I've looked over this article twice now, and I can't figure out how to equate the big bad government with the glass breakers.

How does this analogy work? Could you take me through it? To me, the more striking analogy would be with private hedge funds and investment banks.

We've given them trillions of investment dollars (on the principle that investors are capable of making their own best investment decisions without anyone's help). And so much of that money has been lost in space that we can't even calculate the value of the paper any more. It's like those railway bonds the Russian Empire issued. Or Dutch tulip futures.

Isn't this a prime example of the transformation of a vast store of wealth into a pyramid of broken glass? I need help. 'Splain it to me.

YES, I keep proving the point that Marjon is IRRATIONAL and EVADEs simple straight forward questions
..

How can an irrational individual, like you, make a rational point?
I am still waiting for any rational comments from you.

Government can only TAKE money.
It is only the private sector that can create the wealth money represents.

ALL functions of government CAN be accomplished by the private sector, and in many parts of the country, people find that subscription fire service works very well.

People live in places with home owners associations that take care of the 'public spaces' for a monthly fee.

It is government policies that have caused this financial mess. How will more bad government policies solve it?

A real world example
You really should start coming up with better material.

"To point out the absurdity of minimum wage, why not make the minimum wage $100/hr?"

No, let's make it $8 an hour. Then it makes a lot of sense. And while logic might lead one to think that such a step would eliminate jobs, in the real world it doesn't happen that way.

Here's what happened. Washington state raised their MW to $7.93/hr.. highest in the nation. Nearby Idaho kept theirs at the federal rate: $5.15/hr.

Logic would lead one to think everyone would flock from Spokane across the state line to nearby Coeur d'Alene, to buy the cheaper pizza. Right?

Wrong. Instead, everyone went from Idaho over to Washington, to work for better wages. The Idaho shops couldn't keep any employees. So in order to stay in business they had to voluntarily (gasp!) raise their wages.

The cost of a pizza went up fifty cents or so. But then, pizza has gone up anyway, all across the country. Big deal.

So it's a win-win. Better paid pizza shop employees can afford to do things like rent a room without having room mates. And buy things in an actual store. And we can still get affordable pizza.

"When the cost of a minimum wage exceeds the productivity return, that job disappears."

Nope. The market adapts, and does so by retaining jobs and increasing the employees' share of wealth.

"Washington’s robust economy, which added nearly 90,000 jobs last year, is proof that even with the country’s highest minimum wage, “this is a great place to do business,” Mr. Brunell said."

http://www.nytimes.com/2007/01/11/us/11minimum.html?_r=1&pagewanted=print

"Work Hard. Be Nice. "
"I recently was able to re-establish contact with one of the many great teachers I had in my twelve years of Catholic education --Sister Mary Jean, though when I had her she was Sister Mary Aloysius. She's still at it, well into her fifth decade as an educator. She was a great classroom presence, a skilled algebra and geometry teacher, and a dynamic force in our school."

{An 'irrational' nun who teaches logic? How can that be?}

"Work Hard. Be Nice. "

http://townhall.com/columnists/HughHewitt/2009/01/30/work_hard_be_nice_jay_mathews_crucial_new_book_on_inner_city_public_schools

Work hard, be nice. Sounds like the foundation of the Protestant work ethic.

Students used to pick fruit in NW WA. Boeing is laying off, again.
Since labor costs are so high farmers haves switched from growing strawberries, which require hand picking, to raspberries which can be machine harvested.

Who should expect to stay at an entry level wage?

Forcing a minimum wage destroys entry level jobs which train youth and immigrants how to work.

"Economists have studied the job-destroying features of a higher minimum wage. Estimates of the job losses of raising the minimum wage from $4.25 to $5.15 have ranged from 625,000 to 100,000 lost jobs. It is important to recognize that the jobs lost are mainly entry-level jobs. By destroying entry-level jobs, a higher minimum wage harms the lifetime earnings prospects of low-skilled workers. "

http://www.house.gov/jec/cost-gov/regs/minimum/against/against.htm

"“At $5.15 an hour, I get zero applicants — or maybe a guy with one leg who wouldn’t pass a drug test and wouldn’t show up on Saturday night because he wants to get drunk with his buddies,” Mr. Elder said."

http://www.nytimes.com/2007/01/11/us/11minimum.html

This has more to do with supply and demand than minimum wage.

Ir recall that in the once booming NE economy fast food places had to pay $2-3 more to keep employees.

Seattle has had exceedingly low job growth.
" Case in point Seattle, Washington, which for several years in a row has been voted by Forbes magazine as America’s most over priced city. Since the bubble burst on “Silicon Valley” and high tech jobs crashed,

Seattle has had exceedingly low job growth, add to that an extreme high cost of living with median prices on homes nearing $400,000 and it’s no wonder that Seattle also has one of the Worlds Highest Suicide rates. Or maybe that’s just the weather. "

http://www.worst-city.com/Seattle-Washington-Most-expensive-city-High-Cost-of-Living-world.htm

YES, one “Market” adapted, just as some men may, and even prosper, after crippled by vicious thugs
But there is NO WAY to arrive at the PRINCIPLE that crippling people - literally or figuratively – is NOT the way for the “Society” to prosper, isn’t it Roy?

Apply the theory, please
Well, I've agreed with that here.. in fact, several times. Breaking windows just reduces gross wealth.

Here's Bastiat: But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

All well and good. But now, if you will, apply it to our present circumstance. Certain solutions to our predicament are being proposed. Please square the logical circle the author poses, by telling us just how government's devoting its considerable resources toward a solution amounts to breaking lots of windows.

The windows in question are all already broken. Potential money exists to repair them, in the form of the willingness of our creditors to finance the work. Is there anything, then, in the ouevre of Frederic Bastiat that tells us those windows should not be fixed?

Apropos of nothing
Your reference doesn't add much to the example. Washington state, historically, has had a labor surplus. In fact at times it has rigorously enforced its vagrancy laws, to intimidate young men who wander there in search of work.

What the example points to is a line on the map, dividing two urban areas. One has a minimum of $7.93, while the other has a minimum of $5.15.

In which direction does the business gravitate? You may refer to the article again before answering.

The triumph of principle over observation
We are looking at an experiment. Two urban areas exist, side by side, equivalent in every way. Then the minimum wage is increased in one area.

What happens? Theory predicts that business will gravitate toward the cheaper venue. But apparently this theory has its limits.. because in fact business coalesces around the other node.

Here, you can look at it another way:

A gardener grows two tubs full of tomato plants, from identical seed. Into one tub he mixes a powder whose composition he does not know.

Lo and behold, it grows twice as many tomatos as the other, untreated tub.

What, then, may we say with assurance about the powder in the experiment?

And EVADING the fact that you have NO RIGHT to experiment with others' Life but can get away with it
b'coz you hold the Guns.

Other humans are NOT "things" to do what you please with them.

YOU are the one who is IRRATIONAL Marjon; YOU promote "Faith" which you DECLARED, is IRRATIONAL

There is NO ESCAPE from that Marjon. We may hit TCSDaily.com feedback limit and you may have the last word in this conversation. But the fact remains that

1) You have declared "Faith" to be IRRATIONAL and SUBJECTIVE

2) You promote "Faith" at EVERY opportunity and NO opportunity

3) You haven't answered HOW the proverbial materially disinterested honest Third Party can mediate in case of disputes between two people of differing "Faith"

As to “Work hard, be nice”; both are noble sentiments, No DOUBT, but IRRELEVANT to the issue being discussed.

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