Al Gore is unleashing the climate campaign you can't ignore, in the shape of www.wecansolveit.org, which will spend $300 million to sign up some millions of people who will march, write letters and like, agitate. In the face of this government and business will be forced - the plan goes - to take climate change seriously.
Clearly it's all being done for the very best of reasons: no man could need more than a Nobel and an Oscar to assure him of his status. But all that money being spent to get governments to do as Al Gore thinks they should ought to give us pause for thought.
And unfortunately, there's a flaw at the heart of the plan - a failure of economic logic which rather undermines the justification for the whole campaign:
"Thousands of new companies, millions of new jobs, and billions in revenue generated by solutions to the climate crisis - this is the clean energy economy we can adopt with today's technologies, resources, know-how, and leadership from our elected officials."
Leave aside the absurdity of our (or anyone elses') elected officials being able to create jobs, companies or revenues: if they could they wouldn't be elected representatives, would they? They'd be off getting rich. Look rather at those claims that the plan will create all those jobs, all those revenues: they clearly think that this is a good idea, a benefit of the plan. But it isn't a benefit, it's a cost.
We shouldn't be too tough on them; at least not yet, for this misconception is very common amongst the ageing hippies and other fantasists who run the major green organisations. Says Jonathon Porritt of Friends of the Earth:
"Wouldn’t it be great, just once, to hear a senior Labour Politician (other than Ken) enthusing in similar terms about the hundreds of thousands of real jobs that would be created were we ever to get serious about energy efficiency?"
Or even the British Chancellor, Alistair Darling:
"There are huge opportunities here too for business, and there could be over a million jobs in our environmental industries within the next two decades."
There's something of a willy waving contest going on here, and clearly Al is the Big Swinging Dick because he's offering millions of jobs, not just a million, or mere hundreds of thousands like that piker Porritt.
But all three of them are making the same error, what Bastiat in 1850 (clearly, 158 years isn't long enough for such a simple point to sink into politicians' brains) called the Broken Window Fallacy, or as it is sometimes known, the make work fallacy. For, as I say, all those jobs, all those revenues, are properly counted as a cost of such schemes, not a benefit.
When we come to evaluate a plan we need to know how wonderfully fabulous the results are going to be. I'm certainly not going to try and argue that a richer world without the threat of climate change would be less than wonderfully fabulous. But as well as that elysian future, we have to work out what it is going to cost us to get from here to there. That means being very careful in how we work out what are the costs. It might still be a good idea, just as it might not be, but this is exactly what our cost benefit analysis is designed to tell us: will it all be worth it?
Al's actual campaign will certainly be worth it: the dweebs that populate the green movement need opportunities to congregate and repopulate just as much as any other unfortunate section of society: otherwise who will the next generation buy their burgers from? But will the actions we are being urged to take be worth it?
So consider what happens when we 'create' millions of jobs. Yes, certainly, millions of people then have jobs. That's wonderful for them of course, although quite why everyone insists that it is a good idea that these are 'high paying”' jobs rather escapes: that rather means that whoever is buying their products (i.e., us) is paying more than if they were low paying jobs. But much more important is what is unseen here. What would those people be doing if they weren't doing these newly created jobs? Something else, certainly, we've not just sown dragon's teeth to create these new workers now, have we? And what was it that they were doing previously?
Things are a little different if all those who take these jobs were previously in involuntary unemployment, but mass unemployment isn't something that's all that prevalent in either the US or the UK. Certainly not amongst the skilled workers who would be needed to design, build and install the new glorious renewable energy systems, at least. So all of our new found workforce would have in fact come from doing something else. It doesn't really matter what else either, not to make the basic point. For we lose whatever else it was that they were doing at the same time as we gain our bright shiny new energy system. They might have been wiping babies' bottoms, stacking shelves at Albertson's or working to cure cancer. Whatever it was, that they are now not doing those things is a cost to us: smelly babies, the Great Famine that would follow Albertson's running out of food, the cancer that will get about a third of us, these are all costs.
They might indeed be bearable costs, they might even be worthwhile costs, it might make perfect sense for us to incur them to stop Manhattan from sinking under the waves: but costs they are and as costs we have to account for them.
Which is what makes all the willy waving so silly: what we actually want is someone to come up with a plan that doesn't create new jobs, one that doesn't cause us losses elsewhere. We actually want people to be boasting about how their plan destroys jobs, want what no man has yet done, people to boast of their micro-dicks. As, say, supermarkets themselves have:
"The New Economics Foundation has calculated that every £50,000 spent in small local shops creates one job. You must spend £250,000 in superstores for the same result."
How excellent, eh? Supermarkets use fewer resources (for the labour of a human being is most certainly a resource) but get the same job done. Our retail requirements are catered for and instead of five people working to do so, only one is. The other four are able to go off and wipe bottoms and/or cure cancer. We thus get both our groceries and fresh smelling babies (and perhaps that cancer cure will come before my Marlboros kick in). Excellent, we're richer, all of us as a society, by using less labour to complete a task.
That is why these claims of job creation should be treated as costs, not benefits, when we try to evaluate these schemes and, similarly, why the boosters of these plans are guilty of economic illogic.
This is very closely related to the concept of opportunity cost: you can only use a resource, the labour of a person for example, to do one thing at one time. Which means that there is indeed a huge benefit to Al running this WE thing: if he's doing that he can't run for President again. Lucky, eh? ®
Tim Worstall knows more about rare metals than most might think wise, and writes for himself at timworstall.com, and for The Business, among others. He is a Fellow of the Adam Smith Institute.