Weighing in on green jobs, by Tim Haab: I’ve intentionally laid low in the brewhaha over green jobs… 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… 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.
For the reasons I explained here, I don’t necessarily agree with point 2. If the employment of idle resources in the short-run enhances growth prospects, then the number of jobs and hence employment can increase overall. In that case, it’s possible for jobs to grow in all sectors. That may not happen – I’m not saying it will – and I don’t think long-run job growth is the primary goal of short-run stabilization policy, but it’s not out of the realm of possibility.
Originally published at the Economist’s View reproduced here with the author’s permission.