The Cost of “Cost-Free”

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An Atlantic article by Jim Tankersley, on the subject of job creation, illustrates the way in which bad economic ideas drive bad policy choices. I have in mind specifically Tankersley’s item #5, “Unleash energy companies’ spending power,” in which he proposes

…a “Clean-Energy Standard”–a mandate that a certain percentage of each utility’s power generation come from low-carbon-emission sources. The percentage would ramp up over time. Under current technology, clean energy is often more expensive than, say, coal-fired electricity, but a phased-in standard would allow utilities time to increase electric prices incrementally; a well-designed standard with flexibility (for regions most dependent on fossil fuels today) could blunt much of the long-term impact on consumers. Meanwhile, the new construction could start right away. Such a federal mandate, says Joshua Freed, vice president for clean energy at the centrist Democratic think tank Third Way, “would provide a clear signal, without costing any money, to the private sector to invest in wind, solar, or any of the other technologies that are coming on line today.” Several large utilities say that the resulting certainty would spur billions of dollars of investment and drive job growth.

Note that assertion that this policy could be implemented without costing any money. Perhaps it wouldn’t cost the government any money, in the short term, but it would certainly cost American consumers and businesses plenty of money…after all, if these generation technologies were more economical than the current ones, they would have been implemented without the need for government force. In addition to directly increasing electricity bills, it would represent yet another blow against American manufacturing companies, many of which are highly energy-intensive. Indeed, there are also plenty of non-manufacturing companies, such as operators of large data centers, which would be harmed by government-mandated increases in the price of electricity.. And the resulting decreases in business activity, and reduced ability of consumers to spend money on things other tha electricity, would certainly cost the government money in the future, in the form of reduced tax collections. Not to mention the costs of unemployment among coal miners.

More than 150 years ago, the French economist Frederic Bastiat wrote about the broken-window fallacy, and explained why the breakage of windows does not really provide a net economic gain, despite the fact that such breakage provides jobs for glaziers and glass-manufacturing workers. Apparently, after all this time Bastiat’s insight is still not well-understood. Democrats, in particular, continue to believe that they can push an endless number of “cost-free” mandates on the producers of goods and services, even in the midst of an ongoing economic disaster that has been largely caused by exactly that kind of thinking. And despite all the talk about “conserving resources,” they generally seem to have no compunction about writing off and destroying human-created resources (such as coal-burning power plants) which represent vast amounts of human labor and intelligence.

Atlantic link via Instapundit

17 thoughts on “The Cost of “Cost-Free””

  3. One key idea missing from modern Leftists economic thought is the fact that in order to create a prosperous society, work has to be purposeful i.e. it has to perform a needed task.

    Leftists seem to have gotten the idea somewhere in the 60s that work is just a ritual we go through to gain the moral right to our paychecks. They don’t seem to have any concept that all economic work eventually devolves down to physically altering the environment to make it more amenable to human life. They certainly seem to have lost the concept that work has to be specific and can’t just be the result of whim or fashion.

    I don’t think they understand that farmers actually have to not only grow food but that they have to grow certain specific crops in certain specific locations, seasons and in the right quantities. I don’t think they really understand that we have to have oil wells and mines. I don’t think they understand that we have to have factories that produce specific needed items. I don’t think they understand that all that has to be precisely organized in a specific pattern or everyone dies.

    This leads them to believe in what we might call a “sacred” economy much like that practiced in many highly organized pre-industrial civilizations like the Khmer empire, the Mayan or the Aztecs (and probably ancient Egypt and Sumeria as well.) In those societies, it was believed that keeping right with the gods and the heavens was the primary cause of material prosperity. Of course, they knew that they needed fields, irrigation systems, roads and trade but their upper classes sincerely believed that all those where just epiphenomena of the god’s favor. Today, we would say that the religious structures existed to provide the organizational software that made the hardware of infrastructure work.

    I think contemporary Leftists have the same sort of in vague notion that morality and “social justice” create material wealth and that therefore as long as they act morally (as they define it) then the economy will automatically prosper since its all rather arbitrary anyway.

    So, they see things like so-called “green” power as a means of getting right with the gods. If we have the right moral structure (with Leftists on top) then prosperity will automatically follow regardless of the grubby technological details.

  4. “Cost Free” my ass!! The dhimmicrap party leaders know better, but frankly they do not care, along with the executives of the utility companies that supposedly agreed to go along with the “green” charade.

  7. This leads them to believe in what we might call a “sacred” economy much like that practiced in many highly organized pre-industrial civilizations like the Khmer empire, the Mayan or the Aztecs (and probably ancient Egypt and Sumeria as well.) In those societies, it was believed that keeping right with the gods and the heavens was the primary cause of material prosperity. Of course, they knew that they needed fields, irrigation systems(http://www.shapercorset.com/), roads and trade but their upper classes sincerely believed that all those where just epiphenomena of the god’s favor. Today, we would say that the religious structures existed to provide the organizational software that made the hardware of infrastructure work.

  9. Pixie dust.
    Tankersley forgot to invoke pixie dust.
    If only he had done so, while including rules to exclude greedy, extremist, racist Tea Partiers from the economic process—well, THEN his entire premise makes complete sense. Probably an inadvertent omission.
    Anybody who is truly informed (e.g., NPR listeners and members of the civil service) would understand that he left out some minor details in his outline for the sake of simplicity. Like the pixie dust.

    Shame on you for not believing in the concept. For, to believe is to make it so, n’est-ce pas?

  10. Arthur C. Clarke wrote “Any sufficiently advanced technology is indistinguishable from magic”. Progressives see technology and wealth creation as magic. Engineers and corporate mangers are evil magicians who could do anything they want with the right combination of spells.

    Progressives are convinced that “we” can do anything we really, really want to do. It is all pretty simple. If we don’t have some benefit available in life, it must be because the technical and business types are hiding the advances in order to make themselves more valuable and powerful.

    This is particularly true of energy costs, energy production, and carbon output. Progressives say that the evil energy companies could make it all so much cheaper if they weren’t intent on taking profits from us all.

    I can only assume that progessives see the vast infrastructure of modern society as an elaborate distraction designed to hide the little black box that does all the work for a dollar.

  11. I’ve never much liked that Arthur Clarke quote. Any technology, from a loom to a sailing ship to a steam locomotive to a computer, can be understood at some basic level by anyone who has a bit of intellectual curiosity and is willing to make the effort…the whole point about magic is that you *can’t* understand how it works, by definition. The problem is that too many people are lacking in that curiosity and their education has never pointed them in that direction.

    Indeed, one of the arguments made for the vast expansion of education spending in the wake of Sputnik (in addition to the primary argument, “the Russians are going to come and eat us up”) was that “we’re an increasingly technological society, and people need to understand something about science and technology to be good citizens.” But it all turned out to be bait-and-switch…the schools took the money and are still taking it, but the focus on serious science teaching didn’t last long.

  12. David Foster – I might have been more sensitive to mistakes yesterday because I spent about an hour correcting them on my own site. And forgetting to paste in the URL is a mistake I’ve made more than once.

    Going back to the Atlantic post: I thought it contained an odd mish-mash of good and bad ideas. It’s true, for instance, that employers are slow to hire because of regulatory uncertainty, but his fix in the energy field is just plain silly.

  13. “but a phased-in standard would allow utilities time to increase electric prices incrementally; a well-designed standard with flexibility (for regions most dependent on fossil fuels today) could blunt much of the long-term impact on consumers”

    Oligarchies – which is what is forming in this country in the marriage between the finance sector and the governmental elite – are typically anti-growth, extractive, rentier economies. Either they rely on selling natural resources to the global market and keep most of the profit within their own class or they tax-farm the population with measures like the above, or both.

    The policy is economically stagnating but it keeps the elite on top by ending economic mobility and ultimately, the political liberties of the mass of people, who lack the resources to effectively contest the elite peacefully in the politically process ( when such things are allowed, which frequently they are not. Our elite is growing increasingly anti-democratic as well, with such innovations as “the super-Congress” and attempts to make the actions of Federal regulators immune from judicial review)

  14. Socialism is only free until it runs out of other people’s money to waste.

    Then, not so much because reality is a bummer, man.

  15. We here in the Pacific Northwest get most of our electricity from hydro dams. But those aren’t counted as renewable and clean. The utilities here are forced to invest in wind and solar. Our electric prices are rising because of that “grand bargain” between gubmint and the utes. It is all so……stupid!

  17. Frederic Bastiat was an advocate for individual liberty and free markets

    Bastiat was also a satirist. He proposed protecting candle-makers by a law requiring the closing of all blinds to shut out the sunlight and stimulate the domestic economy

    Bastiat made a distinction between the seen and the unseen, and intended and unintended consequences

    We tend to evaluate the impact of government programs without considering what taxpayers would have done with the money instead

    It’s foolish to contrive inefficiencies just to create jobs

    Progress comes from reducing the work needed to produce, not increasing it. Yet, a day doesn’t pass that we don’t hear some proposal to “create jobs,” as if there’s no work to be done otherwise. If its jobs we want, let’s just replace all bulldozers with shovels. If we want more work, replace shovels with spoons”¦or work only with our left hand.

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