From Terra Rossa (where conservatives consider a new energy future):
One of the most common concerns raised by opponents of cap & trade is it will cost a lot of Americans their jobs. Given folks’ anxiety about the state of our economy today those concerns, whether true or not, have an impact.
I’m not an expert on the economy, though like millions of other entrepreneurial Americans I have started (and ended) a few business ventures. My sense is that cap & trade will create new jobs by giving the economy a market-based incentive for the clean-energy sector to expand. Here at Terra Rossa we’re highlighting a new TV ad featuring CEOs who manage huge enterprises that happen to feel the same.
So what does an expert on the economy say? John Whitehead, professor of economics at Appalachian State University and a fellow blogger over at Environmental Economics, saw the above-mentioned ad and he agrees - to an extent:
“My prediction is that the unemployment rate, the labor force participation rate and the employment population ratio will not be significantly affected by significant climate policy. Why? The (CO2 intensive) job losses that climate policy opponents trumpet will be offset by the (CO2 not-so-intensive) job gains that climate policy proponents trumpet.”
Will cap & trade create new jobs? Yup. Will it cause our unemployment rate to skyrocket? Nope. Dr. Whitehead thinks jobs under cap & trade will about break even. That’s a far more reasonable outcome than the cap & trade fear-mongers would have us believe.
Call me bullish, but I tend to agree with others who think the new clean-energy marketplace that would arise under cap & trade could have as significant an impact on our economy as the rise of the Internet. I wonder what Prof. Whitehead thinks?
"Expert on the economy"? I passed my macro comps and can teach principles of macroeconomics. Past that, I'm a blithering idiot. But that has never stopped me from blithering.
I don't consider the rise of the internet in isolation. This technological innovation occurred at the same time as business firms figured out how to use networked computers to cut production costs. In an aggregate demand (AD), aggregate supply (AS) framework the AS curve shifted to the right leading to strong economic growth accompanied by unusually low inflation (the latter of which we are still experiencing, see image to the right: the annual inflation rate computed from the CPI).
In general, government regulation increases the costs of production which would shift aggregate supply to the left. This might increase inflationary pressures and reduce economic growth. The real debate is the magnitude of these impacts, not whether they will or will not occur. As long as green energy costs more to produce than brown energy, climate policy will harm the macroeconomy. But I don't think it will cost us jobs.
