Wednesday, September 10, 2008

Government is not an efficient entrepreneur

Barack Obama thinks that government can pick a winner and his industrial policy suggests that green jobs will help grow the U.S. economy.

At last month's DNC, Obama claimed that he will “invest $150 billion over the next decade in affordable, renewable sources of energy” creating “five million new jobs that pay well and can't ever be outsourced.”

Not so fast with those job numbers says John Stossel who takes on Obama's major premise that government directed "investment" to create Green Jobs is something that he should be proud of. Obama's claim misses the larger point: government is a lousy investor subject to the push and pull of politics.

1.) Stossel reminds us "Alaska Rep. Don Young claimed the infamous "bridge to nowhere" would create jobs." Digging a hole then filling it is also creates jobs, but people would not consider that a benefit.

As BHI research economist Ben Powell has noted numerous times, “Jobs themselves are not a benefit; if they were, workers would be paying their employers for the privilege of working, rather than vice versa! It is the value created by performing those jobs that is the benefit, while doing the job is the cost an individual must pay to obtain a benefit.”

2.) Stossel also questions the idea “that Obama knows how best to 'invest' the $150 billion.” I have always held a firm belief that entrepreneurs invest much better then any politician. The entrepreneur risks their own money, and therefore will suffer any costs of a poor investment, encouraging them to measure the risk very carefully. The government risks my, and your, money so the costs are merely passed onto taxpayers. McCain suffers from the same issue, saying he “will support projects to advance technologies that capture and store carbon emissions,” funded via federal revenue. He is careful to say he is for “support,” as he is against “subsidies." Six one way, half a dozen the other.

Green jobs are touted as a welcome byproduct of climate change legislation. In truth it is taking money out of the private sector and putting it into a government that take a cut. When an indepth look is taken and the hand waving and populist rhetoric has been pushed aside, current climate change strategies that consist of a mixing of heavy handed government regulation often fail to meet the basic criteria of cost-benefit analysis.

More of this line of critique can be found here at BHI:

The Faulty Economics of Colorado's Climate Change Action Plan: A Peer Review

The Economics of Climate Change Legislation in North Carolina

Peer Review: Minnesota Climate Mitigation Action Plan Cost-Benefit Analysis

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