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Proponents of the carbon tax, cap-and-trade schemes, or other CO2-reducing policies sometimes argue that not only would such policies be good for the environment, they would also create new jobs. I have never found that line of reasoning particularly persuasive. After all, those jobs would be subsidized by money taken out of other industries, where jobs would be lost. Tyler Cowen provides a more obvious and intuitive counter-argument: work is a cost.

But if it takes more jobs to produce “green energy,” that is a net cost to the economy, not a benefit.

He then goes on to the misalignment of resources, similar to the argument behind my skepticism.

We’re dealing now with something beyond the Keynesian short run and so those extra jobs are a drain of resources from elsewhere.  If you wish, sub out the word “energy” and sub in the word “agriculture” and then reevaluate the sentence from the vantage point of 1900.  Would it truly create net jobs — much less good jobs — to trash tractors and industrial fertilizer?  The ideal situation would be a technology where very few jobs were required to create and distribute the nation’s energy supply.  Remember Bastiat’s candlemakers’ petition against the sun?  It’s turning out to be a better hypothetical example than Bastiat himself ever realized.

There are a couple of points “green jobs”-believers could make. Perhaps most sensibly, the Pigouvians among them could argue that resources are currently misaligned (away from the green sector) because of the negative externalities of CO2 emissions. An optimal Pigouvian tax would correct this. In theory, this is correct. In reality it seems difficult to figure out what the correct tax level would be; there is no easy way of knowing how much people would be willing to pay to lower emissions by a certain amount. It is also a bit unclear which people we should consider. Surely, the currently unborn ought to have some say, given that they are the ones that will face most of the consequences? Also, we have little knowledge of future technology. Still, it is not unreasonable to assume that the optimal tax level is higher than zero, so a moderate carbon tax is likely to be a good policy — especially if other, more clearly misaligning, taxes are lowered instead.

They might also argue that despite the net loss, these green jobs are more valuable. That may or may not be so, but it is ultimately beside the point.

All things considered, I remain skeptical towards this line of reasoning. That does not mean that any of these policies are necessarily bad, although good legislation in theory very seldom gets turned into good policy in the real world. And it is in the real world we will have to live with the policies that become adopted.

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