Thursday, June 18, 2009

Green Jobs

Recently there has been a lot of hype created regarding the creation of 'green jobs' and even excitement that the creation of green jobs may help stimulate the economy. This may be counter to what we would expect given basic economic theory.

Recent research by Gabriel Calzada Álvarez (link) indicates that job losses may result from what economists refer to as the broken window fallacy.

'we find that for every renewable energy job that the State manages to finance...that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.'
'Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.'

With the broken window fallacy, as the analogy goes, breaking the baker's window leads to jobs for glass repair workers, and thus acts like a stimulus to the economy. It is a fallacy in that it does not consider the jobs that other wise would have been created had the baker not had to fix his window, but expanded his business or invested the funds. Jobs may be created on both accounts, but who is to say which jobs create the most value for the economy.

If green jobs are created by taking money and resources away from other businesses to subsidize green enterprises (breaking windows) then they are not created without consequence.

Green jobs created by government are not equivalent to those created by the free market. A recent story from the Charlotte Observer points out that according to a study by Pew Charitable Trusts "Green-jobs growth has occurred without consistent regulatory support... "All the states that grew were responding directly to consumer demand."

A prime example of green job creation via the free market can be found when we look at modern agriculture. As pointed out in a recent AgWeb blog post 'Biotechnology: An Agriculture Success Story' recent research from PG Economics indicates that biotech crops have greatly reduced agriculture's carbon footprint and reduced pesticide applications. For additional peer reviewed research related to the 'greening' of the ag industry see the references below.

Green jobs created by the biotech industry are created voluntarily. Investors and entrepreneurs recognized that the money they invested in biotech would yield more benefits to society than any alternative at the margin. Otherwise they would have invested their money elsewhere.

When government tries to create green jobs, it has to arbitrarily take money from one place and put it somewhere else. Because they base their decision on the limited knowledge and preferences of at most a few voters, politicians, and bureaucrats instead of market returns, they have no way of knowing whether the additional benefits to society from their program are greater than the costs. ( and they risk destroying more jobs than they create).

If we truly want increased growth, decreased poverty, and improved environmental quality, our best chance is going to be to leverage the power of the 'invisible green hand' and let the market create green jobs where they are needed most. The ag industry has already set the example.

Enterprise and Biodiversity: Do Market Forces Yield Diversity of Life?
David Schap and Andrew T. Young Cato Journal, Vol. 19, No. 1 (Spring/Summer 1999)

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates
Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva
Science 8 June 2007:
Vol. 316. no. 5830, pp. 1475 - 1477

Smith, J.S.C.; Smith, O.S.; Wright, S.; Wall, S.J.; and Walton, M. (1992)
‘‘Diversity of United States Hybrid Maize Germplasm as Revealed by
Restriction Fragment Length Polymorphisms.’’ Crop Science 32: 598–604

Munkvold, G.P. et al . Plant Disease 83, 130-138 1999.

Dowd, p.J. Economic Entomology. 93 1669-1679 2000.

Miller, Henry I, Conko, Gregory, & Drew L. Kershe. Nature Biotechnology Volume 24 Number 9 September 2006.

Agricultural Outlook ERS/USDA Aug 2006.

Dr. Roger Leonard, LSU Agricultural Center and Dr. Ronald Smith, Auburn University. Research in Bt Cotton

Gregory Conko “The Benefits of Biotech” Regulation. Spring 2003

San Diego Center for Molecular Agriculture: Foods from Genetically Modified Organisms

Wednesday, June 17, 2009

Food Inc

Steve Cornett of AgWeb sums it up pretty well. My response to his post and commentors:

Thanks for sharing this.These sentiments reflect a basic unbiased, common sense science based response to Food Inc. which from what I gather is turning out to be using the prestige of science as a facade to override other people's choices. As far as where I get my news, I would say, as someone else very well known has said, ALL OF THEM. Fox, NPR, ABC, CBS Bloomberg, CNN, CSPAN, NYT, WSJ, WP, etc. Isn't it kind of silly to list all of these sources this day in age. ALL OF THEM.

Monday, June 15, 2009

Taking Up for Monsanto

Several Points:

1) Bringing up DDT isn't the best grounds to stand on from a humanitarian standpoint. More lives have been lost as a result of the DDT ban than saved.

2) Increased use of Roundup is a bad thing? Roundup Ready technology has allowed for glyphosate herbicide to substitute for 7.2 million pounds of other chemicals that are more toxic and persistent in the environment.

According to a recent study,biotech crops have decreased the environmental impact associated with herbicide and insecticide use on the area planted to biotech crops by 17.2%

3) The number of farmers that don't use biotech seeds is diminishing. That is true and it is a worldwide phenomena. The largest increases are actually among subsistence farmers in the developing world. They are able to produce safer, more vigorous and resource efficient crops all while saving costs. The idea that this technology is being forced upon them is specious at best.

As far as 'contamination' is concerned, the technology to prevent it exists. The idea of a 'terminator' gene that would prevent environmental contamination has been trumped by the groups opposed science based agriculture, and the technology has never been used as a result.

4) For peer reviewed research regarding biotech foods, see this link.
Another exhaustive look at this issue can be found here.
The research is actually proliferate.

Sunday, June 14, 2009

Got (Green) Milk?

Another example of the 'Invisible Green Hand' at work. This time in the dairy industry. See link here.


"The study shows that the carbon footprint for a gallon of milk produced in 2007 was only 37 percent of that produced in 1944. Improved efficiency has enabled the U.S. dairy industry to produce 186 billion pounds of milk from 9.2 million cows in 2007, compared to only 117 billion pounds of milk from 25.6 million cows in 1944. This has resulted in a 41 percent decrease in the total carbon footprint for U.S. milk production."

Friday, June 12, 2009

Behavioral Economics

A recent story on National Public Radio ( link) gives an overview of a subfield of economics called behavioral economics. Behavioral economics incorporates elements of psychology into economic theory. Some people believe that behavioral economics will improve economic models because it makes a correction for what they believe are errors in the assumptions of classical economics. As a result many people have come to think that behavioral economics may even justify the unprecedented amount of government intervention in the economy and improve our lives.

Continue reading at AgWeb.