"Green jobs" will dig us more deeply into the red — so argue Andy Morriss (my Market Correction co-blogger), William Bogart, Andrew Dorchak, and Roger Meiners.
Blowing the Cover on Political Hot Air
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I just spend a week visiting my in-laws in the Canon City area of Colorado. Their new manufactured home is at the 7580' level and gets a lot of daily wind.
They had installed, $18,000 plus price tag, a "green system" of windmill and solar panel which charge a bank of storage batteries.
There is just the two of them, no kids, no socialist relative freeloaders, and both will never see another mate or children in their future. Both will probably be dead in another 15 years, max.
Will they ever recoup their investment through savings on their electric bill? I think not, unless of course Obama and his crew of zanies drive the price up so blooming high (a distinct probability) that we all are burning our furniture to heat our homes (a distinct possibility).
But BY God they are green! I was a good guest and didn't laugh until I had left to come home.
10 -20 years hence these guys will look like people arguing against the IT revolution or the move away from horse and buggy to the internal combustion engine at their dawnings.
No we've listened to guys like this over and over, True-believers in the perfection or superiority of markets and the results are clear. People who believe the externalities of wars for oil, mountaintops for coal and coal bed methane are accounted for and yet claim themselves free-marketeers are nothing more then charlatans for hire protecting the realms of kings.
Oh, I forgot to mention that my in-laws also installed an "on-demand" water heater, gas fired of course. And, they heat with gas as well as cook with gas.
With that information the "green-shaft" they took on their electricity seems even less likely to pay off in their lifetimes.
muirgeo -
I don't think we know for certain that your analogy will hold – but I think any objective person has to admit that it may very well hold. Would the internet ever have happened without DARPA investment? We don't know. It probably would have, eventually – but would it be as good? Would it be as successful? If you make a policy of ignoring a priori externalities, accelerator effects, the disparity between private and social discount rates, etc. the answer is really really easy – "of course the market could do it better and if the market won't do it it's not worth doing".
I find that answer doesn't come quite as easy for me and I'm inclined toward the analogies you offer us.
Which isn't to say at all that the concerns that Don has always aired don't hold. They absolutely do! The advantage of government sponsorship of these things is NOT that they have some special knowledge of these issues or that they are especially efficient at getting the job done. I don't think anyone is arguing that. In that sense, it's always good to point out these hesitations. What public investment offers is a way of overcoming the various market failures that a lot of people have pointed out that act as roadblocks to progress.
Does that mean this is the right move? I personally couldn't say. I'm sure there will be false starts. But you hit the nail on the head – there are risks involved with taking a passive stance as well that all too often aren't recognized.
"10 -20 years hence these guys will look like people arguing against the IT revolution or the move away from horse and buggy to the internal combustion engine at their dawnings."
-muirdog
Wind turbines and solar panels are not not new or "revolutionary". Both have been around for years.
MWG -
RE: "Wind turbines and solar panels are not not new or "revolutionary". Both have been around for years."
Yes, and the Turing machine has been around for the better part of a century… what's your point? Muirgeo's point (you seem to have misspelled his name) is precisely that we have a technology that we've had for awhile (like his horse and buggy example), and this kind of knee-jerk reaction is akin to people balking at the expense of an internal combustion engine when it was first introduced.
and this kind of knee-jerk reaction is akin to people balking at the expense of an internal combustion engine when it was first introduced.
That's what you think his point is? You are an accomplished mental gymnast, Dan.
MWG didn't misspell anything – it's just that he chose the most polite of all available and accurate names.
Re: in-laws green system.
The $30K pool that I built in my backyard will never pay for itself. Nor will the Rolex watch that I bought. There were cheaper options available for both and yet my choices were rational given the additional utility that I get.
I suspect the in-laws have made the same exact rational choice in getting their home power system. They have a right to spend their money the way they see fit. Why would anyone want to criticise them for exercising their utility-maximizing behavior?
>>Wind turbines and solar panels are not not new or "revolutionary". Both have been around for years.<<
While the technoloty existed they were not readily available at consumer level and for pesonal/home use. Computers have been in existance since the 1940s yet the invention of PC was "revolutionary".
Methinks -
RE: "MWG didn't misspell anything – it's just that he chose the most polite of all available and accurate names."
"muirgeo" is unavailable or inaccurate? I don't even know what the hell it means, so I don't see how it's "inaccurate"
RE: "That's what you think his point is? You are an accomplished mental gymnast, Dan."
What did you think the point of that statement was then? The statement "10 -20 years hence these guys will look like people arguing against the IT revolution or the move away from horse and buggy to the internal combustion engine at their dawnings." isn't all that complicated… it doesn't really take mental gymnastics
EX-GMU-Student
I presume that you did not finish your degree or that it was in a non-analytical field. The point of purchasing a swimming pool is the enjoyment that it provides (30k is not a huge expense for that enjoyment) and/or the status that it conveys. It has nothing to do with utility.
Buying a Rolex? Same thing, personal enjoyment of its aesthetics (or the fact that you can afford such jewelry – congrats).
The in-laws green energy set up? Vidyohs questions the utility of it. Meaning – does it provide a reasonable payback on their investment or not. He thinks not and I am inclined to think that he is correct. Maybe they purchased it keep their bills more steady (they are paying for it over 30 years of which Vid thinks they won't be in that house for more than 15). So they are paying approximately $120 per month mortgage for the system. It does not provide energy for heating or cooking or hot water. These are the main energy draws in a household, and I am guessing that at 7600' in the Colorado mountains they don't have a real need for the AC in most times of the year (and could probably tap into the grid if needed).
So, like your Rolex watch, the green energy system does provide a service/function. It, however, is jewelry. You could probably purchase the same number of electrons off of the grid for a fraction of the cost (unless the government takes steps to increase the cost drastically) to get the same utility. Much like you could purchase a Timex if your purpose was simply the function of time telling and not the status of the Rolex. They wanted the status of being "green." By the way, my Timex is solar powered, has multiple alarms, a stop watch, and other things I don't care to learn how to use – now that is utility for only $45.
Wow… I am just speechless…
I don't understand how we can be making all these assumptions about technology that doesn't exist.
As the technology currently stands, there is absolutely no way that "green" energy sources can replace fossil fuels.
So we're banking that with enough government money, that replacements can be found.
muirgeo -
Your analogy would make more sense if you compared green technology to, say, solar cells from the 1970s.
They didn't do a very good job then, don't do a very good job now, and likely will continue not doing a very good job in the future.
Wind turbines and solar panels are not not new or "revolutionary". Both have been around for years.
In fact, many farms and ranches had windmills, most of which fell into disuse thanks to the Rural Electrification program.
When citing government funded initiatives, such as DARPA and the internet, it is easy to ignore the technological developments that were precluded by government subsidization that made, for example, centralized power generation and distribution cheaper than windmills, an industry that might have advanced in the market without those subsidies.
Let us not forget the investments that would have occurred had the resources wasted by government been left in private hands.
Whose knee was it that jerked? What did government do to stop the jerking?
The simple fact is that markets CAN'T plan ahead. The don't anticipate future needs. Markets have definite value but planning has a place as well. That planning is a "bad thing" in the eyes of free-market fundamentalist is all one needs to understand that it is a philosophy that borders on being a cult uninterested in naunces and real world pragmatism. We are successful because we plan both as individuals and as societies.
It's either all or none with these people and the refusal to see shades of grey and naunce is the trademark of ideologues.
Their beliefs are perfect on paper and in their minds only. They have no real world applicability.
What would happen to a GMU economics professor who broke from the pack and questioned the groups think? Are they realy at liberty to do so?
Don,
why are your posts at http://marketcorrection.powerblogs.com/ so out of date? The latest "Proto-Simon" dated 1/12/2009.
ROTFLMAO. Can it get anymore hilarious than this?
Just when I thought Gaia worshippers can't get more stupid, I found this
Broken windows everywhere.
"I presume that you did not finish your degree or that it was in a non-analytical field. The point of purchasing a swimming pool is the enjoyment that it provides (30k is not a huge expense for that enjoyment) and/or the status that it conveys. It has nothing to do with utility."
Posted by: T Rich | Jun 2, 2009 1:11:28 PM
>>Wow… I am just speechless…
Ok I have now recovered enough to continue… So I will try my best.
In economics, things like enjoyment, happiness, satisfaction, etc are called "utility". This is a very basic concept in economics and even a high school intro to economics would teach you that. I presume you got an advanced economics degree with honors from GMU?
Don and Russell, you have built an interesting community here at Cafe Hayek. You must be proud.
Its not just a question of wether or not the windmills will pay for themselves. The answer to that question sheds light on the answer to another question: Do they really reduce pollution, CO2 emissions and use fewer resources. I know windmills are made of fiberglass and carbon composits, which are very expensive and use many noxious chemicals to manufacture. They also often require heat treatments, machining, and probably all sorts of other processing that takes a lot of energy and work. This is what constitutes a lot of the cost. If producing energy by more conventional means is cheaper, then it means you have used more resources if you used wind or solar.
MnM,
closing block quotes
Oops. Sorry, I thought it looked okay in the preview…
All true. Problem doesn't end there. It takes a whole lot more maintenance. The windfarms are usually spread over several 100 acres of difficult terrain. Transporting people and equipment over such terrain will cost more human and material resources, therefore will cost more to the consumer.
"…and this kind of knee-jerk reaction is akin to people balking at the expense of an internal combustion engine when it was first introduced."
-DK
The internal combustion engine came about through the free market. If we're on the verge of a green "revolution", there would plenty of profit seekers pumping money into the market for wind turbines and solar panels, not people outstretching their hand for govt. subsidies.
"While the technoloty existed they were not readily available at consumer level and for pesonal/home use. Computers have been in existance since the 1940s yet the invention of PC was "revolutionary".
-EX-GMU-Student
The PC "revolution" came about because companies like IBM, Macintosh, and Microsoft collaborated and competed in the free market. The technologies they created didn't come about b/c a politician picked winners by "investing" in them with tax money.
>>The PC "revolution" came about because companies like IBM, Macintosh, and Microsoft collaborated and competed in the free market. The technologies they created didn't come about b/c a politician picked winners by "investing" in them with tax money.<<
That's fine. I didn't/don't disagree with that.
daniel kuehn: " Would the internet ever have happened without DARPA investment? We don't know."
I think we do know, don't we?
The International Packet Switched Service (IPSS) was created by British Telecom, Western Union International, and the Tymnet division of Tymshare, Inc. IPSS, the first international packet switched network, used the X.25 protocol. X.25 was completely separate and independent of the TCP/IP protocol developed by DARPA. IPSS's X.25 network preceded the first wide area TCP/IP network by several years.
When the National Science Foundation in 1985 chose to use TCP/IP for the NSFNET, that established DARPA's protocol for the internet. As I understand it, they could have chosen X.25. And then we'd be crediting the British Telecom/Western Union/Tymnet alliance for making the internet possible.
Ex-GMU
My only exposure to structured econ was a college macro course and frankly I recall very little of that, but am trying to bootstrap my knowledge and still lack the nuanced lingo. If 'utility' includes all of the things that you listed then fine – my apologies. Perhaps I should have simply stated it as return on investment. I know that most of the projects for plant improvement that I worked on in manufacturing had to show a 3 year or less payback period.
Granted that things like solar power/wind power for use on a residential basis can have different ROI targets than an industrial application might consider. However, the ROI should not be 20 years – especially for solar where panels will need to eventually be replaced.
Also, don't blame Don and Russ for the shortcomings of any posters. I think that most of the posters here are well-informed and sincere about their positions. I try to be open-minded and learn from those comments that express a genuine and well-reasoned opinion. I try to ignore the posts that are clearly ideological/dogmatic in nature. I, for one, appreciate the work that our hosts do to create this forum and think they should be proud of the community they are developing.
I apologize for snarky nature of my initial post.
T Rich,
Thank you for your clarification. I have nothing but respect for people who try to learn more and enhance their understanding of the world. That is exactly what I strive to do as well.
I agree with the ROI view. I did an analysis on a hybrid car a while back and I came to the conclusion that it was not economical even when gas prices were high last year. A much more economical choice would have been an efficient 4 cylander car. However, my wife still got a hybrid and it was a rational choice for her. She felt good about reducing her carbon footprint and took satifaction in maintaining an image of an environmentally conscience person. I did not include those enjoyments in my ROI analysis.
The same applies to the in-law's power system. It may not pass an accountant's ROI model but that does not necessarily indicate the purchase was a bad decision on their part.
EX-GMU-Student,
"I suspect the in-laws have made the same exact rational choice in getting their home power system. They have a right to spend their money the way they see fit. Why would anyone want to criticise them for exercising their utility-maximizing behavior?
Posted by: EX-GMU-Student | Jun 2, 2009 12:31:45 PM"
No, you are wrong.
"The $30K pool that I built in my backyard will never pay for itself. Nor will the Rolex watch that I bought. There were cheaper options available for both and yet my choices were rational given the additional utility that I get."
You get emotional benefit from your pool and from your Rolex you get not only emotional but ego benefit, not increased utility. Cheaper choices would have given you sound utility but not the ego stroke you administered to yourself. You admit this yourself, and then go on to confess that your ego and emotion are to be served as a rational choice. Tsk. Tsk.
"I suspect the in-laws have made the same exact rational choice in getting their home power system." It was an irrational choice, as I pointed out, they will never recoup their investment. They might as well have dumped the money down a rat hole.
"They have a right to spend their money the way they see fit." No, being more rational and smarter, they should have asked me for permission, but I am glad they did not as my life is already too full of responsibilities for me to take care of more than just this one radical man.
"Why would anyone want to criticise them for exercising their utility-maximizing behavior?" See response above. No one is criticizing them on utility-maximizing behavior, as their money is a tool expressly to buy maximum utlility, they did not do that. They squandered their money on an emotional/ego-maximizing choice. They are "green", gosh, oh golly how caring.
Some people are just too clever by half and can't see because of being blinded by their own brilliance.
One thing you seem to not have learned at GMU is any measure of humble attitude.
>>You get emotional benefit from your pool and from your Rolex you get not only emotional but ego benefit, not increased utility.<<
The EX-GMU-STUDENT [and proud of the 'EX', it seems] is correct. All these things that are listed by you and by him/her are utility — another way of defining the word "satisfaction".
But emotional benefits should follow from a realistic appraisal of the object in question. If someone feels good about buying a hybrid because they want to be "green", but hybrid vehicles are actually more damaging to the environment and waste more energy (because of the processes for their manufacture), then this person is being misled by his/her emotions. Its the same as for people who support other government interventions like minimum wage or redistributive taxation. It may make them feel good about themselves, because their motive is to help the poor, but if these policies actually harm the poor, their nice feelings are empty, meaningless, and actually do more harm than good.
>>You get emotional benefit from your pool and from your Rolex you get not only emotional but ego benefit, not increased utility. Cheaper choices would have given you sound utility but not the ego stroke you administered to yourself. <<
Ego stroke is a valid personal utility that greatly influences rational utility-maximing decision making.
>>It was an irrational choice, as I pointed out, they will never recoup their investment. They might as well have dumped the money down a rat hole. <<
Their choice was rational. They get utility from their power system regardless of what the ROI is.
>>No, being more rational and smarter, they should have asked me for permission, but I am glad they did not as my life is already too full of responsibilities for me to take care of more than just this one radical man.<<
>>No one is criticizing them on utility-maximizing behavior, as their money is a tool expressly to buy maximum utlility, they did not do that.<<
So you are saying an entity of authority and knowledge should examine people's decisions and either allow or deny them? You must also believe you (or a similar entity) would make better decisions for people.
Well, if that's the case, we should do away with any personal liberties and let a consortium of smart people make all the decisions for us.
Unbelievable… do you even understand what this blog stands for?
>>But emotional benefits should follow from a realistic appraisal of the object in question. If someone feels good about buying a hybrid because they want to be "green", but hybrid vehicles are actually more damaging to the environment and waste more energy (because of the processes for their manufacture), then this person is being misled by his/her emotions.<<
Hybrid vehicles are not more damaging to the environment, there is nothing wrong with their manufacturing process. I said based on my calculations they are not economical. But that is to be expected given the externality associated with hybrid vehicles.
EGS,
Absolutely, if it has to be, and as long as it's me, I vote for it.
If Obama, why not me. I have a higher IQ and more experience in actual leadership.
Golly, I have even ran more than one successful business.
I actually know what a market is, I know what a marketplace is, I know what trade is,
I know to ask people smarter than me when in doubt.
I know not to put failures in charge of anything.
I am not insane, as I am not willing to try what has failed 100%, and expect that this time it will work for me.
Lot's of good reasons why I should have been consulted by my in-laws.
Lot'sa good reasons why I should run your life as well, what the hell you let a bunch of jerk-offs in a flawed criminal enterprise called congress do it……Ah ha ha ha ha ha ha ha!
Think Chuckie Schumer, Hilary Clinton, Ted Kennedy, Harry Reid, Newt Gingrich, Tom Delay……I can screw up less than those guys and I am a hell of a lot more honest.
Welcome to the blog that I don't understand, I can see that you're going to be entertaining.
What do you mean by the externality associated with hybrid vehicles? If something is uneconomical, doesn't that mean that it is a waste of resources?
I should add that while I agree with the posted article, it is very weak. It presents the conclusions, all of which I agree with, but it doesn't give the doubtful reader any reason to believe it. Its not very persuasive.
EX-GMU-Student,
BTW, just so we can guage you better, does your blog tag imply that you actually went to GMU for a day or more? Four years perhaps? Graduated maybe?
In what discipline? Dance, Folklore and mythology, Usability, Zoo & Aquarium leadership, Athletics, or Economics?
Perhaps you'll reveal your name to Don & Russ and they can tell us if you were last in your class or somewhere above that.
Just curious you know.
My problem with the statement is its arrogance. Muirgeo can't possibly know that it's true. He may believe it all he likes, and he may invest his life savings in "green technology" all he likes, and I hope he's then the next Bill Gates, but he's speculating regardless.
I was an NFL (National Forensic League) debater in high school in the late seventies, believe it or not. NFL teams across the country debate a single proposition each year. In 1978, the proposition involved energy independence. Resolved that the U.S. should pursue a policy of energy independence.
Proponents argued that energy independence was beneficial and possible using various alternative energy sources, from windmills to breeder reactors to solar power satellites, distributed through the electricity grid or hydrogen or otherwise.
Opponents argued that independence from imported fossil fuels, as proposed by a proponent, was either too detrimental or impractical.
Loads of people were completely convinced that the end of oil was near and that greener alternative energy was just around the corner. That wasn't 10 or 20 years ago. It was 30 years ago, before the PC revolution, before the web, before widespread cell phones, before mp3 players with vast music collections around the neck of every teenager, while my energy usage has hardly changed.
So don't tell me that your crystal ball is infallible. I have every reason to doubt you.
"Loads of people were completely convinced that the end of oil was near and that greener alternative energy was just around the corner. That wasn't 10 or 20 years ago. It was 30 years ago, before the PC revolution, before the web, before widespread cell phones, before mp3 players…"
-MB
Great point. Just a bit of trivia: Can you name the first US president who called for "energy independence"?
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Nixon
"10 -20 years hence these guys will look like people arguing against the IT revolution or the move away from horse and buggy to the internal combustion engine at their dawnings."
The thing is, if there was anyone arguing against these innovations, they weren't arguing to prevent them by force of government, and nobody was arguing to impose the innovations by force of government.
Let the reality of the situation, the economic and technical facts of the matter, decide. In other words, let the market decide. We don't want it pushed on us by politicians who want to feel good about themselves, at the cost of hundreds of billions, maybe trillions of dollars, then find out we pouted our money down a rat hole. Who knows? Maybe someday solar and wind power WILL become practical and economical. If it does, you won't need the government to push it on us, or even subsidize it.
"Let the reality of the situation, the economic and technical facts of the matter, decide. In other words, let the market decide. We don't want it pushed on us by politicians who want to feel good about themselves, at the cost of hundreds of billions, maybe trillions of dollars, then find out we pouted our money down a rat hole. Who knows? Maybe someday solar and wind power WILL become practical and economical. If it does, you won't need the government to push it on us, or even subsidize it.
Posted by: SaulOhio | Jun 2, 2009 7:50:21 PM"
Exactly. Someday perhaps we might have a people who have gone back to understanding the intelligent simplicity and workability of what SaulOhio just said.
Just let us be, that's all. Just let us be.
You don't have to tell us to get out of bed in the morning.
You don't have to tell us to employ ourselves in fruitful pursuits.
You don't have to tell us what to make or what to buy, we'll figure it out on our own or we won't. Not your problem.
If my efforts gain market share over my neighbor, it's his problem, not mine or yours.
Let free people be free people, WTF is so hard to understand about that? Well, it's hard for some because they can't see where the thumbsuckers fit in.
I can tell you that in two words. The cemetary. (That's not my dictate, it is nature's)
Would the internet ever have happened without DARPA investment? We don't know. It probably would have, eventually – but would it be as good? Would it be as successful?
Would an alternative to the internet have happened? Would it have been better? Would it have been more successful? Would it have been more efficient to develop by the private sector? See all the other technologies that weren't developed because money was being diverted to DARPA….oh yeah, wait a minute….
Methinks: You are talking about the seen and the unseen.
The best way to think of it is this: All those people who worked on the internet because they were paid to do so with DARPA funds would have done important technological work doing something else. The DARPA money didn't bring those people out of thin air, or make them smarter or give them any new knowledge that they didn't have otherwise. It just moved them around and allowed politicians to take credit for what they did.
test
Let free people be free people, WTF is so hard to understand about that? Well, it's hard for some because they can't see where the thumbsuckers fit in.
I think I figured out why some people seem to have a violent reaction to libertarians.
They abhor personal responsibility.
I call them blamers.
There is always someone to blame.
Not only that but they want the government to take responsibility for them.
So libertarians are a threat. Libertarians want people to be responsible for their own actions, as opposed to blaming others and asking the government to do stuff for us.
The problem is that they will always win.
They will always win because there are always people willing to take on responsibility for them, because that gives them power.
They will always win because there are always lawyers ready to sue the target of the blame, and lawyers write the laws as well.
Is there anything we can do short of waiting for the entire system to collapse and hope we can play a part in the rebuilding?
methinks and SaulOhio,
Let's not confuse things by giving too much credit to DARPA and to the federal government.
DARPA did not create the internet. DARPA developed a packet switched network called ARPANET, but that was not the internet. DARPA created the TCP/IP telecommunications protocol for ARPANET, but that was still not the internet.
The National Science Foundation created NSFNET in 1985, using the TCP/IP protocol developed for ARPANET. By that time, several privately funded computer networks were already operational, including USENET, Tymnet, Telenet, and CompuServe. What we know as the internet came into existence when NSF allowed the privately funded and operated computer networks to interconnect with NSFNET in the late 1980's.
Let's be very clear about the internet. It was created when several computer networks began to interconnect in the late 1980's. Only one of those computer networks was funded by the government.
A little more history about DARPA and the internet:
Although DARPA developed the TCP/IP protocol for ARPANET, it was not an original concept by any means. DARPA borrowed the protocol design for TCP/IP from the French packet-switched network CYCLADES. Though CYCLADES was coordinated by the French agency Institut de Recherche d'lnformatique et d'Automatique (IRIA), it was funded by computer manufacturers and universities, both private and public.
The more I research DARPA and its role in the formation of internet technology, the more I become convinced that DARPA merely piggybacked on private development efforts. Of course, the socialists in and out of government have convinced the media that public funding and government direction played a critical role in the creation of the internet. Socialists always step in front of parades.
You mean Al Gore didn't invent the Internet? And here you are, shattering my faith in the power of government to stimulate technological progress!