Thursday, December 3, 2009


I saw President Obama on TV talking about some sort of jobs summit at the White House.  Two things struck me.  First, he admitted to only attending a couple of the sessions, which is understandable given how busy presidents are, but still seems bad to mention politically.  Second, he started talking about weatherproofing as a way to spur the green economy and how the weatherproofing may pay for itself through energy savings.

This, quite frankly, is bullshit.  As I mentioned before, weatherproofing, and indeed much of the whole green economy stuff, is much like breaking windows to spur the economy.   President Obama did mention that he'd heard from attendees that the carbon pricing issue really has to get settled before the weatherproofing projects could move forward because it would have a big impact on whether the projects would pay for themselves.  This too is bullshit.

If you think about it for more than a second and weatherproofing did pay for itself today, then we wouldn't need a government program to support it.  People would simply do it because it makes them better off.  So, no, these things won't pay for themselves today. 

That's where the carbon pricing stuff comes in.  If you raise the price of carbon, then then savings from more efficient windows or heaters or whatever are larger.  Therefore, the more projects begin to pay for themselves through cost savings.  But it's just fucking stupid to think that a tax, which is what carbon pricing is will stimulate the economy in a way that makes us better off. 

Tax incur a dead weight loss, which means we as a society are worse off economically because of it being in place.  Now, it is possible to then use the revenue from the tax to make society better off in other ways, but taxing and spending pretty much always makes us worse off economically.   There are some exceptions where if you spend and tax at different times you can theoretically smooth the business cycle and perhaps improve overall welfare as a result, but that's not exactly what happens in reality.

On a related note, but not something I heard in relation to the jobs summit, some of my colleagues at work have talked about a WPA style agency to put people to work?   I only have two concerns with the idea.  First, that working at a temporary government job limits the time a person has to find a permanent position.  If you're working it's harder to interview and job hunt.  But with 10% unemployment, there are more people than jobs and this isn't as much of a concern to me as when I normally hear this type of proposal.  Second issue I have is how do we ensure that  these jobs are eliminated as the economy recovers.  Going back to the first point, there will be a time when the economy is creating jobs and people in these government jobs may be hindered or complacent in getting back into the private job market.  BTW, if done right this type of thing falls into the spend and tax at different times to smooth the business cycle category.

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