Green Lies

This story from the LA Times refers to a study by an eco-lobbying outfit, Next 10. The lead author is a "professor" of ag and resource economics (that's my major!) at UC Berkeley, David Roland-Holst. I put professor in quotes because some of the things he says and the conclusions reached in his "study" are nonsense. The conclusions are preconceived and not supported by any economic logic. He claims that regulation in California over the last thirty years increased employment and income. There is no question that regulation creates jobs, the question is whether there is a net increase in employment and income. The study tries to claim that we are better off economically due to the regulations because of the jobs created, the money saved from higher energy efficiency and the money spent on things other than energy. Are we to believe that, absent government regulation, there would have been less efficiency? It can be claimed, maybe, that we have spent less on energy due to government regs but that does not necessarily mean we have been more efficient in our use of energy resources. Money spent on jobs and projects due to regulation is money we could have spent on other, more desirable investment and it is a certainty that California's economy would have grown more without the regulation. By constantly referring to jobs and industries bolstered by regulation "economists" like Roland-Holst avoid this crucial issue. If jobs created were the metric to judge such things by we should just hire all the unemployed to dig giant holes in the desert. They would have jobs, we would have holes, and we would have spent millions of dollars for holes in the desert. When considering such things government is supposed to conduct cost-benefit studies. And as I have mentioned before jobs created by regulation are a COST of that regulation, not a BENEFIT.

The article also says that some businesses agree with this analysis but they only name one: "Applied Materials". AM is a company that stands to gain from the proposed regulations hence their support is rent-seeking of the worst sort. But of course the LA Times leaves that out. And what, exactly, is the relationship between Applied Materials and Next 10? The head of AM is quoted on the Next 10 website. Are Roland-Holst and Next 10 investors in AM?


The key problem with all the economic studies commissioned by CARB and this one is that they lack clear cost-benefit analyses of the proposed regulations. Instead they focus on job creation and alleged higher state income. The studies are simply works of economic prophesy that are non-falsifiable on their own terms. And they are logically unsound.


If green technology is the gold mine that these guys say it is why do we need government regulation to make it happen? If we can produce all our energy from solar and wind at relatively low cost why do we need government regualtion to make it happen? I'll tell you why: these guys may not talk about cost-benefit analysis but they know what it shows. Absent, government mandates oil, coal, and nuclear are the most efficient sources of energy.

If you ran a business and the government told you to hire ten guys to be in regulatory compliance would that strike you as "efficient"? I am sure those ten guys would say yes and that is the gist of Professor Roland-Holst's argument.