Friday, April 8, 2011

Solar Jobs

The following article by Senior Fellow Craig Green was published by the Independence Institute, Denver Daily News, the Greeley Tribune and Pueblo Chieftan in July of 2009.

Solar Job Claims Rely on Exaggeration and Faulty Economics

In promoting Interior Secretary Salazar's plan to "expedite" solar energy projects on 670,000 acres in Colorado's San Luis Valley ("Solar farms could help U.S. to energy independence"), the Denver Post said the plan "has the potential to create much-needed jobs." This is a confused but popular promise, based on faulty economics and frequent exaggeration.

Creating new jobs by force of law instead of entrepreneurship often results in the loss of other jobs and increased costs; especially high wind and solar costs.

In his classic book, "Economics in One Lesson," Henry Hazlitt pointed out the common fallacy of counting new jobs created by money taken from taxpayers without considering how they would have spent that money on other things. He pointed out that many public projects are promoted without explaining the negative effects of penalizing productive, efficient enterprises by subsidizing their more costly, less efficient competitors. This results in a net LOSS to the economy, not a gain.

Hazlitt's theory was recently confirmed in Spain, a European leader in producing millions of new "renewal energy jobs" since 1997. Gabriel Calzada Alvarez, PhD of the Universidad Rey Juan Carlos, published a study in March of 2009 ("Study of the effects on employment of public aid to renewable energy resources") that shows more than two jobs lost for every new job created. Spain spent more than 500,000 Euros to create each "green job" since 2000, not counting an additional million Euros in subsidies per wind industry job. Also, two-thirds of these jobs were in construction – jobs that would be eliminated once the facilities are up and running. The study also found that customers' electricity rates will have to be increased by 31 percent to pay off more than 28 billion Euros of new debt to finance the projects.

Does this sound like an economic windfall, which is the impression the promoters of such projects want you to get?

Exaggeration of job numbers is also used to make losing projects look like winning ones. As Vince Carroll pointed out [in the Denver Post] last October, Governor Ritter's announcement of 90,000 new jobs in Colorado exceeds the total number of cops, firefighters, security guards and prison guards in the entire State, and twice the number of all waiters and waitresses in Colorado.

Ritter's figure came from Boulder's American Solar Energy Society and included all jobs in the "energy efficiency" industry, even non "green" jobs.

The deceptive way "green" jobs are promoted by politicians and the press is the political equivalent of selling your business by listing only revenues, without expenses. You can honestly tell a prospective buyer that your company takes in a million dollars a year, which might impress a novice. But, if it turns out that your expenses are two million dollars a year, you have a losing business, like so many public works projects that drain the public purse after promises of "new jobs" and other benefits without mentioning costs or tradeoffs.

Hazlitt summarized his theory by saying, The art of economics consists in… tracing the consequences of that policy not merely for one group but for all groups." Isn't this the essence of what public policy should be, instead of political manipulation in favor of special interests?

Markets are very good at creating wealth and maximizing its productive use because they are based on voluntary transactions in which both buyer and seller must consent before a deal is made. Government routinely takes money from some by force, giving it to others, which destroys essential price communication between supply and demand. Government-subsidized jobs are frequently promoted in clouds of confusion and exaggeration necessary for political success. Sound economics however, suggests a more careful investigation of tradeoffs for wiser public policy decisions.

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