I know my environmental writings upset some of you, but I must press on… In this post I take on a new study from the Political Economy Research Institute. An excerpt:
Glancing through Appendix B of the PERI report, in which they explain the method by which they come up with such counterintuitive conclusions, shows that it truly is based on the crude “insight” that forcing businesses to spend money complying with new regulations, will cause them to hire workers. There is nothing in the PERI study showing that what these workers are doing is beneficial to the economy; it is the mere fact of their hiring per se that is supposed to be the benefit.
To demonstrate the problem with this approach, we’ll do the folks at PERI one better. To repeat their argument: they are claiming that the EPA’s new pollution regulations will create 640,000 years of work directly flowing from the need to comply with the new rules. But if that’s supposed to be a good thing, then why not pass a further regulation specifying that anyone performing upgrades to power plants must work with one hand tied behind his back? We haven’t done a formal simulation as the PERI folks have done, but we bet our augmented regulations would easily require 2 million years of work directly in the generation sector. So the IER plan creates far more jobs than the modest EPA proposal, especially when you factor in the indirect benefits flowing to the massage therapists who have a surge in arm and hand cramps to deal with.
If proponents of the EPA’s new regulations want to admit that they will hurt the conventional economy, but will yield benefits in the form of reduced air pollution or global warming, then that is at least a coherent argument. To see if the plan made sense, we would then face the empirical question of seeing whether the alleged environmental benefits came at too high a cost in terms of lost jobs and lower economic output.
But that’s not what the folks at PERI are claiming. Instead, they are mixing up their costs with their benefits. They are saying that it is a good thing that it will take more workers to produce electricity, and hence drive up electricity prices.