The Myths of Green Jobs – from the Classical Economists and a Beancounter

The Adam Smith blog posts (here) on the seven myths of green jobs (by the Policy Network). They are useful as a criticism, but more fundamentally the classical economists gave a rebuttal over a century ago.

From Adam Smith, you get increased prosperity from division of labour. Localism reduces the division of labour, thus reduces the wealth of nations

From David Ricardo this is augmented with the idea of comparative advantage. Trading nations gain advantage by specialisation in areas where they have a comparative advantage. Green economics ignores this. (Mises applies this concept to the labour markets. Low productivity, green, jobs will be created at  the expense of high productivity, conventional jobs.)

From Alfred Marshall there is concept of opportunity costs. In evaluating a measure you should not only look at the benefits of a choice, but the alternatives forgone. Green jobs will be creating, but at the expense of conventional, higher productivity jobs along with higher taxes.

From Karl Marx, you should look at the distribution of the national pie. Green jobs will only be created by forcibly reducing non-green industries. This enforced tendency towards monopoly will increase the profits accruing to the bourgeoisie, at the expense of the working classes. Given that the rate of return on Capital has fallen dramatically over the past two decades, is the Green Movement just a puppet of a degenerate Capitalist Class?

But as a (slightly manic) Beancounter, the economist’s arguments pale into insignificance beside a project management issue. In a major project, if you have no dynamic concept of how to control and continually reduce costs, or a clear idea of how to achieve objectives, along with ridiculing of any questioning of the attainability of the objectives –  then you have a recipe for massive cost overruns, and benefits failing to be achieved on a massive scale.  In the UK, the NHS computer system, the Scottish Parliament and the New Deal for jobs were all massive policy failures for these reasons. But they all pale into insignificance beside the global attempt to stop global warming by reducing CO2 emissions. Not just the scale, but also the lack of clarity as well.

(Roger Pielke Jnr’s recent talk is instructive on the perspective here)

Denialists become Superfluous

OR Who Needs Enemies when you have Friends like These

Climate Psychology is a blog specialising in mirror-posting articles from one side of the climate change argument, but with more lurid titles. The direct inference being that the truth of the science is so blatantly apparent that any criticism must be by the deluded, the deranged, or be in the pay of some sinister forces. One such mirror posting is of Tamino’s “Hockey Stick Delusion” at RealClimate under the Title “Tamino debunks the junk science of Montford and McIntyre for the umpteenth time — the hockey stick is still sticking around

To anyone who looks at both sides of the argument – who properly compares and contracts each point made, will see that Tamino fails to address the points made. As I said in an earlier posting

 Look at

1. Who gives the fullest answers?

2. Which side evades the points, or attempts sleight of hand?

3. How are contrary or neutral points treated. Clue – look at how Judith Curry (who is trying to remain neutral) is treated. Further, look at how contrary opinions are treated.

4. Finally who are the real deniers in all of this?

This leaning on psychology is nothing new. It was used by the KGB to punish dissenters without trial (see also here and here). The recent publication of a statistical analysis of the Hockey Stick by McShane and Warner again shows which side of the debate the delusional mostly reside. The greatest irony is the blog has the following quote:-

“Because the truth is that promoting science isn’t just about providing resources — it’s about protecting free and open inquiry. It’s about ensuring that facts and evidence are never twisted or obscured by politics or ideology.” Barack Obama

Andy Revkin doesn’t know which way to Panic

Andy Revkin today blogs about a 30km chunk of the Petrmann Glacier in Greenland breaking free. Yikes! We say! Run for the hills the see levels will rise!

Just hold on a minute! How much will this chunk of ice affect the global see levels? Well assume that this iceberg is only 20% submerged (still resting on some bedrock) and has a volume of 30km3.  With the oceans covering around 140 million square miles of ocean (363 million km2) this will raise ocean levels by about 16mm or 2/3 inch.

But in the Youtube video accompanying this piece, the problem is much more serious than that. It seems that the Greenland icecap is melting in the summer faster than the snow is replenishing it. If it all melted then see levels would rise by 20 feet or 7m (2min 50s), so Florida disappears beneath the sea. But hold on a minute, computer models show that all this cold water entering the Atlantic may cause a sudden Atlantic cooling in years to come. (1min 50s). I might be a little uneducated, but if the Atlantic cools around Greenland, then this will affect the air temperature. That means there will be cooler summer temperatures nearby. So the net melting process will be diminished, stop or even be reversed.

The message from this for the residents of Florida is not to run for the hills, but buy in a sweater or two, and be prepared for bigger beaches – the tide will go out, and never return.  However, for those a nervous disposition, I suggest take a shot of Whisky (Springbank 21 y.o. or Lagavulin 16 y.o. are my favourites), sit down and relax. The ice-melt will happen over decades, so see levels will not rise much in the next hundred years. Even with a 5 degree warming, most of Greenland will still be below freezing throughout the year. But this will not happen, as natural correction mechanisms will diminish the impact.

The Division of Labour & Climate Science Part 1

Bishop Hill displays to an excellent short video at TED by Matt Ridley, encapsulating the concepts of the division of labour and comparative advantage. One thing that Matt Ridley leaves out is the creative destructiveness of competition through supplanting the existing order. Specialisation leads to new products and processes. By implication, the established processes and products are overturned. (Joseph Schumpeter needs to be added to the list of Adam Smith and David Ricardo)

It is not just in the sphere of production that these concepts apply. It is also with empirical science, be it economics, medical research or climatology. With complex data and many facets to the subject, there is scope for division of labour into

–         Data collectors,

–         Data analysts & measurers,

–         Statisticians to validate the analysis,

–         Theoreticians to innovate or create new ideas.

–         Mathematicians, to provide tools for analysis.

–         Methodologists, to provide structures of meaning and assess the boundaries of science.

–         This is alongside the general sub-divisions of the subject, which may change over time.

–         Alongside greater specialists there is also scope for generalist assessors who get a total perspective of the corpus of knowledge, weighing up the status of competing ideas.

–         Academic competition (to gain status) leads to improvements, but can also lead to diversity in conclusions. It also tends to blunt the conclusions where data is ambiguous or fuzzy.

This makes things a bit messy. In economics there has ceased to be any dominant schools of thought or policy prescriptions. But in climatology we are lucky to have the IPCC, which divides the world into a small group of generalist experts (who agree their main conclusions) and the masses, who accept the wisdom handed down. A bit like the guild system, that kept England in the Dark Ages.

Keeping ahead of China and India

John Redwood is comments that the Chinese and Indian economies will soon be larger than those of The EU or USA. The high growth rates, coupled with their huge populations means that this will happen quite soon. I believe that if the most advanced nations are not to stagnate they must accelerate the advance into higher value-added activities*.

 The government’s role in this should be, at minimum, to refrain from hampering the creativity and the flexibility that this requires. Further it should provide a structure to enhance the comparative advantages that the UK enjoys. For example, in no particular order:-

 1. In learning. Britain is probably second in the world (behind the USA) for attracting foreign students. For the size of population, we lead the world in world-class universities. The government should encourage/enable the universities to build upon this. Our comparative advantage is that we are the home of the English language, the World’s second language.

2. In Finance. Sorting out a proper structure for banking regulation that will both prevent the build-up of systemic risk, whilst at the same time encouraging/enabling future innovation. The apparent contradiction between these two aims is best resolved by emphasising general all-encompassing principles, rather than the detailed rules of the American’s or the detailed form-filling that was key feature of the last decade.

3. In Climate Change. The current aims to reduce CO2 emissions by 80% by 2050 are totally unrealistic. The attempts to do so will only serve to make Britain’s poorer and fail to meet our growing energy requirements. Roger Pielke Jnr explains why here.

* It is usual to say that higher productivity per person is required. From that tautologous statement the National Income = National Output, the way to increase income per person is to increase output person. As working time tends to decrease, more that 100% of this must come from higher output per unit of time. That is, greater productivity. However, the way to increase the income of a business is to increase the margins. The output of a university is not in the raw number of published papers, but the rare papers that create a seismic shift in out knowledge. In finance, it is not the quantity of deals done, but the large deals that create the most profit. For these reasons, I prefer the term more value-added rather than productivity as the driver of increased income per capita.

Why Electric Cars Cannot Pay

In the Sunday Times of  1st August, Jeremy Clarkson does a review of BMW Mini E – an electric test car. (In Gear Pages 15 & 16).

He concludes that  electric cars are something that cannot be achieved – simply because they are too expensive, too short a range, and we have not got the electrical capacity.

There is another reason. We would decimate out public finances. Clarkson estimates that topping the Mini E up with standard rate electricity would cost £4, compared with about £12 for a standard Mini Cooper, or around £10 for a 60mpg diesel for 104 miles.

Now consider the exchequer impact. The £4 of electricity carries 20p of tax (VAT at 5%). The tax on petrol or diesel is about 60%, so £7.20 for petrol and £6.00 for diesel. The net loss for a typical 10,000 mile per year motorist is in the order of £650 – plus the road tax loss of around £100 or more.

If just a million car users switch to electric – 3% of the total – then the loss is around £750m per annum.

 Will motorists actually go for these savings? Not if they look at the total costs of ownership. The life of the batteries will be less than the 100,000+ miles that you expect from a modern engine. Current lithium ion might give you about 300 charges, or 30,000 miles in the Mini E. With the cost maybe £6,000 per pack (for simplicity), that would add 20p per mile to costs – equivalent to annual costs of £2,000 per year. The servicing may cost a bit less (no engine, but still all the other mechanical bits like brakes, tyres, etc.), but overall the cost of ownership.

Therefore, it will only be a small minority who will buy these cars – probably the richer end of the Prius set. Alternatively, the government will step in to subsidise the battery pack. So the middle class conspicuous consumers will be subsidised by the, poorer, users of internal combustion engines.

Finally, will this save the planet within Lord Stern’s criteria cost of £80 per tonne of carbon? Let us assume somebody swaps their standard small car with 130g/km of carbon with the zero-emission car. At 10,000 miles per year, that is a saving of 2 tonnes of carbon IF the electricity comes from zero-emission sources. The net cost to society is going to be at least 10 times that, so it fails the economic test as well.