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Recycling to Nowhere

The green economy meets the facts.

Aug 27, 2012, Vol. 17, No. 46 • By IRWIN M. STELZER
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Diana Furchtgott-Roth, former chief economist at the Department of Labor and now a senior fellow at the Manhattan Institute (as well as a former colleague of mine at the Hudson Institute), likes to tilt at windmills, and in her latest book she has an opportunity to do so—and at actual windmills, no less.

Diana Furchtgott-Roth

Diana Furchtgott-Roth

In this year’s revised edition of her earlier work, Women’s Figures, Furchtgott-Roth marshals reams of data in an effort to debunk “the myth of women as victims”—an undertaking hardly for the faint of heart. Regulating to Disaster demonstrates equal courage: She attempts, successfully, to show that the concept of “green jobs” is a fiction, that the 3.1 million such jobs the Obama administration claims to have created include a reclassification of employees at bicycle shops, drivers of hybrid buses, and manufacturers of paper cups with a “Save Energy” logo (but not of those without that imprint). 

By simply “relabeling existing jobs as ‘green,’ ” the administration has sought to justify massive subsidies to wind, solar, and other “green” ventures, subsidies that are labeled as loans but are, in fact, venture capital allocated by bureaucrats convinced they can pick winners. That these subsidies often end up in the hands of contributors to President Obama’s campaigns is no coincidence, as the hearings following the bankruptcy of Solyndra demonstrated. But this is not a purely partisan attack: Furchtgott-Roth points out that legislation to promote green jobs began with George W. Bush. There is blame enough to go around.

Furchtgott-Roth is blessed with opponents who have no understanding of cost/benefit analyses. They see only benefits, so desirable that to measure costs would be substituting bean-counting for policymaking. For them, the inefficiency with which bureaucrats allocate capital to favored green enterprises is not a problem worth considering, and they ignore studies showing that the Clean Air Act “inhibited net [economic] growth because it shifted investment into less dynamic industries at the expense of successful industries, which were penalized by higher energy costs,” resulting in a 3 percent reduction in GDP when the amendments to the act were fully implemented. 

Furchtgott-Roth doesn’t just tilt at windmills and deflate politicians’ absurd claims about the job-creating potential of subsidies to “green” enterprises that waste scarce resources. She takes on what she characterizes as a theology that provides its advocates with a feeling of moral superiority, akin to that felt by Jimmy Carter when he advised us to confront oil embargoes by turning down our thermostats in winter and donning sweaters, his version of the ever-comforting hair shirt. The theological nature of the support for green policies (most greens typically capitalize “Earth”) places a huge burden on anyone who wishes to do more than preach to the choir.

Furchtgott-Roth meets that burden. And it is no easy thing, given the high moral standing of the green machine among those who feel good when recycling (despite the fact that its costs often exceed its benefits), who can afford hybrid and electric-powered vehicles (after reaping substantial taxpayer-funded benefits), and who genuinely believe they are inhibiting what, to them, is the impending catastrophe of global warming.

When it comes to shale gas, however, her lack of experience with private-sector energy operations shows. Shale gas is produced by hydrofracturing (fracking), which some say might contaminate water supplies. “Some of these worries,” says Furchtgott-Roth, “while conscientious, are misguided.” While the “some” is generous—there might be others among the conscientious who are not misguided—it doesn’t go far enough, for she fails to apply to the private sector the standards she  rightly applies to error-prone bureaucrats. 

The rare but well-publicized cases of water-table contamination occurred due to poor casing jobs or improper drilling techniques and were immediately prosecuted by the government authorities. .  .  . Hydrofracturing itself is not the villain. Sloppy drilling and casing are problems, but such problems are neither inevitable nor pervasive.

Besides ascribing a legitimate role to the regulators for which she has little use in most other connections, Furchtgott-Roth here ignores the fact that, like governments, large private-sector companies can screw up. Think of BP. Of course, private-sector players bear the cost of their incompetence (at least sometimes), while government bureaucrats rarely do. But in appraising the environmental impact of something like fracking, it is not enough to say, in the absence of private-sector errors, worry not about the environment. I have been around the energy industries for more decades than I care to remember and can assure the author that there will be errors. They may not be frequent, but these are industries in which one error—be it by BP in the Gulf of Mexico, or by the utility companies during the blackouts of 1965 and 2003, or by the officials responsible for the Exxon Valdez oil spill of 1989—can have rather high costs. 

Given the complicated nature of the energy sector, the not-always-perfect performance of the industry’s managers, and plain bad luck, these possibilities must be considered and weighed against the more serious costs of refusing to add to our energy supply sufficiently in advance of demand growth. Shale oil will, as Furchtgott-Roth notes, prove to be an economic game-changer for an energy-hungry America, but its risks must be recognized and managed.

But this is a quibble, required of all reviewers of economic tracts. My main quarrel stems from a desire for more from an author surely capable of providing it. It would have added to the large contribution this book makes to the debate about regulatory policy if she had shared with us her suggestions for the criteria to be used in setting policy capable of avoiding the errors she criticizes. From her other writings we know that she is unenthusiastic about the carbon taxes that so many economists feel would create a level playing field for all energy sources and eliminate the (nontheological) justification for subsidies to uneconomic wind, solar, and other renewables, and allow markets rather than regulations to determine the level and pattern of energy consumption. She is, after all, more than a little skeptical about those who believe there is such a thing as “green jobs” to be wished into existence by lavishing taxpayer cash on worthy recipients. How would she reduce their role?

In the end, it would be churlish to argue that Diana Furchtgott-Roth has not made her case. By piling fact upon fact, example upon example, carefully analyzing the relevant data relating to the costs of green-jobs policies, and reminding us of the fallibility and partisan nature of politicians’ glowing forecasts of the job-creating potential of subsidies and regulations, she has shown that these programs, more often than not, make “people feel good about themselves” only by placing a huge burden on the economy. 

They might not quite be the “disaster” the title suggests, but they surely are “expensive, inefficient .  .  . counter to economic growth and .  .  . a wasteful way of meeting our objectives.”

Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).