Green Jobs Myths

University of Illinois Law & Economics Research Paper No. LE09-001 ~and~ Case Western Reserve University Research Paper Series No. 09-15 March 12, 2009 Green Jobs Myths Andrew P. Morriss H. Ross and Helen Workman Professor of Law & Professor of Business University of Illinois William T. Bogart Dean of Academic Affairs and Professor of Economics York College of Pennsylvania Andrew Dorchak Head of Reference and Foreign/International Law Specialist Case Western Reserve University School of Law Roger E. Meiners John and Judy Goolsby Distinguished Professor of Economics and Law University of Texas-Arlington This paper can be downloaded free of charge from the Social Science Research Network at: http://ssrn.com/abstract=1358423 Page 2 Morriss, Bogart, Dorchak, & Meiners Green Jobs Myths Andrew P. Morriss,* William T. Bogart,** Andrew Dorchak,*** & Roger E. **** Meiners Abstract A rapidly growing literature promises that a massive program of government mandates, subsidies, and forced technological interventions will reward the nation with an economy brimming with “green jobs.” Not only will these jobs improve the environment, but they will be high paying, interesting, and provide collective rights. This literature is built on mythologies about economics, forecasting, and technology. Myth: Everyone understands what a “green job” is. Reality: No standard definition of a “green job” exists. Myth: Creating green jobs will boost productive employment. Reality: Green jobs estimates include huge numbers of clerical, bureaucratic, and administrative positions that do not produce goods and services for consumption. Myth: Green jobs forecasts are reliable. Reality: The green jobs studies made estimates using poor economic models based on dubious assumptions. Myth: Green jobs promote employment growth. Reality: By promoting more jobs instead of more productivity, the green jobs described in the literature encourage low-paying jobs in less desirable conditions. Economic growth cannot be ordered by Congress or by the United Nations. Government interference – such as restricting successful technologies in favor of speculative technologies favored by special interests – will generate stagnation. Myth: The world economy can be remade by reducing trade and relying on local production and reduced consumption without dramatically decreasing our standard of living. Reality: History shows that nations cannot produce everything their citizens need or * H. Ross & Helen Workman Professor of Law and Professor of Business, University of Illinois; Senior Scholar, Mercatus Center at George Mason University; & Senior Fellow, Property & Environment Research Center, Bozeman, Montana. A.B. Princeton University; J.D., M.Pub.Aff., University of Texas; Ph.D. (Economics) Massachusetts Institute of Technology. The authors gratefully acknowledge the support of the Institute for Energy Research, our respective institutions, and Terry Anderson and Bruce Yandle, who offered helpful comments. All errors are, of course, our own. ** Dean of Academic Affairs and Professor of Economics, York College of Pennsylvania; B.A., Rice University; A.M., Ph.D. (Economics) Princeton University. *** Head of Reference and Foreign/International Law Specialist, Case Western Reserve University School of Law; M.L.S. 1994, Kent State University; Honors B.A., 1988, Xavier University. **** John and Judy Goolsby Distinguished Professor of Economics and Law, University of Texas-Arlington; Senior Fellow, Property & Environment Research Center, Bozeman, Montana. B.A., Washington State University; M.A., University of Arizona; Ph.D. (Economics) Virginia Tech; J.D., University of Miami. Electronic copy available at: http://ssrn.com/abstract=1358423 Green Jobs Myths Page 3 desire. People and firms have talents that allow specialization that make goods and services ever more efficient and lower-cost, thereby enriching society. Myth: Government mandates are a substitute for free markets. Reality: Companies react more swiftly and efficiently to the demands of their customers and markets, than to cumbersome government mandates. Myth: Imposing technological progress by regulation is desirable. Reality: Some technologies preferred by the green jobs studies are not capable of efficiently reaching the scale necessary to meet today’s demands and could be counterproductive to environmental quality. In this Article, we survey the green jobs literature, analyze its assumptions, and show how the special interest groups promoting the idea of green jobs have embedded dubious assumptions and techniques within their analyses. Before undertaking efforts to restructure and possibly impoverish our society, careful analysis and informed public debate about these assumptions and prescriptions are necessary. Contents I. Envisioning a World of Green Jobs ...................................................................................... 10 II. Defining “green” jobs ........................................................................................................... 14 A. What counts as “green” .................................................................................................. 15 B. What counts as a “job” ................................................................................................... 22 C. Forecasting ..................................................................................................................... 24 1. Small base numbers .................................................................................................... 25 2. Huge growth rates ....................................................................................................... 26 3. Selective technological optimism ............................................................................... 29 4. Unreliable underlying statistics .................................................................................. 31 5. False precision masking large variations across estimates ......................................... 36 6. Summary: unreliable forecasts ................................................................................... 38 D. The inappropriate use of input-output analysis .............................................................. 38 E. Promoting inefficient use of labor .................................................................................. 43 F. Assessing green job estimates ........................................................................................ 48 III. Mistakes in economic analysis........................................................................................... 49 A. Rejecting comparative advantage ................................................................................... 49 B. Consumer surplus ........................................................................................................... 52 C. Mandates vs. markets ..................................................................................................... 54 D. Neglecting opportunity costs .......................................................................................... 59 E. Ignoring incentive effects ............................................................................................... 61 1. Iron and Steel .............................................................................................................. 66 2. Aluminum ................................................................................................................... 67 3. Ammonia .................................................................................................................... 68 4. Pulp and Paper ............................................................................................................ 69 5. Appliances .................................................................................................................. 69 F. Market hostility .............................................................................................................. 74 Electronic copy available at: http://ssrn.com/abstract=1358423 Page 4 Morriss, Bogart, Dorchak, & Meiners IV. Ignoring technical literatures ............................................................................................. 75 A. Mass transit .................................................................................................................... 75 B. Biofuels. ......................................................................................................................... 79 C. Electricity Generation .................................................................................................... 89 1. Wind power ................................................................................................................ 89 2. Solar power ................................................................................................................. 91 3. Nuclear power............................................................................................................. 93 V. Conclusion ............................................................................................................................ 95 The solutions to environmental and economic problems, domestically and internationally, are often tied together. The assertion that “green jobs” can be created to improve environmental quality while reducing unemployment is behind an aggressive push for a “green economy” in the United States and elsewhere. For example,

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