Weighing in on green jobs

I've intentionally laid low in the brewhaha over green jobs--mainly because John is far more diplomatic than I am and has handled himself admirably (not that he needs my support).  But Mark Thoma's post raises some questions that I don't know the answers to, but am willing to opine about, so I'll put in my two cents. 

Disclaimer:  I'm nowhere near as versed in macroeconomics as John is, who is nowhere near as versed as Mark.  I've never even taught a macro course.  Take that for what it's worth.  Onward...

My questions center around the seemingly conflicting (but not mutually exclusive) goals embedded in the green jobs/economic stimulus discussion.  As Mark points out, one goal is broadscale economic stabilization.  My take on John's original intent is a discussion of reductions in short-term unemployment (goal 2) and long-term job creation (goal 3).  Many of the comments focus on the use of green subsidies to alleviate environmental externalities (goal 4a) and dependence on fossil fuels (goal 5b). 

With these five goals in mind, I'd like to lay out what seems to me an inherent inconsistency in using the broad umbrella of 'economic stimulus' to meet all five goals.

To me, the big question is what are immediate needs/goals to reduce the length of the recession versus long-term desires for an economically efficient energy sector.  The inconsistency arises from using policies designed to induce long-term shifts in technology (subsidizing green technologies) under the mask of meeting short term goals (reduce unemployment and stabilize the economy). 

I agree with Mark that in times of high unemployment, public investments in any industry won't result in crowding out of private investments in the short-run, and might generate temporary increases in employment.  But

1) although there's no consensus on a definition of a depression, one tell-tale sign is high unemployment.  7% is not high. and,

2) any net job gains in new industries for currently unemployed workers must mean fewer jobs in the industries those workers came from which may or may not be an efficient allocation of resources (one of John's points), and

3) public investments take time to create jobs--it's not a short term quick fix.  Especially with something like investments in new technologies (green?) where the sector is still in the R&D mode and not yet ready to build the infrastructure.

So what do we end up with?  A quick expenditure of public funds on an industry where the technology is not yet developed.  It doesn't seem to me that the employment effects are going to happen very quickly so the end result is inconsistent with the original goal of short-term economic stimulus.  It doesn't seem to me this is going to result in short-term economic stabilization.  I could be wrong.

But, you say, the end result is more green jobs (and a bigger green sector) and fewer brown jobs and that's a good thing right?  Maybe, but there are easier ways to reach that rather than hide behind the mask of saving the economy.  This is probably where my free-market tendencies come out, but if the goal is to achieve the socially optimal (efficient) balance between green and brown industries, then the simplest way to go about it is to get the relative prices right (capture all of the costs and benefits in the price) and then let the incentives that creates establish the right balance. 

Will public investment in green industries have the same effect?  Again, maybe, if designed optimally, but it's not a short-run fix for unemployment or stabilization.

I guess my broader point is that I perceive a time inconsistency between the short-term economic stimulus goals of stabilizing incomes/reducing unemployment and the long-term goals of reducing environmental externalities.  Using strategies designed for the latter won't necessarily achieve the former.

But then again, I'm a micro-economist.  I'm probably wrong.

Comments

[odograph]

I sense some boolean logic in "are we in a depression or not?"

It's probably better treated as a fuzzy question. In times more like full employment a green jobs focus is probably bad, in times more like depression employment it might be good.

I mentioned uncertainty in understanding and prescription a day or two ago. I think we have to accept uncertainty. Heck, when Cowen and Thoma can both make good (but contradicting) arguments, who to believe?

Naturally it would be a flawed strategy to seek out "green jobs" programs which fail your tests, Tim. On the other hand, screening for good green jobs when times fuzzily call for it might be productive.

[Tim Haab]

Odo,

I almost agree, but I would reword slightly:

"In times more like full employment a green jobs focus is probably bad, in times more like depression employment it might be good."

In my view, the issue of green vs. brown is separate from stimuls and should stay that way.

[odograph]

Oh that we lived in a 2-dimensional world ;-)

[John Whitehead]

Tim,

Meet Odo.

[odograph]

Come on guys, it shouldn't be that hard to understand my meaning. In a 2-dimensional world, with values along a line, it is easy to optimize for one thing only.

With higher dimensions (just adding "environmental benefit" to "jobs" makes it 2) you can (or must) optimize in a more robust way.

Actually, it is striking that a blog called "Environmental Economics" would opine that we NOT optimize for a healthy economy and a healthy planet at the same time.

[odograph]

(Though I think I got off in my dimension count :-/)

[John Whitehead]

Odo,

Actually, it is striking that a blog called "Environmental Economics" would opine that we NOT optimize for a healthy economy and a healthy planet at the same time.

Er, we DO advocate for a healthy economy and a healthy environment at the same time -- we may have a different definition of these concepts than some others (and I recognize those differences).

P.S. Your anonymous distortions of what we are trying to say are starting to creep me out.

P.S.S. I'll beat you to the punch line:

Oh John, nice try staying adult.
- Odo

[odograph]

I think I and others have asked why we can't kill two birds with one stone (a green energy transition in a time requiring jobs stimulus).

You and Tim have both said that they should be considered separately. Right?

Quote:

In my view, the issue of green vs. brown is separate from stimuls and should stay that way.

Don't accuse me of distortion when I am responding directly to what was said.

[John Whitehead]

Odo,

I think that the coupling of stimulus with progressive environmental policy could actually hurt the macroeconomy ... if there are better ways to stimulate the economy than environmental policy ... and there likely are, in my opinion.

Further, not everyone thinks that a fiscal stimulus, any at all, is best for the macroeconomy.

[odograph]

That's a reasonable statement John. I think though, that when "green jobs are bogus" reveals itself as that kind of balancing, it becomes less appropriate a meme.

What "could actually hurt" depends of course on what is proposed.

[Phillip Huggan]

America has been borrowing heavily since dubya and giving all the goodies to rich since Reagan. What makes you think this will short term? That is, at every point along the way to a domestic Iraqing of society, it will appear that a job creation scheme that takes 6 months to implement will be ill advised if you only assume the employment short-fall will be 5.5 months long and magically end.
It is simple, at USA upper income tax rates and loopholes/fraud, the rich have crowded out entrepreneur and professionals, so few of the right wing economic argument apply remotely (in USA). Unemployment has a toll too, isn't free. It leads to property and violent crime rate increases, revolution if it isn't short-term.

I'd love to know what other job-creation strategies work quicker than green jobs. If anyone knows a way to quickly sop up unemployment better than employing carpenters to retrofit building insulation, and if anyone knows a way to tell if this decades long failure of Republican policies will only result in a 3 month long unemployment blip that can be handled by existing safety net transfer payments...then the above argument isn't facetious.

[sandy chan]

Solar, Clean Technology, Wind, energy (carbon), social and environmental jobs are helping American economy as well as green jobs to grow. Even in this recession I am able to find at least 50 to 60 new and quality jobs on JustMeans site and if we compare with other sites then they have an update of only with 5 to 10 jobs a day. Also I would like to mention that JustMeans is very simple & well designed platform, informative and very good in terms of usability. I think JustMeans is the only site where any individual and companies come together to debate on CSR, Green Jobs, Social and Environmental cause. I thank you for highlighting this issue on your blog.

[joshua corning]

In a 2-dimensional world, with values along a line, it is easy to optimize for one thing only.

It is almost as if Odo is saying that all factors determining outcomes cannot be known by an individual or even a select group of individuals no matter how well informed.

Where have i heard that before?

[joshua corning]

I'd love to know what other job-creation strategies work quicker than green jobs.

Tax cuts

Removing trade barriers

Deregulation

[joshua corning]

Giving all federal land to the families of former slaves would stimulate the economy and create more jobs then any green job initiative that Obama is proposing.

Note: If you do not agree with me you are a racist.

[odograph]

American moderates (quite conservative by world standards) look to public response only when the private fails. "When the window is broken" to borrow from John's post.

If the market could always optimize there would be no broken windows (no unresolved environmental externalities), and no problem.

(I really do wish I'd gotten my dimensions right.)

[Bob Murphy]

John and Tim,

You guys rock. We disagree on the need for the government to "do something" about global warming etc., but I'm glad you are not willing to throw basic economics out the window because someone throws the phrase "depression economics" at you.

Sandy Chan: I can't tell if you are just advertising for that site... If not, my question is, why do we need a trillion dollar stimulus to create "green jobs," when you are saying the sector is already booming?

To refine the catch phrase, the purist free marketeer position isn't that "green jobs are bogus," it's that "government-created green jobs are bogus." If it really made more sense for workers to crank out wind turbines than something else, then wind turbine manufacturers would pay them a competitive salary and hire them.

And as Tim said above, even if you think there is a huge market failure because of GHG externality, then fine, slap on a carbon tax and you're done. You don't need Congress borrowing a trillion dollars from the public in order to spend on "critical" areas.

(And btw I have been very publicly opposed to the Paulson bailouts, so this is not partisan for me. I don't think the politicians in either party should be spending my money to "help" the economy.)

[odograph]

I can spot the logical error when someone says that stimulus spending is sometimes good, but green stimulus is always bad. The only rational way to make that argument work is to say that there are certain criteria for good stimulus and all green jobs fail the test. That's not reasonable, given the absolute constellation of green job candidates.

On the big economic question, does stimulus work, or is it justified in the extremes of "depression economics" I'm less suited to answer.

I can make an observations though: The answers given are breaking uncomfortably along ideological lines. The folk that oppose government involvement in a problem are pretty much the folk that oppose government involvement in this one. Similarly, those economists who lean toward government action in general, favor government involvement (and spending) in this one.

You may think yourself "non-partisan" Bob, but I doubt you think you've broken from your ideological roots.

So if we set aside the question "if stimulus, why not green?" we return to the question, "how useful is this economics stuff, if the economists are giving us their canned answers?"